The great unravelling: Demise of the neoliberal centre (Part 2)

In Part 1 of this series on ‘the demise of the neoliberal centre’ we examined the outcome of the Australian elections in May. Surprising all, the conservative Coalition won narrowly.

Despite talk of the rise of ‘Trump conservativeThe great unravelling: Demise of the neolibs’ in Australian politics, a basic difference between recent Australian and US (and indeed UK) politics is that this election was won by the party promising stability, not radical change.

And yet – recent elections in all three countries reveal new fault lines in the old two-party systems dominated by a liberal-conservative bloc and a social democrat-labourist bloc, and between the economic prospects and ideological outlook of inner city, outer urban and country people.

In the US and UK, this has led to a radical break with the neoliberal economic policies championed by the very same countries in the 1980s. In place of free trade and (more) open borders, the Trump administration promises to ‘build a wall’ against Latino migrants and Chinese products. In the UK, the Conservatives, once champions of British membership of the European Union, has changed its mind, and the political divide between ‘remainers’ and ‘leavers’ is as bitter as that between Conservatives and Labor.

In Part 2, we ask why those countries broke with the liberal economic order, and who supports the main advocates of aggressive nationalism in each country.

In future blogs, we’ll move from politics to economics to examine neoliberalism (what it is and where it came from), recount the shift to neoliberal policies in Australia; and then move on to political philosophy (the contest between conservatism, liberalism and social democracy); to assess what might replace the 30 year neoliberal consensus that has prevailed in many, but not all, western nations.

What’s wrong with these pictures?

reaganthatcher3

Here we are at the White House in the mid 1980s, with the political founders of the neoliberal order that privileged ‘free markets’ over government regulation and services.* In the West, the post-war economic and political system was unravelling. In the East, the Soviet Union was about to unravel too, and China had set off down the capitalist road. Dominant in their own countries, these two led the West down a new path where ‘government isn’t the solution, it’s the problem’ and ‘there is no such thing as society, only individual men and women’.  It was a new dawn: morning in America.

* I’ll try to define this in the next instalment

President Trump Meets With British PM Theresa May At The White House

Returning to the same place 30 years later, the same parties are in power, but each leader, in their own way, is disrupting the order founded by Reagan and Thatcher.

Narcissus on the left came into office speaking darkly of ‘this American carnage’. He set  out on a different path, to ‘protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs’. America as leader of the ‘free world’ is now regressing to the tribal isolationism of  ‘America First’. 

Listening to Trump’s inaugural speech, ‘Morning in America’ was now a dark and stormy night.

The Prime Minister on the right of the picture wanted to restore ‘the bonds and obligations that make our society work’; to disrupt the power of those who ‘behave as though they have more in common with international elites than with the people down the road’. Her solution was ‘Government stepping up. Righting wrongs. Challenging vested interests,’ and ‘intervening where markets are dysfunctional’.

Having failed to convince the Parliament and a bitterly divided nation that her plan for the UK to leave the EU was either radical enough, or that the UK should leave the EU at all, she has just been replaced by the chameleon below.

”Do we have a plan for Brexit? We do. Are we ready for the effort it will take to see it through? We are. Can Boris Johnson stay on message for four days?” Teresa May speaks at her first Conservative conference as Leader (2016)

boris

Trump and May were not tinkering at the edges of the neoliberal order to present a friendlier face to people whose lives were gutted by another recession. They were striking at its core institutions and beliefs: one starting a trade war with China and restricting immigration, the other doggedly pursuing Britain’s divorce from the European Union (and restricting immigration).

The workers’ revenge?

On the face of it, this was about the revenge of working people against an international business elite that destroyed their jobs in the wake of the Great Recession of 2008, and diverted resources from the many to the few. Leaders of the Right in the very countries that launched the neoliberal project were quickest to hop on board. In her first speech to a Conservative Party conference as Prime Minister, May enthused about an ‘economy that’s on the side of ordinary working class people’.

In the US, working class voters had every economic reason to revolt. From 1975 to 2014, male workers without a college degree saw their median incomes fall by more than 20 per cent, after adjusting for inflation. The share of pre-tax income going to the top 10% rose from 35% in 1979 to 47% in 2014. The share of the lowest 50% fell from 20% to 13%.

In the UK, while low and middle incomes did not stagnate as they did in the US, incomes became much less equal from the late 1970s. In 1979, the lowest 20% of households by disposable income received 10% of all income, the middle 20% got 18% and the top 10% received 37%. By 2014, the share of the lowest 20% had fallen by 2 percentage points, that of the middle 20% fell by 1%, while the top 10% share rose by 3%. These shifts mostly occurred under Thatcher during the 1980s.

In Australia, the rise in inequality was less extreme, but still substantial. The main trend was for high earners to leave the rest behind. The share of pre-tax income of the top 10% rose from 24% in 1979 to 32% in 2014.

The US: a workers’ revolt?

An economic revolt by white manual workers is often blamed for Trump’s narrow wins in key rust-belt States in 2016.

The rightward shift of working class communities across the rust-belt was epitomised by the strong showing of Republicans in Harlan County, Kentucky.  This was the same dirt-poor coal mining community whose struggle to unionise a mine was celebrated in the brilliant 1974 documentary Harlan County, USA.

harlan county3

Yet there are gaping holes in the ‘white working class switches to Trump’ story. Clinton won the popular vote, including 52% of those earning less than $50,000 a year (against 41% for Trump). In the mid-west, Clinton’s losses were due more to her failure to rally working class voters (including African-American and Latino voters who were generally poorer) than a groundswell for Trump.

Or a revolt of the white non-urban middle class?

The main divides between Trump and Clinton voters were race, education and geography rather than income. For example, 63% of white men and 67% of non college-educated white men and women opted for Trump. Clinton won 88% of the black vote and 65% of the Latino vote: a strong result but well below Obama’s 93% and 71%.

This divide is an old one. For decades the Republicans have appealed to less-educated white voters in smaller cities and towns. Trump’s gains in the mid-west were mainly in those districts.

When Trump voters were polled, racial resentment was a stronger motivator than economic anxiety (though that played a part). Much of the South has been fighting an undeclared civil war since the abolition of slavery. One striking consequence was that white middle-class voters in the South abandoned their political home (the Democratic Party) and voted for Nixon in response to President Johnson’s civil rights reforms in the 1960s.

So Trump’s election did not signal an economic backlash by people experiencing poverty (they mostly voted Democrat), rather a revolt by less-educated white middle-class voters outside the major cities. They had economic concerns, but what they really wanted was to restore a lost way of life – where their jobs were more secure, they held a higher status in the community and nation, and the USA was dominant in the world.

”Candidate preferences in 2016 reflected increasing anxiety among high-status groups rather than complaints about past treatment among low-status groups. Both growing domestic racial diversity and globalization contributed to a sense that white Americans are under siege by these engines of change.” Dianne Mutz, 

And in the UK

In 2016, the British people voted to leave the EU by the whisker of a Eurosceptic: 51.9% to 48.1%, in a bitter campaign that cut across traditional party lines. This was seemingly another retreat to isolationism and ‘national traditions’ and a body-blow to the European project and liberal economic order.

Brexit voters in the UK were heterogenous. Natsen Social Research found that ‘affluent Eurospceptics’ (23% of the population), ‘older working class’ people (16%) and an ‘economically deprived and anti-immigration’ group (12%) were the three segments of the population most likely to vote Leave.

Consistent with the American pattern, around 70% of Black or Asian adults voted Remain, while men were more likely (at 54%) to vote Leave. The Leave vote was highest in the non-metropolitan East and West Midlands, and lowest in London and Scotland.

Overall, lower education levels, middle-class identification, and a declining economic position were key predictors of a Leave vote. As in the US, people who were once economically and socially comfortable and now felt threatened by international or ‘elite’ forces beyond their control, struck out against the existing order.

The referendum on EU membership was not supposed to end this way. Former PM David Cameron launched it to fend off the eurosceptics in his own party. He failed, and was replaced by May, who promised but failed to implement Brexit.

May’s political philosophy, as framed by Chief-of-Staff Nick Timothy, harked back to pre-Thatcherite ‘One Nation conservatism’.  Timothy’s role model was pre-war PM Joe Chamberlain, an former industrialist and Mayor of Birmingham who led the Liberal Party. Timothy’s philosophy was a form of communitarian capitalism.

”Chamberlain is the Conservative Party’s forgotten hero.  At the
birth of mass democracy, he gave the Party an unambiguous mission: the
betterment of Britain’s working classes.
He believed that the state must remain small, capitalism must be
preserved and private property protected, but working-class children needed to
be educated, workers protected from industrial injuries and unscrupulous
bosses, and the ownership of property extended to people of all classes.”

Nick Timothy (2012), later Teresa May’s Chief of Staff.

May’s pitch was not to those in the lowest 20% of households by income, who according to Oxfam were the main victims of the government’s relentless austerity policies. She pitched to the middle-income workers who were ‘Just About Managing’ (or JAMs).

”All of those families have at least one person in work, and most work full-time, but they are under-represented in higher-paying jobs. They are also half as likely to have a degree as the rest of the population. However, not all ‘just managing’ families are low earners. Some have higher salaries – up to £50,000 in the case of larger families – but still struggle to cope with the additional cost pressures of having children.” Resolution Foundation (2016), ”Britain’s ‘just managing’ families have experienced a 13 year income squeeze.” 

In this latest variant of  ‘one nation conservatism’, the JAMs would be sheltered from the harsh winds of global markets, Brussels bureaucrats, London elites, and mass immigration; unified by christian patriotism; and helped to get ahead through property ownership and thrift.

Conclusion

A decade after the Global Financial Crisis, key elements of the neoliberal paradigm or ‘Washington consensus’ that dominated economic policy-making in the Anglophone countries (including free trade, large-scale immigration, and international rule-setting institutions) were aggressively challenged by anti-liberal right-wing insurgencies in two of the leading Anglophone countries, the US and UK.

The core political base for those movements was older white communities outside the major cities, and their inspiration came from nostalgia over a lost traditional order in which they earned a decent income, occupied a respected place, and ‘others’ (especially other races and people who challenged the traditional gender order) knew theirs.

Irony of ironies: this was a revolt to restore tradition, like Sulla’s march on Rome (and that ended badly).

In Australia, as we have seen this anti-liberal movement was more politically marginal, but still had a big influence on mainstream politics, contributing to the un-seating of a Prime Minister by his own party.

The anti-liberal movement has spread across Europe, Russia, and more recently Brazil. The reasons can be traced to unique national conditions, but there is a common pattern, and the movement began in the countries that first championed the neoliberal order three-and-a-half decades ago.

The next blog in this series will go back in time to examine the emergence of neoliberal economic policies in Australia.

 

 

 

 

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