Economic Theory, Politics and the State in the Neoliberal Epoch

In the decade since the 2008 financial crisis, the literature on economic ideas has exploded in the popular and academic fields, as the aura of inevitability of the dominant neoliberal ideas crumbled along with the balance sheets of the leading financial houses of the global financial system. In contrast to earlier economic crises, however, this time we have seen no subsequent shift in the scientific and policy paradigm within economics, as we did with the rise of Keynesianism after the great depression, or the advent of neoliberalism after the crisis of the 1970s.
Despite the loss of credibility and legitimacy of the ruling neoliberal paradigm of liberal neoclassical economics, relatively little has changed in the way economics is taught at universities or how macroeconomic policy is conducted and analysed in finances ministries or central banks across the world. It is in the light of this situation that this thesis tries to develop and apply a materialist approach to the study of the political influence of economic ideas. The aim is to deploy a framework that takes seriously the power and significance of economic ideas, but at the same times recognises their embeddedness in broader economic and institutional contexts, and considers the complex interplay between states, social forces, ideas and political actors.
This is done through five individual articles that each try to intervene in the debates around the influence of economic ideas and the nature of neoliberalism, outlined as follows.
Ruling the Interregnum: Economic Ideas and Authority in Non-Hegemonic Times deals with the apparent lack of change in economic ideas and policy after the crisis. Through a comparison to earlier economic crises and with theoretical inspiration from Gramsci, the article develops a notion of the interregnum. This is a period after the breakdown of one hegemonic paradigm and the successful rise of the next. As these periods can last for decades they deserve further attention in the IPE literature.
The second article, Economic Liberalism and the State: Dismantling the Myth of Naïve Laissez-Faire, deals with the prevailing understanding of the state in critical political economics scholarship and liberal economic theory. In recent years, much of the work on neoliberalism has emphasised that neoliberal theorists and practitioners have generally had a much more positive view on state power than the traditional idea of the liberal night-watchman state would suggest. While this undoubtedly is correct, the idea is often construed by contrasting this with a caricature of classical liberalism, which is described as seeking a naïve realisation of just this so-called night-watchman state. Through an investigation of 19th century liberal theory and practical policy, the article argues that this is incorrect, but that classical liberalism also involved a pragmatic and active use of state power. This invites a general reinterpretation of the relationship with the state in economic liberalism, inspired by the works of Karl Polanyi.
Beyond States vs Markets: Macroeconomics, Governance and the State, revisits the central macroeconomic debates of the 1970s, where a new generation of market-oriented neoclassical economists such as Lucas and Sargent overturned the dominant Keynesian theories that had dominated the post-war era. Normally this wave of New Classical Macroeconomics has been understood as a general critique of government intervention in the economy. But through a contextualised reading of the central papers of the debate, the article uncovers the fact that it is not so much political intervention and discretion that are criticised, but rather the democratic form that this took in the post-war period.
Neoliberalism with Scandinavian Characteristics: the Slow formation of Neoliberal Common Sense in Denmark shows the gradual adoption of a neoliberal paradigm in the Danish macroeconomic establishment since the 1970s. Based on a systematic analysis of documents from the Danish government and the Economic Council, the paper argues that the nature of this paradigm shift is more uneven and gradual than the literature traditionally suggests. Furthermore, the adoption of new strict monetary and fiscal policies was already in place from the early 1980s, before the intellectual tools of the new paradigm were dominant and developed. This suggests that it was not the intellectual dominance of liberal ideas that caused the initial adoption of neoliberal policies, but that economic theory instead played a legitimating role.
The last article, Embedded Expertise: A Network Analysis of the Danish Economic Council, offers a social network analysis approach to the study of the connection between academic economists and the general power elite within business and the state. The article represents the first attempt at situating academic economists within the wider elite networks, through a case study of Denmark. The analysis is focused on the Economic Council and the position and networks of the highly influential economists from the council’s presidency, where many are centrally placed in the elite networks of the country. The focus of the article is primarily empirical, by demonstrating the effectiveness of the methods of social network analysis as a supplement to more traditional analysis focused on formal institutions.