THE RISE AND FALL OF THE NEOLIBERAL ORDER: AMERICA AND THE WORLD IN THE FREE MARKET ERA

By Gary Gerstle

During the 1994-95 academic year, I had a fellowship at the Center for Advanced Study in the Behavioral Sciences, located on the edge of the Stanford University campus, to make progress on a book I was writing. A few of the center’s other fellows came, like me, from the humanities, but most were social or life scientists and legal scholars. Of special interest that year—generating not only intense discussion and intellectual fascination but also study groups aimed at aiding research projects—were the ideas of rational choice theory and game theory. These are interconnected approaches to analyzing individual and collective decision-making based on models, devised chiefly between the 1940s and the 1960s and drawn from the world of market-based economics. I found the openness to and, in some cases, excitement about these theories a bit puzzling, given their transhistorical and transcultural assumptions about “rationality” and “rational actors,” not to mention the left-of-center political leanings of most of the fellows. As odd as it all seemed to me at the time, however, the episode serves as an example of one of the important, though generally unappreciated, themes in Gary Gerstle’s terrific new book, The Rise and Fall of the Neoliberal Order: how neoliberal ideas and perspectives gained traction and energized the imaginations of people across the political spectrum, including those who were once part of the New Left.

Gerstle, the Paul Mellon Professor of American History at the University of Cambridge, has never been reluctant to take on sweeping chronological and thematic subjects. He’s written on race and the nation in the 20th century in American Crucible (2001), and more recently on the “paradox of American government” from our founding to the present in Liberty and Coercion (2015). But with The Rise and Fall of the Neoliberal Order, Gerstle not only takes on a big and consequential topic but wades into what can be the murky waters (at least for historians) of theorizing and representation. Which is why the book—brilliantly conceived, capaciously argued, and written with great clarity—is so impressive and timely. For those interested in a meaningful historical perspective on where we are now, I can think of no better book.

Gerstle begins not with the neoliberal order but with the New Deal order that preceded it, whose arc of dominance stretched from the 1930s into the 1970s. He uses the concept of “order” in a wide-ranging way to encompass culture, ideology, and politics as well as political economy—in effect, a hegemonic structure of power relations, moving from the local to the national and international. Federal policies, economic thought, and popular consciousness, to say nothing of the struggles between labor and capital, were all shaped by an emerging article of faith: that unfettered capitalism was a destructive force, one that needed to be tamed by the mechanisms and resources of the state, as well as by a moral perspective subordinating private interest to the “public good.” All of this, together with an embrace of “expertise” as a guiding light—a notion inherited from Progressivism—went into the making of what Gerstle views as a “modern liberalism” that defined the era and became the property of the Democratic Party. 

Central to the hegemony of the New Deal order, Gerstle insists, especially during the late 1940s and the ’50s, was the developing Cold War. The fear of communism, combined with worries about a backslide into another economic depression, made possible a “class compromise” between capital and labor, also known as the 1950 “Treaty of Detroit.” Capital accepted collective bargaining, and organized labor, especially in the mass-production industries, accepted wage increases as well as a raft of social benefits (health care, pensions) in return for abandoning its demands for co-management and purging the socialist and communist left from its ranks. So extensive was the reach of this New Deal order that, with some exceptions, it pushed Republican opponents like Robert Taft to the margins and brought Eisenhower Republicans into the fold as effective partners. The buy-in of Eisenhower Republicans—many of whom were internationalists like Franklin Roosevelt—was the moment, Gerstle argues, when the New Deal transitioned from a “political movement” into a “political order,” a transition secured by the anxieties of the Cold War.