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Larry Kramer

October 16th, 2024

What comes after neoliberalism?

0 comments | 34 shares

Estimated reading time: 6 minutes

Larry Kramer

October 16th, 2024

What comes after neoliberalism?

0 comments | 34 shares

Estimated reading time: 6 minutes

Despite its unquestionable successes overt the past fifty years, the neoliberal paradigm has proven incapable of dealing with the greatest challenges of our time. It’s time to come up with a new account of society that goes beyond methodological individualism, with values deeper than negative liberty, a greater concern for wealth distribution, and measures of government success beyond “growth” and “GDP”, argues LSE President and Vice Chancellor Larry Kramer.


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It hardly seems controversial to note that what has for the past fifty years been the dominant approach to political economy, what people now call neoliberalism, is failing. I say that knowing that neoliberalism was not embraced in many parts of the world. Even in those places, however, it was effectively imposed, if only because of the ways in which the United States and Europe used their political and economic muscle, including skewing international financial institutions like the World Bank, IMF, and WTO, to adopt neoliberal approaches.

To say that neoliberalism is failing, by the way, does not require denying things it helped accomplish. With some pain, it energized stultified economic growth in the 1980s, while bringing high inflation, high interest rates, and high unemployment rates under control. The free trade regime it fostered has played an important part in bringing hundreds of millions of people out of extreme poverty. And its focus on free markets helped catalyse innovations that have improved lives in many ways and given us all cheaper and better commodities like cars, phones, TVs, and computers.

Perhaps most importantly, neoliberalism has proved inadequate to deal with emergent developments like climate change, changes in gender and race relations, and a workplace transformed by the very technologies it catalysed.

It has, unfortunately, floundered when it comes to what many (I daresay most) would regard as the most important necessaries in life, including better education, better healthcare, and better housing. Over time, it has also produced skyrocketing wealth inequality (which turns out to be a feature, rather than a bug, of neoliberal economics), along with wage stagnation, not to mention the adverse consequences of its free trade approach in the developed world. And, perhaps most importantly, it has proved inadequate to deal with emergent developments like climate change, changes in gender and race relations, and a workplace transformed by the very technologies it catalysed.

To address these problems, we need new and better policies across a whole range of economic and social challenges—work that scholars and students across the university are doing.

Yet this alone is not enough. The reason has to do with the intersection of ideas and politics. Because the likelihood that a particular policy will be enacted and will stick is not solely, perhaps not even primarily, a product of the policy’s quality and sense. Rather, in actual governance, particular policies are always and necessarily nested in a broader set of ideas about political economy—an intellectual paradigm, if you will—that effect the likelihood of adoption and success.

Intellectual paradigms influence the outcomes of politics by tilting the playing field for or against competing claims.

The life and death of political economy paradigms

A political economy paradigm is always contingent. There is no timeless perfect wisdom, but simply an approach that in a particular context and for a particular time achieves acceptance, because it works as an explanation for people. It provides a convincing account of what people see in the world around them, which in turn structures how they think about and understand the economy, what its ends should be, and so what government should and should not do.

Except during intermittent periods of transition, there always is a prevailing paradigm—not held unanimously (nothing ever is), but held widely enough to make possible what we think of as “normal” politics. Conflict does not disappear, but clashes are worked out within broadly shared premises that enable the kinds of compromises necessary in a complex society in which people have divergent preferences.

Intellectual paradigms influence the outcomes of politics by tilting the playing field for or against competing claims. They do not, of their own force, determine particular political outcomes. These are ultimately dictated by interests, cultural beliefs, material needs, and other contingencies—not least the talent and tactical decisions of the various actors. What the paradigm does is to structure the rules of engagement and shape how political and lay actors understand their interests, beliefs, and material needs: putting a thumb on the scale in favour of some arguments and against others, while concealing or obscuring options that fall too far outside its main premises.

Intellectual paradigms are also understood differently by, and function differently for, different actors. Ordinary citizens and political leaders comprehend the paradigm at a relatively high level of generality: for them, it is a thumbnail sketch, just thick enough to make sense of the world without being or needing to be a comprehensive political or economic philosophy. The same is not true for policymakers and academics, for whom the paradigm offers just such an over-arching philosophy, which they then rely on to propose and justify practical solutions to policy and political problems.

The intellectual paradigm that prevails at any given time, then, does so not because it fits or explains the world perfectly. No paradigm ever does. It prevails because enough citizens, political leaders, and policymakers perceive it to fit the world better than available alternatives.

The key is in the way these different understandings are linked. A paradigm “works” when the solutions it shapes for policymakers and academics are intellectually consistent with the thumbnail understanding of ordinary citizens, while addressing these citizens’ problems well enough in practice to prop up and sustain that understanding. The intellectual paradigm that prevails at any given time, then, does so not because it fits or explains the world perfectly. No paradigm ever does. It prevails because enough citizens, political leaders, and policymakers perceive it to fit the world better than available alternatives.

It follows that, as circumstances change and evolve, a paradigm that has been accepted may lose its explanatory power. Changes in technology, politics, and society will transform the economic and social environment in ways an established paradigm deals with poorly or not at all. Because accepted paradigms tend to be sticky once embraced, the dissonance between what the paradigm teaches about how things “should” work, on the one hand, and the world as people are experiencing it, on the other, must grow quite large before enough people come to feel disaffected to produce change on a widespread scale. As this happens, we see increasing political and social turmoil until another explanation achieves acceptance. The cycle then repeats.

The process is familiar. Just think of the evolution of ideas and the politics they created in the shifts from mercantilism to laissez faire in the early to mid-19th century, to Keynesian Social Democracy in the 1930s, and finally to neoliberalism in the 1960s-70s. As each paradigm collapsed, we experienced heightened political disruption, with competition among rival paradigms (socialism, communism, fascism, etc.), until a new conventional wisdom achieved sufficiently widespread acceptance and what we think of as “normal” politics resumed.

It doesn’t take great insight to see that we are, today, in the midst of another period of political disruption akin to the 1920s and 30s, or 1960s and 70s.

The shifts can be dramatic, as was the case with Communism and Fascism. But this need not be so, and wholesale replacement with something radically different is actually pretty rare. More typically, as in the change from laissez faire to Keynes or Keynes to neoliberalism, new paradigms reorder familiar concepts and tools to fit new and changed circumstances. Still, the consequences for governance of even modest reordering can be profound.

It doesn’t take great insight to see that we are, today, in the midst of another period of political disruption akin to the 1920s and 30s, or 1960s and 70s. Much as people lost faith in laissez faire or in Keynesian public management, they have lost faith in the market fundamentalism of neoliberalism. As in these earlier periods, this shows up as a loss of faith in the political institutions that have embodied the intellectual paradigm, accompanied by social turmoil and chaotic politics. And, as in these earlier episodes, people are looking for alternatives—other explanatory frameworks to help them make sense of the despairing confusion they feel and to guide their choices of political leadership and direction.

The challenge is to offer something better, to develop ideas and policies and frameworks that provide a more attractive alternative not just to the failing neoliberal regime, but to the appeal of illiberal democracy.

In search of a new paradigm

Right now, unfortunately, the available choices are pretty thin. China offers one option: state run capitalism without individual rights. The other option, which seems to be taking root in much of the world, is being called “populism,” but is really forms of ethno-nationalism. We see this tendency underlying the support for Trump and for leaders in so many other countries whose chief appeal is to blame some “other,” while calling for return to a make-believe version of a “true” national culture.

The challenge is to offer something better, to develop ideas and policies and frameworks that provide a more attractive alternative not just to the failing neoliberal regime, but to the appeal of illiberal democracy: a vision for a more inclusive democratic politics that can produce a more justly distributed wealth.

We need a better account of society than the methodological individualism of neoliberalism, and we need to link that account to values more serviceable and compelling than the constrained notion of negative liberty that animates it.

This entails much more than economics. To successfully enact a new policy program, we need a new values-based ethical framework, connected to a new economic approach in which any such program can be nested. Note in this connection that both Keynes’ “General Theory” and Hayek’s “Road to Serfdom”—the urtexts for their respective visions of political economy—were as much about ethics and civic morality as they were about economics.

We need a better account of society than the methodological individualism of neoliberalism, and we need to link that account to values more serviceable and compelling than the constrained notion of negative liberty that animates it. Likewise, we need a more normatively attractive measure for success in governance than neoliberalism’s focus on economic growth as measured by GDP, one that includes greater concern for the distribution of wealth, and greater concern for aspects of well-being beyond the economic. Most important, we need synthetic work that links these various elements together into a persuasive holistic account, showing how the new policy approaches follow from an enriched account of society to achieve a similarly enriched account of our social ends.


This is an extract from the inaugural lecture of LSE President and Vice Chancellor of LSE Larry Kramer, “What is needed is hard thinking”: five challenges for the social sciences, held at the London School of Economics on 14 October 2024

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

Image credit: ZGPhotography on Shutterstock


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About the author

Larry Kramer

Professor Larry Kramer took office as President and Vice Chancellor of the London School of Economics and Political Science on 1 April 2024. He served as President of the William and Flora Hewlett Foundation from 2012 to 2024. Under his leadership, the foundation significantly adapted its strategies to meet changing circumstances and seize new opportunities, including new efforts to respond to pressing and timely challenges related to democracy, economics, climate change, and racial justice.

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