After neoliberalism

Across the West, faith in liberal democracy is waning. We need a clear response to the new politics of grievance.

When Thomas Piketty’s Capital in the Twenty-First Century was first published in English, a decade ago this April, the institutions and economic orthodoxies that underpinned the postwar Western order had been thrown into doubt by the financial crisis of 2008.

Mr Piketty’s book, drawing on a mass of historical tax data, showed that neoliberalism – the reigning capitalist ideology in the West since the late 1970s – had undone the post-1945 settlement. As they privatised, deregulated and offshored their industries, developed economies turned away from equality and faster growth, towards a world defined by slow growth and severe inequality. Incomes would fail to keep up with the inheritances, rents and asset growth of the idle rich. The West, Piketty declared, had returned to a Victorian age of “patrimonial capitalism”.

The political scene of a decade ago appears mild and orderly compared with what followed. Since 2014, a series of crises has convulsed the world: Britain’s departure from the European Union; the election (and possible re-election) of Donald Trump; the deterioration of US-Chinese relations; the Covid-19 pandemic and enforced national lockdowns; and soaring consumer prices and energy shocks caused by the war in Ukraine – all of which have unfolded against the backdrop of the escalating climate emergency and widespread economic dysfunction.

In an interview on page 32, Mr Piketty predicts that the emerging order in Western democracies will be defined by a “confrontation between some form of neo-nationalism and a form of new democratic socialism”.

We are sceptical about such a conclusion. Across Europe and in the United States, there is greater bipartisan agreement between political parties and social movements on the left and right about the role of an active state at a time of geopolitical flux and corporate power. National resilience has replaced market efficiency as the emerging economic common sense.

At the same time, however, across Western societies new social and political movements are appearing, none of which maps neatly on to the traditional axes of left and right, nationalist and social democratic, freedom-loving and authoritarian, rural and metropolitan.

In an essay for the New Statesman in November 2023, the geographer Christophe Guilluy described the anti-elite social movement in France as something that “cannot be understood using yesterday’s sociological or political models: some think it ‘social’ in the sense of left-wing, hard-left or even Marxist politics; others see it as right-wing, extreme-right, populist identity politics. Yet it cannot be labelled.”

A similar phenomenon can be observed in Germany. The Querdenker (literally, lateral thinkers) movement, which emerged during Covid in protest against lockdowns and vaccines, defies easy categorisation. Its supporters include hippies, green alternative-left politicians, libertarians and avowed members of the hard right. The academics Carolin Amlinger and Oliver Nachtwey have called this mix “libertarian authoritarianism”.

Amid this strange and contradictory new politics, parties are doing their best to pretend they have answers for everyone. The Chancellor, Jeremy Hunt, pretends he can reduce taxes and borrowing, while hiking income tax by record amounts (as inflation draws taxpayers into higher brackets) and pushing the UK ever deeper into debt. Rachel Reeves, the shadow chancellor, says she will make work pay for workers, while also planning to maintain low taxes on wealth. Neither will say how much more the UK (and the world) is going to have to spend in the new era of high debt, struggling public services and environmental instability.

The public knows that such contradictions cannot be sustained, and so faith in liberal democracy wanes; in its place a darker and more febrile politics emerges. Ten years since the publication of Capital in the Twenty-First Century, the simple dividing lines of the post-financial-crash era – rich vs poor, equality vs inequality – have been replaced by competing narratives. In the battles over 15-minute cities and ultra-low emission zones, migrant crossings and farm subsidies, a new politics of grievance is being formed.

It falls to Labour to name and define this new political era, as it seeks to offer a brighter future for Britain.

[See also: Bidenism comes to Britain]