Neoliberalism Is Over – Welcome to the Era of Neo-Illiberalism


By Reijer Hendrikse | openDemocracy*

Big tech, nationalist politics, and the billionaire class have propelled a novel political economy. What impact will the virus have on this new status quo?

Jan Scheunert/Zuma Press/PA Images

Crisis redux

As the coronavirus and its political combatants hold the world hostage, it is pertinent to scrutinize the (geo) political and economic context within which the pandemic has emerged. Many analyses view neoliberalism as the culprit, having given rise to a dismantling and marketization of public services such as healthcare for which we are now paying the price.

The virus confirms the bankruptcy of neoliberal capitalism, based upon global production networks of western corporations and Chinese factories, allowing the virus to spread across the globe. Alas, neoliberalism is in trouble once again, perhaps terminally ill.

That said, the death of neoliberalism has been pronounced before, not least in the wake of the 2007-08 financial crisis, from which it however quickly resurfaced stronger than before. Moreover, western neoliberalism has witnessed a significant mutation over the last years, not least to better accommodate the changing logics of global capitalism.

The coronavirus offers an opening to change the world for the better, not least by undoing decades of neoliberalization to give vital professions in health care and education the appreciation they deserve.

Unfortunately, as detailed in Naomi Klein’s ‘The Shock Doctrine‘, crises also offer ample opportunity for the established order to realize ambitions which are inconceivable in normal times.

The global political economy before the outbreak of corona was defined by the rise of a global billionaire class, tech platforms, and illiberal(izing) nationalist politics, having jointly propelled a novel wave of (geo) political-economic restructuring which I have called neo-illiberalism. What will be the effects of coronavirus on this new status quo?

The new normal

Alongside the 2008 financial crisis, the votes for Brexit and Trump have often been described as ruptures to the neoliberal status quo. But as in the wake of 2008, the aftermath of 2016 also brought about more of the same: more tax cuts for corporations and the rich, more environmental and financial deregulation, more cuts in public services i.e. more policies of neoliberal signature.

That said, the politics peddling the same neoliberal policies has substantially changed. Where preceding waves of neoliberalization have been variably executed by centrist parties, seeing the center right commit itself to progressive politics in exchange for center-left support for economic neoliberalization, since 2016 a new alliance has emerged between center and far right, seeing the latter mainstream as center-right parties such as the US Republicans and UK Conservatives have steadily radicalized themselves, thereby forsaking their erstwhile commitment to what Tariq Ali has called ‘the extreme center’.

Notwithstanding the fact that center-right parties co-produced the neoliberal world order, they have since come to reinvent themselves as nationalist challengers to the ‘globalist’ status quo, which they habitually present as leftist.

Where preceding waves of neoliberalization resulted in the limitation of democratic control over economic policymaking, the present nationalist wave captained by Donald Trump and his copycats is defined by efforts of political illiberalization, brazenly seeking to undo the institutional setup of liberal-democratic checks and balances, seeing legislative and judicial branches of government subjected to a power-hungry executive.

Wider societal counter-powers are also under attack, from academia and media to NGOs, along with attacks on a range of constitutional basic and/or fundamental rights constraining the illiberal exercise of absolute power. While this development heralds the end of progressive neoliberalism, political illiberalization ultimately still protects the encasement of global capitalism, the core aim of the neoliberal project.

The rise of neo-illiberalism might be compared to a virus, whereby western liberal democracies increasingly come to resemble illiberal democracies and (competitive) authoritarian regimes elsewhere. Where illiberalizing regimes in Hungary and Poland are infecting the neoliberal European Union (EU) as a whole, not least because of center-right political cover offered by the European Peoples Party (EPP), neo-illiberalism constitutes a fundamentally global phenomenon.

For example, Brazil and India have recently embraced political illiberalization without rejecting neoliberal economics, whereas illiberal China and Russia have equally tightened their authoritarian rule. Amongst others, what unites these and other regimes is the mobilization of divisive nationalisms, seeing variegated ‘strongmen’ adapt state constitutions to their will, typically bulldozering pluralist political space whilst shielding the respective neoliberal interfaces between national economy and global capitalism.

Global capitalism

To grasp the rise of neo-illiberalism we need to go back to the turn of the millennium, a time in which the various developments culminating in the neo-illiberal synthesis were put in motion. Next to the terrorist attacks on US soil which ignited the gradual mainstreaming of far-right narratives, the year 2001 is characterized by the entry of illiberal China into the neoliberal World Trade Organization (WTO).

Meeting in serene Doha following the riots of Seattle, China’s WTO entrance heralded a larger geographical shift captured by the famous BRIC acronym (Brazil, Russia, India, China) coined that year by Goldman Sachs economist Jim O’Neill. O’Neill foresaw stronger economic growth in the non-west, and called upon western leaders to incorporate leading non-western states into key governance platforms, which was realized later that decade by elevating the Group of Twenty (G20) as the world’s leading forum on global governance.

Alongside the search for new markets and cheap labor, the 2000s were characterized by the ascent of the financial offshore world – a legal realm comprised of tax havens and secrecy jurisdictions where corporations and the rich stash their cash and property – which became global capitalism’s central operating system by the turn of the millennium. Since then, offshore money from Russia and elsewhere flooded into cities like London, igniting a spending spree on real estate, football clubs, media conglomerates, and political influence.

Amongst others things, the offshore world enabled spectacular corporate fraud, such as that which led to the collapse of US energy giant Enron, whose accounting gimmicks were copy-pasted by western banks, setting the stage for the financial crisis later that decade.

The final key development traced back to the turn of the millennium is the birth of digital platforms. Invented by Google as what Susanna Zuboff calls ‘an automated architecture functioning as a one-way mirror’, surveillance capitalism has since grown into a worldwide machine dedicated to behavioral observation, manipulation and modification, steadily enmeshing itself with the core logics of capital accumulation.

Crucially, digitization accelerated the aforementioned trends: not only has digitization fueled global capital flight into offshore anonymity, it also augmented the mainstreaming of far-right narratives via YouTube and Facebook algorithms. Much like the invisible offshore world, the rise of surveillance capitalism largely went unnoticed, assisted by anti-terrorism legislation like the 2001 Patriot Act enabling far-reaching surveillance.

Growing up under the radar of the war on terror and financial turmoil, the first decade of the twenty-first century saw the birth of a fundamentally global, offshore, digitized and financialized hyper capitalism. Descriptions like shadow banks, phantom investments and dark money do not do justice to their role as fundamental building blocks of the new world. Amongst others factors, the offshore world was the ground zero of the financial crisis, where banks kept their toxic investments.

This new world is the ‘home’ of trillion-dollar tech companies, who with other (shell) companies form an integrated web of corporate structures whose chief ultimate owners constitute a global billionaire class of approximately two thousand individuals and families. As such, this is also the world where neoliberal technocracy is increasingly fused with oligarchy.

Due to the spectacular growth of income and wealth inequality worldwide, oligarchic enmeshment of the superrich and state power does not only define elites in Russia or the Gulf, but increasingly defines western states such as the US, where multibillionaire activists like the Koch brothers have effectively taken over the Republican Party.

Next to the economic recovery, the 2010s were defined by the increasing coalescence of financial and technology sectors. Within a development model labeled The Wall Street Consensus by political economist Daniela Gabor, an adaption of the neoliberal Washington Consensus within the framework of the G20, banks and financial institutions worldwide have come to embrace financial technology (fintech), driven by an insatiable hunger for personal data as raw materials for financialized surveillance capitalism.

Crucially, where Silicon Valley long enjoyed a global tech monopoly, the 2010s saw the arrival of Chinese bigtech vying for global dominance. The western financial lobby has voiced its fears of Chinese platforms like Alibaba and Tencent, which they describe as all American bigtechs ‘rolled into one’ operating under tight control of the Chinese Communist Party (CCP).

These fears are not unfounded: where Facebook encountered many difficulties in building a global cryptocurrency, the Chinese central bank has developed its own alternative, and the CCP has recently ordered China’s banks and tech platforms to adopt it. In the words of Mark Zuckerberg: the American state has to play a more active role ‘otherwise our financial leadership is not guaranteed’.

Whilst the rest of the world has steadily bought into Chinese technology, the other BRICs have embraced (parts of) China’s digital strategy. For example, where a small minority of India’s 1.4 billion population had a bank account in 2014, this number has since risen beyond a billion. That said, these bank accounts are coupled to biometric personal data, and critics identify this policy as part of Narenda Modi’s political agenda to transform India into a Hindu nationalist surveillance state.

Taken together, around the time the coronavirus made the first news headlines, the New York Times identified three competing visions on the future of surveillance capitalism: where the Chinese are ‘moving fast and breaking things’ without any regard for privacy and citizen rights, and the EU tries to make a moral point around privacy and consent, with the US caught in the middle.

Nationalist Leninism

Although ‘moving fast and breaking things’ is a good description for Xi Jinping’s China, it should be remembered that this philosophy has long guided Silicon Valley, where asking for forgiveness trumps begging for permission. The disruption of established industries, practices and processes defines platforms like Uber, operating without any regard for the law or basic decency. With the rise of western neo-illiberalism, moreover, this philosophy has also entered into government.

Brexit, for example, is best understood as a process of continuous disruption of established political practices and procedures, from shunning press conferences to unlawfully closing down parliament. As The Economistnoted: ‘The Tories’ disruptive strategies would not be out of place in Silicon Valley’.

Where rampant digitization has disrupted a range of established industries since the turn of the millennium, and set its sights on incumbent finance in the wake of the financial crisis, the 2010s are marked by tech’s infiltration of established politics. Where Facebook and Google place their own employees in US political campaigns ever since the rise of Barack Obama, an entire ecosystem of techno-metapolitical players has since grown up around these platforms: next to dedicated bots and troll farms there now exists a media network dedicated to mainstream far-right narratives, of which Breitbart News – financed by US billionaire Robert Mercer, captained by the identitarian demagogue Steve Bannon – is the most prominent.

The adoption of far-right narratives by established media, whether global corporate players like NewsCorp or national public broadcasters, brought right-wing culture wars into the established arena of mass-mediated politics.

Other crucial players in this ecosystem are data analytics firms, like Cambridge Analytica (CA), again featuring Mercer and Bannon, as well as Palantir Technologies owned by US tech billionaire Peter Thiel.

Where CA founder Alexander Nix was schooled at the elitist Eton College alongside David Cameron and Boris Johnson, Thiel not only enjoys the ear of Trump as advisor, but also those of Mark Zuckerberg as Facebook board member, where he kept the company from fact checking political advertisements.

Where US journalist Jane Mayer speaks of ‘the Fox News White House’ to highlight the close relationship between Trump and the world’s second most powerful media magnate, in the digital age the world’s first Twitter presidency might equally be labeled the Facebook White House to emphasize the ways in which Trump has become a digitally mass-mediated virus enabled by the world’s most powerful media magnate. As argued by Trump’s digital campaign manager: ‘without Facebook we wouldn’t have won’.

The global rise of neo-illiberalism is covered with the fingerprints of tech firms: where WhatsApp-mediated memes helped Jair Bolsonaro assume power in Brazil, the Philippines’ Rodrigo Duterte was an early adopter of Facebook’s political capabilities.

Once in power, moreover, these ‘strongmen’ act like disruptive tech CEOs whilst demolishing liberal democracy, and embrace surveillance tools to anchor their rule: in India, for example, encrypted WhatsApp was recently found to be hacked, allowing Modi to track his political opponents. But although Israeli spyware and Russian hackers play an important role in the cross-border spread of neo-illiberal politics, to fully grasp the political possibilities of the digital age we need to redirect our gaze to Beijing, where digital technology is paramount in the exercise of social control.

In combining economic neoliberalization with illiberal political control since the late 1970s, the CCP has been one of the world’s neo-illiberal vanguards. Experts describe the governing ideology of the CCP as a curious combination of nationalism and Leninism, following China’s ideological rejection of both the French and Russian revolutions, which according to Wang Hui shaped up after the Cultural Revolution and was settled on Tiananmen Square. Crucially, the rejection of ‘two major emancipation movements – socialism and liberalism’ – is exactly what the western far right is after.

In other words, what emerges under neo-illiberalism is a global ideological convergence. Just consider this: at the height of the so-called European ‘refugee crisis’ in 2015, which accelerated the mainstreaming of far-right narratives across the west, neo-illiberal China also saw the emergence of its own Alt-Right lingo for ‘libtards’ or ‘regressive liberals’, with derogatory terms like baizuo (白左)i.e. ‘white left’ popping up across the blogosphere.

Since 2016, this cocktail of nationalism and Leninism has put its mark on the west, with nationalist projects like America First! and Brexit being guided by self-proclaimed Leninists, like Bannon or Boris Johnson’ advisor Dominic Cummings. Enabled by far-right culture wars informed by another communist – Italian Marxist Antonio Gramsci – these disruptive Leninists have set their eyes on breaking down liberal democracy and the rule of law.

To do so, they pretend to represent ‘the will of the people’, and relentlessly discredit the core infrastructure of liberal democracy, framing its key institutions as ‘enemies of the people’, ‘saboteurs’, and ‘traitors’. In the words of Bannon, the identitarian toyboy of the billionaire class: ‘Lenin wanted to destroy the state, and that’s my goal too. I want to bring everything crashing down, and destroy all of today’s establishment’.

Alibamazonia

Where economist Branko Milanovic foresees a global clash between two ideal type political operating systems in the twenty-first century – liberal capitalism captained by the US, versus political capitalism championed by China – in reality the two have already substantially converged. Reduced to its core, where China and the non-western world opened up economically in the image of the US and the west in the closing decades of the twentieth century, today you can tentatively argue that the US and the wider west are politically closing up in the image of China.

The new synthesis is neo-illiberalism, which speaks to what Thomas Piketty views as ‘merchant nativism’ i.e. the marriage between neoliberalism and identitarian nationalism. Besides emphasizing a process of reglobalizationrather than deglobalization, the rise of neo-illiberalism also suggests that the center of capitalist gravity has shifted: where parts of the traditional periphery have steadily assumed characteristics of traditional core countries, the west has witnessed a reverse process of what the late Immanuel Wallerstein calls semi-peripheralization. In the words of Martin Wolf: ‘as western economies have become more Latin American in their distribution of incomes, their politics have also become more Latin American’.

Where historian Neill Ferguson once spoke of ‘Chimerica’ to emphasize the co-dependent relationship between the world’s two superpowers, today we can identify the contours of what you might call ‘Alibamazonia’: a twenty-first century imperial federation of techno-nationalist states, i.e. a global alliance between nationalist ‘strongmen’ and digital platforms. The relationship is symbiotic, as the rollout of digital surveillance requires the rollback of liberal democracy by design, which in turn strengthens illiberal political rule. In the words of Susanna Zuboff: ‘surveillance capitalism takes an even more expansive turn toward domination than its neoliberal source code would predict … Though still sounding like Hayek, and even Smith, its antidemocratic collectivist ambitions reveal it as an insatiable child devouring its aging fathers’. Indeed, digitization and surveillance not only disrupt Smithian competitive markets, but also Lockean notions of private property, and ultimately threaten to undo all liberal guarantees of individual freedom.

Besides heralding a territorial shift from west to east, amongst others symbolized by the United Nations’ (UN) recent contract with China’s WeChat (Tencent) to streamline its digital communication, neo-illiberalism also heralds a fundamental reconstitution between national and global scales, respectively understood as public and private spaces, whereby decades of neoliberalization transformed the former in the image of the latter, whilst the latter has witnessed an extraterritorial shift into digital and offshore domains, giving rise to private capitalist power of vast proportions, eating away at national states and international state systems.

This is the most banal explanation for the western rise of neo-illiberalism: where decades of neoliberalism effectively put up the west for sale, neo-illiberalism heralds the moment when neoliberalism’s ultimate winners seek to buy up and privatize government itself: ‘neoliberalism’s final frontier’.

Pandemic

Although coronavirus might be the final death knell to neoliberalism, it should be remembered that neoliberalism is a highly mutable ideology – well equipped to utilize its own failure for its advancement. Put differently, if neoliberalism is dying, we are looking at a slow-motion demise: where some identified its imminent death after the dotcom crash at the turn of the millennium, neoliberalism certainly lost its self-explanatory aura after the financial crisis of 2008.

Accordingly, although still carried forward by a centrist consensus, western neoliberalism became more authoritarian. And where 2016 saw the centrist consensus collapse, seeing neoliberalism’s core economic project carried on by a decisive illiberal politics, the question is whether today’s coronavirus will bring an end to the economic project. For example, the key pillars of that project, such as global capital mobility and central bank independence, are still standing. Furthermore, although non-neoliberal policies might well be enacted to stem the virus, like introducing capital controls, these might be temporary measures to save the project in the long run.

That said, if coronavirus proves to be the final death knell to neoliberalism, which even the Financial Times alludes to, it still might prove a blessing for core features of neo-illiberalism.

For example, where the virus is regarded as an indictment of neoliberal globalization, it nonetheless fuels the rollback of liberal democracy and rollout of digital surveillance. Indeed, for the world’s faux Leninists and tech billionaires the virus is the ultimate disruptive event to be exploited. Where the US Republicans have used the pandemic to legislate neoliberal tax breaks and deregulation, as part of a rescue package that trumps the 2008 financial bailout, we should not underestimate the extent to which Trump might exploit the pandemic for his own benefit, not least to escape the prospect of electoral loss and prosecution.

Many ‘strongmen’ are embracing the virus to anchor their rule, not least Victor Orbán cynically exploiting the virus to accelerate Hungary’s transformation from liberal democracy towards illiberal dictatorship, with the EU once again looking the other way, thereby confirming its own neo-illiberal corrosion.

Where many countries have yet to setup mass testing capabilities to track the virus and create viable paths out of societal lockdowns, a whole range of states have watered down privacy legislation to digitally track the virus, including left coalition governments like Spain. In this sense, the virus has led to a reboot of neoliberalism’s famous TINA mantra – there is no alternative – because who cares about far-reaching surveillance when lives are at stake? As argued by Jamie Bartlett, ‘the looming dystopia to fear is a shell democracy run by smart machines and a new elite of ‘progressive’ but authoritarian technocrats’.

Mimicking core features of China’s fin-tech-state integration, Apple and Google have joined forces to allow governments to track the virus, whereas the US government has promised to rollout a digital dollar and wallet as part of its coronavirus rescue package. Indeed, the virus is a financial bonanza for tech companies, not least Thiel’s Palantir having signed a contract with the British National Health Service (NHS) to optimize data management. In one of his first acts to tackle the virus, Dominic Cummings invited all bigtechs to Downing Street. As noted in Wired magazine: ‘for Cummings it’s big tech versus bad virus’. Palantir is currently in talks with governments across Europe.

Across the globe, the virus is spurring the development of digital apps, using locational data and facial recognition technologies to track population health and whereabouts. In India, Modi’s henchmen are forcing citizens to take hourly selfies to track the virus through their whereabouts, and non-compliance will result in enforced mass quarantine, where catching the virus seems all but certain. In so doing, coronavirus threatens to deepen the ugly face of neo-illiberalism, defined by mass incarceration programs, from Uighurs in China’s Xijiang to refugees indefinitely locked up along the Mediterranean and the US-Mexican border.

And whilst the pandemic has yet to reach the world’s favelas and slums, threatening the lives of the most vulnerable, lax responses to the virus in the developed world characterized by defunded health care systems are making neoliberalism’s implicit social Darwinist inclinations shockingly explicit.

As the rise of neo-illiberalism signals profound geopolitical and economic shifts, the pandemic might well be utilized to rewire the world’s legacy operating systems. Are we moving towards a financial reset, which was due in 2008 but was postponed via monetary gymnastics?

Will China liquidate its massive holding of US treasuries? Will the world’s superpowers ramp up the threat of war or will they compromise, or are we already looking at the contours of a new settlement?

Furthermore, with the world economy falling off a cliff, and the worst still to come, many small-and-medium-sized enterprises are facing bankruptcy, whilst Amazon and a handful other bigtechs are massively expanding their businesses. What will the post-corona world look like? Will capitalism survive?

While we anticipate what might be coming, one of the biggest societal disruptions is the loss of conventional social exchange, of physical closeness and contact, as we are all locked up in our homes, forcing into digital interfaces, continuously leaking data into the expanding machine of surveillance capitalism.

Although there momentarily is no alternative, we’d better make sure we seize the moment: the disruptive virus offers an incredible prospect for societal reprogramming, for better and for worse. Lest we forget that this crisis is not merely biological – it is deeply political.

This essay is based on a longer academic article currently under peer review. A digital copy might be available from the author upon request (reijer.hendrikse@vub.be).

*Reijer Hendrikse is a postdoctoral researcher based at Vrije Universiteit Brussel, Belgium.

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