During the 1970s, a new set of economic policies for preserving and promoting capitalist development emerged. Its most celebrated political expression was in the governments of Margaret Thatcher and Ronald Reagan.

Presented as a response to the stagnation and inflation of the late 1970s, the central economic tenets of this trend were privatization of publicly owned, non-profit enterprises, deregulation of corporate activities and capital movements, and the ‘freeing’ of labor markets (union-busting and the elimination of labor legislation). These served as the economic pillars of what came to be called supply-side economics or neo-liberalism.

Supply-side economics sought to replace the demand-side doctrines associated with the thinking of John Maynard Keynes, which dominated bourgeois economic thought after World War II. Keynesianism came to be the ideology of both political parties, with the liberal wing of the Democratic Party supporting income redistribution and social welfare as a means for increasing demand. Conservatives pursued military spending and corporate welfare as means to the same end.

While an unshakable faith in the market began as the ideology of the political right, it quickly infected the entire spectrum of bourgeois political parties. By the 1990s, the idea of free, unregulated markets became enshrined as a canon of economic thought, accepted by even many on the left. Democratic President Clinton did more to shrink government, pursue the fetish of a balanced budget at the expense of social welfare, and promote the quest for free markets than any other U.S. president.

Fueled by the demise of the Soviet Union as a bulwark of independence and brake upon imperial adventure, the weakening of labor, changes in technology and stock market fantasies, the ‘new’ economy seemed to fit perfectly with the neo-liberal model. But at the close of the decade, the attraction of free, unregulated markets began to lose its allure. Stock markets plunged, economic growth stagnated, and the revelations of deep, profound corruption tarnished the image of the new model.

The World Bank has moderated its unwavering insistence upon neo-liberal austerity after nearly destroying the economies of less developed countries like Argentina. Corporations have revealed calculated patterns of deception masking unprofitable investment and market manipulation as with the shameful behavior of Worldcom, Tyco and Enron. A relentless effort to restore profitability has created massive unemployment and a steep drop in living standards through restructuring and employee give-backs. Today, the capitalist economy seems more unstable than it was at the beginning of the neo-liberal era.

Bourgeois politicians have been slow to respond to the changing conditions. Nonetheless, there is a growing sense among ruling class intellectuals that the neo-liberal agenda has failed. Writing in the Wall Street Journal, Alan Murray, CNBC Washington Bureau chief and co-host of ‘Capital Report,’ states ‘the pendulum has swung. For 25 years, the reach of market principles grew steadily, penetrating every aspect of our lives and every corner of the globe. … But now the long fingers of the market are pulling back.’

Murray notes that anti-globalization forces ‘have won the argument. Capitalism now has the blackeye that they tried so hard to give it.’ Drawing upon an article in The Washington Post, Murray cites the comments of Robert Weissman of Mobilization for Global Justice: ‘Marketization, deregulation, and privatization … are now discredited in the United States. And in developing countries, where their effects have been most devastating, they are the object of widespread public opprobrium.’

To further bolster his point, Murray quotes from a recent seminar of the IMF: ‘’Market fundamentalism is gone,’ said Trevor Manuel, finance minister of South Africa. ‘The ideology is gone, and that’s good,’ agreed Jan Karlsson, development minister of Sweden.’

Horst Koehler, managing director of the IMF concedes, ‘We are in the process of searching for new policy concepts that make globalization work for all.’

May we suggest socialism?

The author can be reached at pww@pww.org