The Politics of Free Markets: The Rise of Neoliberal Economic Policies in Britain, France, Germany, and the United States

by Monica Prasad

The attempt to reduce the role of the state in the market through tax cuts, decreases in social spending, deregulation, and privatization—“neoliberalism”—took root in the United States under Ronald Reagan and in Britain under Margaret Thatcher. But why did neoliberal policies gain such prominence in these two countries and not in similarly industrialized Western countries such as France and Germany?

In The Politics of Free Markets, a comparative-historical analysis of the development of neoliberal policies in these four countries, Monica Prasad argues that neoliberalism was made possible in the United States and Britain not because the Left in these countries was too weak, but because it was in some respects too strong. At the time of the oil crisis in the 1970s, American and British tax policies were more punitive to business and the wealthy than the tax policies of France and West Germany; American and British industrial policies were more adversarial to business in key domains; and while the British welfare state was the most redistributive of the four, the French welfare state was the least redistributive. Prasad shows that these adversarial structures in the United States and Britain created opportunities for politicians to find and mobilize dissatisfaction with the status quo, while the more progrowth policies of France and West Germany prevented politicians of the Right from anchoring neoliberalism in electoral dissatisfaction.

Genres: Economics, Politics, History

328 pages, Paperback

First published July 17, 2006

Reviews

[Yisu Z. · Rating 5 out of 5]

一边读一边感慨，怎么能写的那么聪明？把一个一直以来的意识形态问题在一个结构化框架下分析，政治光谱的移动，选举政治导向的不同造成了经济政策完全不一样的结果，真好。

[Martin · Rating 4 out of 5]

The politics of free markets is a strong compliment to the literature on comparative welfare states (Esping-Anderson, Korpi-Palme etc.), although her book also touches on industrial policy and regulation.

I’m particularly intrigued by attempts to explain why political events occurred, with comparative case studies of different countries. In order to find out if different ‘worlds’ are possible, it’s necessary to look at different worlds that already exist. However, it is incredibly difficult to gain clear insights from broad groupings of countries, and simplifications are inevitable. With that said, Prasad makes a noble attempt to make sense of the messy data she is forced to deal with, going at lengths to be systematic, for example, by thoroughly explaining and justifying why she would choose a particular source to draw on. Overall, she makes some useful observations, challenges my views, and comes to some conclusions that I hope are not true.

Prasad makes the consistent point that ‘adversarial’ policies towards business and the wealthy and in favour of the disadvantaged tend to draw more backlash leading to greater chance of neoliberal reform. She observes that unions were temporarily very unpopular in Britain (due to strikes and their opposition to wage freezes in response to out of control inflation), which contributed to Thatcher’s political success. Similarly, she argues that the targeted nature of welfare in the U.S. and targeted (progressive, and visible) tax system in the U.S. was ‘adversarial’ and thereby vulnerable to neoliberal reform.

Here, she draws on the Korpi-Palme “Paradox of Redistribution” thesis, which argues that more targeted attempts at redistributing income is less likely to help the poor partly because it is more likely to be retrenched by a lack of coalition support. I find this story somewhat plausible, but also very troubling. This means we only want to help the poor if it helps us too, or if the aim of helping the poor is hidden or indirect. I find this troubling because I think we should have more solidarity as a society and help those less well off.

I also wonder if it’s harder to get more universal programs going right now. If our legacy universal programs are not helping the poor, it will be difficult to get started with them now.

With that said, not everyone agrees with Prasad that targeted welfare programs are more likely to fail polically. Peter Whiteford and Lane Kenworthy defend both the desirability and political feasibility of targeted programs. This question is one of my key sources of interest in comparative welfare state research: can we as a society truly have solidarity or will we only support the poor if support for the poor is depoliticized or hidden?

Prasad is quite unconvinced by the ‘economic determinism’ of the Varieties of Capitalism school for explaining different styles of capitalism found in different countries. Her section on Germany in particular torches Varieties of Capitalism, by pointing out that contrary to their thesis that German capitalism actually prefers certain types of state intervention to aide in the building of high value products, German business interests have been explicitly neoliberal in their advocacy.

Prasad finished with a discussion of the pros and cons of ‘adversarial’ policies and asks whether or not adversarial and ‘pro-growth’, ‘regressive’ policies can be switched in different countries. I wonder if Prasad would consider the Nordic model to be ‘adversarial’- I would guess not, based on their more universal social services and reliance in part on regressive sales and sin taxes (Lindert, Peter 2004, 2021). However, the Nordic model is also not regressive, despite the use of sales and sin taxes, certainly not like France, I would think. It would have been helpful for Prasad to include a Nordic country in her analysis. With that said, Prasad was able to rely on her own translations in the case studies that she used.

[Deetz · Rating 4 out of 5]

Good book！This is a book that will not be recommended to everybody but will definitely be mentioned in discuss about related issues.