Neoliberalism didn’t Fail and isn’t Dead, Yet

Remember that famous scene in Monty Python and the Holy Grail? The one where a man is pushing a cart full of bodies through a village during the plague crying, “Bring out your dead!” and someone deposits what he claims is a corpse, only for the body to cry out, “I’m not dead yet!”? Well, much the same could be said for neoliberalism, which is at peak opprobrium, and widely derided as a multi-decade failure that has produced Trump and populist backlash around the world. With the threat of trade and tariff wars looming larger than ever—amplified by the president-elect’s social media threats to slap 25% tariffs on Canada and Mexico—the proverbial final nails appear to be headed into the neoliberal coffin.

Perception, however, is at odds with reality. Neoliberalism did not impoverish the middle class. Instead, it led to an explosion of global wealth, with billions of people in China, India, Southeast Asia, and Latin America as the primary winners, while some tens of millions in Europe and the United States suffered the consequences of displaced industries. The system worked beyond the wildest dreams of global flourishing, though yes, thousands of global corporations and countless wealthy individuals reaped disproportionate rewards along the way.

But the system did not fail. What failed in the United States, especially, was the government’s inability to provide an adequate cushion for those most directly harmed.

And not only didn’t it fail, it also isn’t dead. In fact, there is more trade between nations than ever before, in a far more complex, decentralized, and non-U.S.-centric lattice, and that shows no sign of significant retreat.

Neoliberalism is a wonkish term for the economic orthodoxy that prevailed in most Western nations from the 1980s until now-ish. It is also not an exact term. It can mean a free-market society with a robust set of government institutions meant to tame the excesses of the free market. But as applied to the international economic system, neoliberalism became a catchall for a system of fewer trade barriers, more tariff-free commerce between countries, a global supply chain where production went to where it was least expensive (a version of Ricardo’s law of comparative advantage), and capital flowed to where it could yield the highest return—all of it unencumbered by state barriers and controls on goods, capital, or services.

The pinnacle of neoliberalism was the formation of the European Union in 1992, NAFTA in 1994, the entry of China into the World Trade Organization in 2001 and the rapid globalization of supply chains that followed. Even as it rose, the counter-reaction was evident: violent protests in Seattle against the WTO in 1999; disquiet over outsourcing to China in the 2000s; and Democratic presidential candidate John Kerry’s accusations against US “Benedict Arnold CEOs” who moved factories. Then came the global financial crisis of 2008–2009, which many saw as the emperor-has-no-clothes moment for neoliberalism. Yet while the financial system recovered, industrial heartlands in the United States and Europe did not, which in turn helped fuel the rise of today’s populism.

It took election of Trump in 2016, and then the election of Trump in 2016, followed by the domestic industrial focus of Biden, to cement the turn away from the open-trade, fewer-barriers approach to global economics. Biden did not lift Trump’s China tariffs, and his administration aggressively pursued a policy of promoting domestic industries in green energy and semiconductors, in stark contrast to the laissez-faire attitudes of the past decades. And now we face Trump 2.0 and the promise of trade wars and a world of economic nationalism and retrenchment.

Read Will the Coronavirus Bring the End of Globalization? Don’t Count on It, an article I wrote in March of 2020

And yet, for all the passionate anger against the neoliberal order of the past 40+ years, the world remains deeply interconnected and dominated by trade of goods and services that dwarfs whatever previous generations experienced.

To wit, in 1999, when those protestors violently railed against globalization in Seattle, the value of global trade in merchandise was just over $5 trillion dollars. That was on a global GDP of about $30 trillion so trade was about one-sixth of that. In 2023, trade in merchandise was about $24 trillion on a global GDP of just over $100 trillion, making trade about a quarter that. Trade in services, which is hard to measure, is another $6-7 trillion at least, whereas in 1999, services trade was much more modest. While trade has dipped slightly in the past two years, it is now a far greater share of global economic activity than ever before.

Trade patterns are also morphing. It is no longer resource-rich countries selling oil, minerals, and commodities to the developed nations of the West and East Asia. It is now everyone selling something to everyone and everyone buying stuff from everywhere. The arrows used to be simple, with the developed world sending raw materials and the industrial powerhouses, and the U.S. most of all, selling finished goods to the world. Now the lines go from Africa to Asia, from Asia to Latin America, from Latin America to Africa, and Africa to Europe, and Europe to the United States, and the United States to everywhere. Hundreds of lines now link nations, peoples, and companies in unprecedented ways.

In the process of that explosion of commerce, the world became vastly richer, and average incomes across the world rose from about $5000 per person to about $17,000 per person in constant dollars (meaning inflation-adjusted). That tripling of income is directly correlated to trade, and hence to the very neoliberalism currently derided.

What many countries failed to account for, however, was that millions and millions would be negatively impacted even as billions benefitted. In fact, even those uprooted and displaced in the United States ended up with less expensive material goods, albeit at the cost of shattered communities. Cheaper stuff not withstanding those harmed in the United States were essentially left in a wasteland. Hence the plaintive J.D. Vance bestseller Hillbilly Elegy that catapulted him to the senate and now the vice-presidency. You can’t tell actual humans to celebrate a system that benefitted others and harmed them. You could have - we could have – cushioned those harms. That was vaguely understood in the early 1990s and was brilliantly captured in the book and then the movie Primary Colors in 1998. If only actual politicians had such cinematic wisdom.

And now, we hear constantly that it’s done. It’s failed. It’s over. But it’s not. And it didn’t.

A 2025 trade war could certainly alter the trajectory. But the sheer domestic cost of tariffs everywhere will likely doom those efforts. You can instantly raise tariffs. You can’t instantly turn back the clock on global supply chains and interwoven economies, and much of the world doesn’t want to and cannot afford to.

Those China tariffs for the past six years have succeeded in getting U.S. and foreign companies to move new production away from China, but not back to their home countries. Instead, those tariffs made the world even more global as companies moved into Vietnam, Thailand, Turkey, Mexico, Egypt, the Philippines, to name a few. Trump hopes that his new tariff regime will force production away from those countries and back to the United States, but without enough laborers and attractive costs in the United States, that is impossible. There may be some real economic pain caused by this tariff experiment, and it is likely doomed to fail in the face of the world as it now is—a world far more powerful than the fantasy some want to create.

We live in a more interconnected world than ever. We live in a more prosperous world than ever. And we live in a world where a vast number of people are angry and unsatisfied. Neoliberalism may be banished as term, but its structure remains our collective exoskeleton whether we like it or not. And in much of the world, the connections between nations continue to grow, becoming deeper and more varied, even as the United States tries to turn inward. That will also not succeed. The fact remains: neoliberalism didn’t fail, and it isn’t dead. Not yet. And likely not after four years of Trump’s strong efforts to kill it. We will see, but for now, I’m betting that the forces that have unleashed untold prosperity globally will be more powerful than the forces seeking to end that.