After Failure: A Second Stage of Neoliberalism

by Frank Nullmeier

After the financial crash of 2008 a great number of observers expected an end of neoliberalism as the dominant principle in economic policy. However, policy change did not occur. Quite the opposite, after a short period of Keynesianism in 2009 governments have returned to neoliberal politics. The 2010 sovereign debt crisis brought about a more intense mode of neoliberal economic and social policy inducing an age of enduring austerity.

In the 1980s, neoliberalism triumphed at the ballot boxes. It succeeded because of its attractiveness to political and economic elites and to broad strata of the population of OECD countries. In 2008/2009 neoliberal politics entered the phase of continuation after failure. We might call this a second stage of neoliberalism. Its acceptance is no longer based on its attractiveness. It rests upon enforcement and the disability to find an exit out of neoliberal economic policy. Continuation by coercion takes place where governments are forced by the banking sector to introduce bail out policies. Enforced neoliberalism is established once national governments highly recommend governments of other countries to basically redesign national politics and introduce regimes of massive austerity and once these governments impose high financial charges on their populations. Governments that are either captured by the financial sector or transformed into a status of a mandated territory by other countries are characteristic elements of an enforcement culture of second-stage neoliberalism.

In the era of second-stage neoliberalism with its culture of enforcement the risk of resentment and illiberalism increases. Neoliberalism has been ‘loaded up’ by adding elements from conservative or nationalistic or other right-wing ideas. Postliberalism is the result of this transformation of neoliberalism as a system of beliefs and thoughts. Postliberalism can be defined as the attempt to cure neoliberalism – by abandoning liberalism. ‘Postliberal’ refers to political concepts and ideas that try to solve the follow-up problems of neoliberalism by using lines of argument that are no longer compatible with a liberal understanding of freedom, individuality, self-determination and autonomy.

Postliberalism is to be understood as a reaction to neoliberalism’s argumentative difficulties. To take the free market and free competition as the core of the entire political thinking might be called the essence of being ‘neoliberal’. But, the emphasis on the functioning of markets – in the sense of a ‘spontaneous order’ – has led to substantial tensions in relation to ways of thinking that strive to achieve a just order.

Friedrich A. von Hayek, the main proponent of neoliberal thinking in politics and economics, has expressed thoughts on the topic of justice in three respects: Due to the structure of markets, the concept of ‘justice’ only makes sense as a term to describe the quality of market framework institutions. The concept of ‘social justice’, on the other hand, does not make any sense in relation to the spontaneous order of the market. Therefore, the concept has to be avoided. Markets do not implement the merit principle. Rewards in a market system depend on the contingencies of supply and demand conditions – and not on skills, efforts or contributions to the common good. Neoliberalism aims to avoid a political debate in terms of social justice and justice as merit. In times of crisis, these two aspects of neoliberal thinking lead to a situation in which neoliberalism is getting more and more into argumentative difficulties. A form of capitalism that is increasingly producing social injustices and that is passing the costs onto those who did not cause the crisis is widely perceived as ‘socially unjust’ by the public.

In Germany, postliberal intellectuals, including the philosophers Peter Sloterdijk and Norbert Bolz as well as Thilo Sarrazin, use the following arguments to justify the increase of social inequality: First, social differences have to be unquestionably accepted. Inequalities have to be accepted, a passive-enduring stance has to be assumed towards the twist and turns of ‘fate’. Norbert Bolz refers to this stance as ‘reasonable fatalism’ (“vernünftiger Fatalismus”) (Bolz 2009: 36). Whatever happens is good. Instead of focusing on differences, one should concentrate on the appropriateness of the state and situation of an individual person – regardless of the situation of other persons.

The emphasis on acceptance, sufferance, acquiescence and fatalism, however, puts the core value of liberalism at risk: its concept of liberty. Second, social inequalities are justified as grounded in characteristics like ethnicity, cultural affiliation, religious affiliation, or genetic potential. Accordingly, market success is related to certain cultural or natural characteristics. Inequality is affiliated to characteristics that are essentially unalterable. In this context, one may refer to biological, but also to cultural characteristics that have a long tradition (advanced civilizations, religions, ethnicities). By renouncing the value of merit and its role as a central means of justification for the market, the vindication of the market goes off the rails and turns to criticism of Islam – and to Biologism.

Peter Sloterdijk chooses an emotion-psychological foundation in order to construct a difference between those who strive for greater things and those who only strive to satisfy their needs. This difference is emphasized in a way that makes mutual recognition within a society negligible. Overt anti-egalitarianism takes over the leading role as successor to neoliberal thinking. Third, Thilo Sarrazin combines eugenic neoliberalism – which aims to increase economic productivity in terms of international competition through population policy – with an ethnic-nationalistic approach. Sarrazin’s book deals with inherited pools of intelligence of ethnic groups. The confrontation between ‘educationally weak Muslims’ and ‘educationally strong autochthonous Germans’ becomes a permanent feature of society. According to Sarrazin, naturalization does not turn migrants, even those who were born in Germany, i.e. second-generation and third-generation migrants, into Germans Following his argumentation, social inequalities in Germany reflect the differences in intelligence and culture; they weaken Germany’s global market position and can only be mitigated by reducing the number of people with a (Turkish-Muslim) migration background. Such examples of thoroughly illiberal thinking are typical of second-stage neoliberalism marked by enforcement and rising inequalities.