By Noah Smith

Depending on who you ask, the term «neoliberal» can apply to anyone from Ronald Reagan to Barack Obama. Some on social media have turned the term into a running joke, holding ironic Twitter polls to see who is the «chief neoliberal shill» (the winner last year was none other than yours truly).

But at least one economist has articulated a coherent vision of neoliberalism — Brad DeLong, a professor at the University of California-Berkeley who worked at the Treasury Department during the Bill Clinton administration. In 1999, DeLong wrote that a combination of market liberalization in developing countries and trade opening by rich nations would allow the poor countries of the world to end centuries of poverty.

The plan seems to have worked. Market liberalization in countries such as India and China seems to have precipitated a shift to faster growth, while trade and investment links with rich countries have helped these and other developing countries tremendously:

These changes helped pull a billion people out of desperate poverty, and billions more are on the way to becoming middle class.

But there was a big hole in DeLong›s neoliberal plan. While the developing world surged forward, the U.S. began to encounter a host of economic problems. Wage stagnation, reduced mobility and rising inequality eroded the foundations of the New Deal society that had sustained the US›s middle class during the second half of the 20th century. The US resisted nationalizing its health-care system, resulting in a cumbersome public-private hybrid arrangement that allowed costs to mushroom while letting some people go uninsured. And financial deregulation led to a crisis and a huge, long recession throughout much of the developed world.

Now, DeLong is ready to throw in the towel. In a recent interview, he declared that left-leaning advocates of neoliberal policies in the U.S. were mistaken in thinking they would find a political partner on the center-right. The plan was always to cushion the blow of international trade and easing of regulations on business using government programs, such as universal health care and a robust social safety net, to make sure the working class wasn›t left behind. But, DeLong argues, Republicans rejected that compromise, insisting that any neoliberalism be of the free-market-fundamentalist variety:

Barack Obama rolls into office with Mitt Romney›s health care policy, with John McCain›s climate policy, with Bill Clinton›s tax policy...(but) John Boehner, Paul Ryan, and Mitch McConnell (were) the leaders of the Republican Party, and...decided on scorched earth(.)

As a result, DeLong declared that old-line neoliberals need to pass the baton to the political left. Others aren›t ready to let DeLong off so easily. In the Boston Review, a panel of economists writes that neoliberalism got the policy wrong as well as the politics. Their various suggestions for post-neoliberal policies include increasing labor›s power with greater unionization and wage boards, tighter regulation of the finance industry and restriction on trade in order to protect U.S. workers. Mike Konczal of the Roosevelt Institute echoes their assessment.

Many of these are good ideas. But in rejecting neoliberalism as a concept, the critics go too far.

First, progress in the developing world has been impressive — something for which neoliberalism probably deserves a lot of credit — but it is far from complete; most of South Asia is still very poor, and much of Africa is just beginning to industrialize. To curb the flows of trade and investment with these countries would be a grave abdication of the US›s international and humanitarian responsibilities.

Second, neoliberal policies might have led to faster productivity growth in the 1990s and early 2000s: Contrary to popular belief, wages also increased during that period. The spurt of growth is commonly attributed to the information-technology boom, but that boom might not have been possible if the US had more strictly regulated emerging industries in order to protect favored incumbents.

Tribune News Service