Abstract
AbstractWhile the last few decades of political economic history give the impression that the logic of neoliberalism is inexorable, this article argues that once we look further backwards and dig into recently declassified archives documenting the early days of neoliberal theory and practice, we find a messier picture. Economic policymakers in Thatcher and Reagan's administrations in the early 1980s did not set out to ‘fail forwards’ by generating a crisis that would enable a statist kind of neoliberalism. The key ideas that they drew on and the policies that they used to put them into practice sought to transform the economy indirectly, through a set of performative policy devices that they believed would generate a dramatic shift in people's inflationary expectations, lowering inflation without provoking a major recession. Archival records make it clear that these efforts were not only a failure, but also one that policymakers were acutely aware of at the time. By examining these quiet failures in economic policy, we can better understand how these governments simultaneously failed in their early efforts to introduce neoliberal economics and yet ultimately succeeded in transforming their economies in important respects – and in legitimising those transformations by narrating failure as a kind of inevitable success.
Highlights
The obituaries for Paul Volcker, chairman of the United States’ Federal Reserve between 1979 and 1987, who died in December of last year, have been powerful and even moving – yet in one important respect they have almost all been misleading in defining his legacy
While the last few decades of political economic history give the impression that the logic of neoliberalism is inexorable, this article argues that once we look further backwards and dig into recently declassified archives documenting the early days of neoliberal theory and practice, we find a messier picture
My attention is on the little-discussed but incontestable failure of early efforts to put three key economic theories – monetarism, supply-side economics, and rational expectations theory – into practice during the early days of the Reagan and Thatcher administrations. In examining these efforts to translate theory into practice, this article seeks to answer three key questions: what do economic ideas require in order to work? Why do they fail? And why do those failures not always matter politically? I suggest that by focusing on the role of ‘quiet failures’ we can develop a clearer sense of the very real and practical challenges of translating economic ideas into practice
Summary
The obituaries for Paul Volcker, chairman of the United States’ Federal Reserve between 1979 and 1987, who died in December of last year, have been powerful and even moving – yet in one important respect they have almost all been misleading in defining his legacy. Scholars working on the professional ecologies of economic policymaking, like Henry Farrell, Joel Quiggan, Leonard Seabrooke, and Eleni Tsingou have sought to challenge overly simplistic assumptions about how ideas get translated into policy – exploring the complex professional cultures that emerge when professional economists and policymakers engage with each other around difficult problems.16 These political economists join a growing cohort of historically minded scholars who have sought to complicate many of the ideationalist approaches to Thatcher and Reagan’s early years, emphasising the pragmatic basis for many key decisions and their dependence on concrete political and institutional realities rather than abstract ideas. I argue here that it is possible to recognise the messy, contingent, and strategic nature of economic policymaking without treating that fact as evidence against the power of ideas; this is just the way the ideas work.
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