Possible Purple Rhetorical Passages for the Summary Chapters of "Slouching Towards Utopia?: The Economic History of the Extended Twentieth Century": Part XXII
The Neoliberal Bet
All in all, the history of economic policymaking during the 20th century was profoundly depressing. Inflation. Deflation. Trade protection. Insufficient investment in infrastructure. Corruption. Recession. Negative-sum redistribution. And the two biggies: the Great Depression, and that hideous destructive catastrophic mistake was world communism--the second greatest catastrophe the world of the 20th century saw.
None of these were in any sense imposed on us by nature or fate. We did them all to ourselves.
Ten years ago, however, it was possible to coherently and cogently argue that economic policymakers had learned their lesson. This was the neoliberal social democratic bet: placing your money on the idea that economic policymakers had finally learnt what institutions and practices worked best. Market economies. Government provision of public goods and correction of the most gross externalities. Free-trade and export oriented industrialization. Progressive taxes on consumption and free universal public education to create a relatively equal middle-class society. A safety net in the form of large-scale social insurance--pensions, health, unemployment,disability. And the most important part of the safety net of all: macroeconomic stabilization via monetary policy, lenders of last resort, and appropriate financial regulation.
In the 1984-2007 years of the Great Moderation it was possible to argue that policymakers had adopted or at least could see their way to adopting institutions and practices that made the social democratic or if you prefer neoliberal mixed economy work well.
Today, of course, in the wake of the financial crisis of 2007-08, the downturn of 2008-09, the subsequent flatlining of the employment-population ratio at a depressed level in United States and the second wave of recession in Europe, such economic policy triumphalism looks like one of those fits of irrational exuberance that economists and their acolytes undergo every generation or so.