The Death of Neoliberalism

Pro-market Democrats disappeared just when we needed them most.


Our grandchildren won't believe our stories about the 1990s. Yes, there really was a time before the World Wide Web and ubiquitous portable communication devices in sub-Saharan Africa. Yes, you really could travel to some foreign countries without a passport, without a return ticket, without a credit card, and without entering multiple government databases. Yes, the Pittsburgh Pirates really did once play winning baseball.

But as the Bush-Obama era of bailout economics and Keynesian rehabilitation settles into something like cruising speed, perhaps the most fantastic fact to swallow will be that once upon a time the United States had a president who restrained government spending, balanced the budget, argued forcefully for the benefits of free trade, and declared that "the era of big government is over." And he was a Democrat.

I come here not to mourn Bill Clinton, nor to give him sole credit for accomplishments that would not have happened without a hostile Republican Congress, but rather to lament the mostly unremarked passing of the political movement that made his economic successes possible. Its disappearance has meant the biggest expansion of the federal government since World War II.

Starting with the Reagan landslide in 1984 and ending with John Kerry's flaccid resistance to George W. Bush's re-election in 2004, liberals and Democrats went through a two-decade cycle of re-examining their previous philosophical and technocratic assumptions, embracing (or at least grudgingly accepting) some key elements of market economics and competition, then backtracking at least partway toward hoary old labor politics. The party's fortunes in capturing the White House ebbed at the beginning of the economic rethink, flowed at its height, then ebbed again during its final days.

This 20-year process encompassed many different strains and went by several names—neoliberalism, the Third Way, the New Democrats—but underscoring most of it was a sound judgment that Ronald Reagan and Margaret Thatcher effectively destroyed traditional labor politics, a slow-building acknowledgment of the benefits of global trade and industrial privatization, and a nagging suspicion that lefties in the West too often looked like unmanly, unelectable sourpusses. Better to cheerfully embrace the 21st century, á la Clinton and the early Tony Blair, than grumble in your cups about industrial malaise, declining union ranks, and unequal economic outcomes.

The seeds of the New Democrats' demise were already flowering by Clinton's second term, when an increasingly hostile progressive-left flank reacted with fury to gung-ho globalization, elective wars in Yugoslavia, and welfare reform (see our Q&A with longtime neoliberal and welfare reform advocate Mickey Kaus). Only the Republican-led persecution of Clinton's sex-related crimes rallied progressives back to his side, and that support did not carry over to Vice President Al Gore, despite his last-minute lunge toward "I'll fight for you!" populism. Ralph Nader's 2.9 million votes in 2000 were both the deciding factor in the electoral contest and a stinging rebuke of Clintonomics.

This restive sentiment on the left was enough to push the stentorian bore John Kerry into concocting outrage at "Benedict Arnold CEOs" in 2004, but the pose was undermined both by Kerry's surface insincerity and the fact that his top economic advisers were rushing around reassuring business journalists that all free trade agreements were safe. No Democrat outside of Kerry's immediate family voted for the candidate with enthusiasm, and after his routing by a proven incompetent it was time to throw the old playbook out once and for all.

Neither Kerry nor the more solidly neoliberal New Democrats were only or even primarily differentiated by their economic philosophies, and therein lies a key reason for their demise. The movement, like so many major-party fads, was primarily motivated not by ideas but by the desire to regain and retain power. And a fundamental element of that mission was to identify and noisily reject past party tendencies that were seen to be unpopular among centrist voters.

So these New Democrats didn't merely refuse to be soft on crime like the touchy-feely ninnies in Dirty Harry movies; they were tougher on crime than the most hardened Republican. Clinton famously demonstrated his conviction that Democrats "should no longer feel guilty about protecting the innocent" by flying back to Arkansas in mid-1992 to oversee the execution of the brain-crippled cop killer Rickey Ray Rector, and once-rising New Democrat star Gray Davis was notorious as California governor for extolling the criminal justice policies of Singapore and rejecting his own parole board's very rare recommendations of leniency. New Democrats were some of the worst politicians in America when it came to expanding the War on Drugs, dreaming up new categories of people to execute, and degrading civil liberties for crass political gain.

Lacking Clinton's serpentine political abilities, those who aped his base-repudiating stunts often ended up looking ridiculous. John Kerry's iconic moment at the Democratic National Convention in 2004 came not in any speech about economic policy but when the Vietnam vet strode out on stage, gave a theatrically grave military salute, and announced that he was "reporting for duty." No draft-dodging peacenik, he! The gesture was received with the eye rolling it deserved.

Defining yourself by what you reject may yield short-term political gain and allow you to stumble into some good public policies now and then, but it's no long-term substitute for articulating and defending concrete principles. This is as true for citizens as it is for politicians. That's something to keep in mind as you read our cover forum, "Where Do Libertarians Belong?" In the Democrats' case, the constant triangulation against the party's true believers eroded enthusiasm at the core and produced a Republican-dominated Washington.

When voters belatedly soured on that bit of disastrously unified government in 2006, it was an entirely different Democratic Party that rode the pendulum back to power. The two-faced, unconfident approach of Kerry and Gore was out; the full-throated combativeness of 2004 presidential contender turned party chair Howard Dean was in. New members of the revitalized Democratic majority included many who were more conservative socially, but the party's trade-bashing economic message bore little resemblance to the arguments Al Gore used to rout Ross Perot in their 1993 debate over the North American Free Trade Agreement. By the time Barack Obama was ready for his coronation at the Democratic National Convention in 2008, the party was unified in opposition to Bill Clinton's trade and deregulatory policies, even while taking credit for his successful results.

But there's a larger disconnect here. Twenty years is a long time for ideas to percolate. Younger voters and pundits supported Obama without understanding why Democrats were saddled with the "big government" label in the first place. The only Democratic president in their memory was also the only one who didn't seriously goose the size of government. And the Democrat who won in 2008 was a serious-sounding fellow from the University of Chicago who repeatedly promised "pay as you go" budgeting, no tax increase for 95 percent of Americans, and a "net spending cut."

Did these liberals—some of whom frequently flashed their free trade credentials during the Bush administration—just forget what they used to believe? Or are they suppressing their principles until Obama announces that the economic crisis has finally been solved and we can resume regularly scheduled fiscal sobriety? Either way, their ongoing silence has to count as one of the great underreported political stories of the Obama presidency.

The New Democrats may be gone, but many of their worst policies—on criminal justice and foreign policy especially—are still locked into place. We replaced politically insincere, base-distancing market enthusiasts with deadly serious, interest-group-embracing Keynesians. Come back, 1990s. All is forgiven.

Matt Welch (matt.welch@reason.com) is the editor in chief of reason.