Neoliberal Fiscal Policy Making in Times of Crisis

• In Event: European Crises and Crisis Management

Abstract

The global financial and coronavirus crises have presented two of the greatest threats to global capitalism in nearly a century. In 2008, advanced industrialized economies spent vast sums of money cushioning the blow to their domestic economies and attempting to restore growth. In hindsight, the fiscal response in the advanced economies exacerbated pre-existing inequalities and was quickly overtaken by a turn to austerity. In contrast, the response to the coronavirus crisis has been hailed as evidence of a “paradigm shift” in fiscal policy making, with the most striking contrast observed in more neoliberal economies like the United States and the United Kingdom. The US and the UK spent over $6 trillion between 2020-2021 to increase social spending and benefits for the unemployed, subsidize businesses to retain employees, and support consumer spending across the income distribution. How can we explain this marked shift? Contrary to widely voiced hypotheses that policy makers are responding to a growing populist demand for expansionary fiscal policy born of the great recession, I argue that diminishing public approval of austerity policies in the period following the 2008 financial crisis is insufficient to explain the difference in approach between 2008 and 2020. Instead, relying on analysis of elite interview data combined with a content analysis of think tank reports, symposia proceedings, and political party platforms, I demonstrate this change in policy demand was accompanied by an even more consequential shift in the discursive framing of the appropriateness of intentionally redistributive fiscal policy within an otherwise neoliberal economic paradigm.

Author

• J. Michael Dedmon, Syracuse University