Why neoliberals should love Bernie

By Robert Wright, Mar 07 2020

Three months ago, on the website Counterpunch, Richard Ward wrote that Bernie Sanders is “the one possible challenger to the neoliberal order.” That status, he went on to assert, accounted for the timing of the Senate impeachment trial; it was the neoliberal order’s way of keeping Sanders off the campaign trail. I can only imagine what Ward thought this week after the Democratic establishment swung into action to convert Joe Biden’s victory in South Carolina into victory on Super Tuesday.   

If Biden’s resurrection was indeed in some sense the work of the “neoliberal order,” the effort may have been misguided. However qualified Sanders is to overthrow that order, he’s also qualified—maybe uniquely qualified—to save the things about it that many neoliberals profess to cherish, things that may otherwise suffer a grim fate.

To see what I mean, you have to first appreciate an odd thing about the word “neoliberal.” Unlike most ideological labels, it is claimed by virtually no one. It’s used mainly as a pejorative, typically to mean something like “a free market fundamentalist who happily does the bidding of corporate overlords, helping them run roughshod over the world’s working people.” And that’s not the kind of phrase you put in your LinkedIn profile.   

But even if no one wears the neoliberal label proudly, and even if the term is now thrown around so loosely as to make it unclear who really merits the label, it’s possible to apply it with some precision. If you follow the term “neoliberal” back to the 1990s, you’ll find it referring to a distinct set of policies—policies collectively called “the Washington consensus”—and an underlying philosophy. Adherents of that philosophy are still around, and many of them—neoliberals in a precise and not-necessarily-pejorative sense—are now being called neoliberals in the vaguer, pejorative sense.

These are the people I’m calling neoliberals, and here is the point I want to make about them: If their detractors are right—if they are mere tools of rapacious capitalism, cloaking their true motives in liberal cliches—then they should definitely oppose Sanders. But if their goals are the more high-minded ones that they profess, Sanders may be their man and Joe Biden may not.

The Washington consensus was a view, prevalent in Washington-based institutions like the International Monetary Fund, the World Bank, and the US government, about how countries should structure their economies—a view that struggling countries often had to accept if they wanted aid from those institutions. 

The prescription these countries got was heavy on free-market medicine: privatization, deregulation, opening up to freer trade and to foreign investment. And there was an emphasis on fiscal responsibility that sometimes meant cutting government services (though the Washington consensus did encourage spending on public education, health care, and infrastructure). 

When these policies went awry—when, for example, the “shock therapy” of sudden fiscal austerity hurt a country’s workers and destabilized its politics—the “neoliberal” philosophy naturally got the blame. Hence the pejorative sense of the term, which only got stronger as the Washington consensus was linked to other kinds of trouble—as the free flow of capital was implicated in the 1997 Asian financial crisis, and as free trade was blamed for shuttered factories and stagnant wages in America and other affluent nations. (There was at least one other meaning of “neoliberal” prevalent in the 1990s, but it’s the “Washington consensus” meaning that led most directly to the pejorative use of the term, and that’s the meaning that’s relevant to this argument.)

So what do people who backed the Washington consensus have to say for themselves? What would Bill Clinton—who not only backed it but helped implement it—say his motivations were? 

I have some relevant experience here. My book Nonzero, which came out 20 years ago, had some nice things to say about globalization, international trade, and even about a big bete noire of the left, the World Trade Organization. The book was embraced by Clinton, who is now viewed on the left as among the most nefarious neoliberals (rivaled in nefariousness, perhaps, by his wife). Clinton mentioned my book in more than a dozen speeches, had White House staffers read it, and told Foreign Policy Magazine that it had a “huge effect on me as the president.” 

That last part may merit a grain of salt; when the book came out he had barely more than a year left in office. Still, his descriptions of the book—including in a brief conversation with me—make it clear that he broadly shared its view of globalization, and that it reflected the hopes he had for the neoliberal order he helped build. Looking at the fate of those hopes twenty years later, we can see both why that order is imperiled and why Sanders, however ironically, may be better equipped than Joe Biden to save the parts of it that are worth saving.  

For Clinton, the aspirations behind the Washington consensus fit into a larger vision of the post–Cold War world that he hoped to usher in. Prosperity would spread to poorer countries, and in the process the world’s nations would be drawn together via economic interdependence. Such a world would be well positioned to sense and act on other areas of interdependence—cooperating to address climate change and other environmental challenges, as well as problems like global pandemics and the proliferation of chemical, biological, and nuclear weapons.  

In short, nations would recognize that they’re playing lots of non-zero-sum games (hence the title of my book)—games that could have win-win outcomes if they collaborated wisely and lose-lose outcomes if they didn’t. As global governance evolved to mediate this collaboration, the world would cross the threshold into a true global community.

At least, that was the hope. People who still share this hope—which includes lots of prominent Democrats, certainly including many who are called neoliberals—face a question: Which of the 2020 presidential candidates is most likely to use the White House to help us move closer to that vision?  

Obviously not Trump. He explicitly and generically rejects “global governance,” and he has worked against particular manifestations of it such as the Paris accord on climate change and arms control agreements (which he’s more likely to abandon than nurture).  

Indeed, Trump is a threat not just to the global governance that is indirectly tied to the Washington consensus—the kind that is facilitated by the web of economic interconnection the consensus aimed to build—but to the kind that sustains the web itself. He has paralyzed the World Trade Organization’s dispute resolution mechanism by blocking the appointment of judges (perhaps to evade judgment of his more dubious unilateral trade tactics). 

So the question becomes: Is Joe Biden or Bernie Sanders more likely to pave the way for the world Clinton envisioned and Trump rejects? The first step toward answering that question is to underscore one of the big upsides of the Washington consensus and its relationship to one of the downsides. 

The upside: lubricating trade and the flow of capital did indeed help bring prosperity to parts of the world that had seen little of it. The amount of poverty in the world has dropped massively as China, India, and other countries have plugged into global commerce and adapted their economies to it. 

The downside: One thing that pulled people in these countries out of poverty was factories built by corporations that wanted to harness low-wage labor—and this was bad news for higher wage workers in, for example, the United States (even if, as consumers, they benefited from the low cost of foreign-made goods). Working class wages stagnated while income and wealth flowed to the upper tiers of American society.

This is far from the only source of Middle America’s economic troubles. Automation has eliminated some jobs, and competition from immigrants has held down wages for other jobs. Neither of these things can be blamed directly on the Washington consensus, but both are associated with globalization (which hastens technological change and often involves migration) and so can be plugged into a narrative about how America’s indiscriminate engagement with the world is dragging it down.  

What’s more, immigration, along with free trade, can be plugged into a narrative about coastal elites who, so long as their stock portfolios are trending upward, are happy to let corporate interests reign, whatever the costs to ordinary Americans. And this narrative possesses, in addition to a political power that Trump has harnessed, some truth. Corporate lobbying has deeply influenced our trade agreements and, until Trump, our immigration policy. 

The challenge for neoliberals is this: If you want to govern in America, it’s a good idea to address Middle American discontent and appeal to some of the voters who feel it. But the only demonstrated way to do that—Trump’s way—entails an assault on the multilateral institutions you consider important. Trump’s impairment of the WTO is a straightforward expression of the narrative that got him elected. And as time goes on, this impairment could take a real toll on the global economy, as trade disputes, in the absence of adjudication, give rise to trade wars.

My own view is that the only way to have it both ways—to accommodate, even harness, the discontent of alienated Americans without surrendering to the nationalism that could spell doom for global governance—is to make global governance do a better job of serving those Americans. In particular: use multilateral trade agreements to improve working conditions in low-wage countries—which, by raising production costs there, will reduce their competitive edge over America. This won’t wholly insulate American workers from foreign competition (doing that is for various reasons a bad idea anyway), but it can provide some support for American wages and give the American workforce more time to adapt. (A sub-head in one of Nonzero’s chapters is “Slow Globalization Down.”)

In one sense, this is a popular idea. It’s hard to find a Democrat who opposes the “labor provisions” that were part of NAFTA. The problem is that these provisions were mainly window dressing. And, though Trump’s renegotiated version of NAFTA (USMCA: the US Mexico Canada Agreement) has an interesting new wrinkle or two, it is not, as a whole, much more friendly to American labor than NAFTA was. Labor provisions in trade agreements have been most politically feasible when they’ve passed muster with corporate lobbyists, and they’ve passed muster with corporate lobbyists so long as they’ve been basically impotent.

One famously big difference between Biden and Sanders is that Biden tends to embrace trade agreements—the Trans-Pacific Partnership, NAFTA, USMCA—and Sanders tends to reject them. What’s less well known is that when Sanders rejects a trade agreement he spells out things the agreement would need to have in order to win his support—as he did last year in a letter to Trump about USMCA. And these lists include meaningful labor provisions. 

To take just one example from Sanders’s USMCA list: all member states would have to guarantee workers the right to organize and bargain collectively—something Mexico now does only nominally. And, critically, a multilateral body would be charged with monitoring and enforcing compliance with this and other provisions.  

Sanders would also like to see such things added to the rules of the World Trade Organization. If he ever succeeded—if he even half succeeded—that would be pretty radical. But we live in radical times. Intense popular grievance in America and in Europe is being harnessed mainly by right-wing nationalist politicians, and they’re using it to erode various multilateral institutions, threatening to kill global governance in its crib. Maybe saving those institutions will require re-engineering them so that they do more work on behalf of the aggrieved.

Obviously, big structural change to trade agreements takes time. But the commitment of a President Sanders to it would be convincing, and that would have two benefits. It would add to his bargaining leverage with other nations, and it would give the kind of alienated Americans who got Trump elected reason to believe that it’s possible to have a Democratic ally in the White House. Indeed, re-engineering trade agreements aside, Sanders’s basic domestic policy impulse—tax the rich, use the money to help the working class, and shame any corporation that tries to get in the way—could help convince them of that. 

Maybe my reading of the situation is too dire. Maybe Joe Biden can endear himself to enough Trump supporters to drain some of the energy from the populist nationalism that seems to threaten institutionalized multilateralism. Biden certainly has some assets that will help, including a basic likability and genuine empathy for the working class.

But Biden has often been something that most politicians often are and Bernie Sanders has rarely been—responsive to the very corporate lobbyists whose influence on the “neoliberal order” helped give it a bad name and helped Trump get elected. And, anyway, Biden just isn’t equipped, dispositionally or temperamentally, to rage against the machine with the persistence that’s second nature to Sanders.  

There are various ways to define “the neoliberal order,” ranging from the minimalistic and cynical (as the infrastructure for ruthlessly imperialistic global capitalism, anchored by such institutions as the WTO) to the broader and more generous (as including the larger body of much-needed global governance). But however you define the neoliberal order, it is being challenged by populist and sometimes radical forces. 

A century or so ago, America’s system of national governance was being challenged by populist and sometimes radical forces. Franklin Roosevelt responded to that challenge by doing something that was itself deemed radical: he moved America’s government to the left. Champions of the neoliberal order—in various senses of that term—might give some thought to the possibility that it, too, can best survive challenge if it moves to the left, however radical that may now seem. And if they resist that idea too fiercely, maybe that’s a sign that “neoliberal” in the pejorative sense of the term is a label they deserve.

Illustration by Nikita Petrov.

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