The power of economic ideas – through, over and in – political time: the construction, conversion and crisis of the neoliberal order in the US and UK

ABSTRACT

In recent years, scholarly concern for ‘great transformations’ has yielded to a stress on ‘gradual transitions'. In thiscontribution, I offer a discursive institutionalist model of the shifts in ideational power which drive order construction, consolidation and crisis. First, I argue that leaders exercise rhetorical power through ideas, employing communicative appeals to shape principled beliefs. Second, I argue that élites employ epistemic power over ideas to consolidate intellectual consensus. Finally, I posit that as structural power in ideas assumes a life of its own, this breeds overconfidence and crisis. Empirically, I then track the development of the neoliberal order over Reagan's and Thatcher's use of power through ideas in constructing principled restraints on the market power of labour, Clinton- and Blair-era efforts to concentrate power over ideas in central banks, and the structural power of New Keynesian ideas that obscured concentrations of financial power, culminating in the global financial crisis.

KEY WORDS:

• Crises
• discursive institutionalism
• Keynesianism
• macroeconomic policy

ACKNOWLEDGEMENTS

For comments, I owe debts of gratitude to Daniel Béland, Martin Carstensen, Zim Nwokora, Susan Park, Craig Parsons, Leonard Seabrooke, Vivien Schmidt, Eleni Tsingou, and participants at the 2014 Copenhagen Business School Conference on ideas and power. I also gratefully acknowledge the support of an Australian Research Council Future Fellowship (FT100100833) and Discovery Grant (DP130104088).

Notes

1 On punctuated and incremental change, see Mahoney and Thelen (2010); Moschella and Tsingou (2013); on political orders and political time – defined with respect to stages of order development – see Skowronek (1993). The key advantage of a stress on political time is in moving beyond a paradigmatic focus on discrete rational choices in favour of a stress on sequential inefficiencies that can cause mounting instabilities.

2 On paradigmatic debates, see Jackson and Nexon (2013).

3 For an overview of institutionalisms, see Hall and Taylor (1993); in an International Relations setting, see Fioretos (2011).

4 While Mahoney and Thelen (2010) view institutional rules as ambiguous, they do not view the underlying distribution of power in this light – and so theirs is a constrained view of ambiguity's scope. On ambiguity, see Best (2005).

5 Margaret Thatcher, interview for Woman's Own (‘No such thing as society’), 23 September 1987, available at http://www.margaretthatcher.org/document/106689 (accessed 2 December 2015).

6 To be sure, the early neoliberal order was marked by the use of efficient markets rhetoric to justify legal moves to fragment labour's power. However, just as Paul Volcker's embrace of monetarism served an instrumental purpose in enabling the Federal Reserve to raise interest rates – as Volcker abandoned monetarism in 1982 – efficient markets rhetoric would be qualified to recognize the role for monetary policy in stabilizing market expectations. Mankiw (2008) concedes as much in noting that ‘At the broadest level, new Keynesian economics suggests –in contrast to some new classical theories – that recessions are departures from the normal efficient functioning of markets.’

Additional information

Notes on contributors

Wesley Widmaier

Biographical note

Wesley Widmaier is a senior lecturer in the Griffith University Centre for Governance and Public Policy.