Why Didn’t the Economic Crisis Dislodge Economic Orthodoxy? Preliminary Findings from a Comparative-Historical Approach

• In Event: 221 - ASA-NSF Postdoctoral Fellowship Program Research Session. Issues in Economic Sociology: Comparative International Perspectives

Abstract

Viewing the current economic crisis in historical perspective, what is striking is the degree to which is has failed to undermine current economic orthodoxies. While expansionary Keynesianism enjoyed a brief revival in the crisis’ early days, neoliberal fiscal austerity quickly reasserted its dominance as the consensus policy strategy across advanced capitalist countries. This stands in stark contrast to previous economic crises. The extended tumult of the late 19th century forged a consensus around the gold standard. The crisis of the Great Depression then discredited the gold standard in favor of Keynesianism. In turn, the crisis of the 1970s discredited Keynesianism in favor of neoliberalism. The failure of the current crisis to dislodge neoliberal orthodoxy raises two important questions. First, why did state policy elites converge on fiscal austerity as the consensus response to economic crisis, despite its considerable political and economic costs? Second, why did this economic crisis not only fail to dislodge the prevailing economic orthodoxy, but actually strengthen it? This paper offers preliminary findings from an ongoing research project that grapples with these questions. I compare responses to four key episodes of economic crisis in the U.S., Canada, and Britain from the 1870s to the present. The analysis focuses not only on policymakers and their economic advisors, but on the interaction between state policymakers, employers and financial elites, and working class organizations. My initial findings identify two key differences between the current crisis and past crises that could explain why policymakers “doubled down” on neoliberalism. First, important sections of the organized working class were incorporated into the pro-austerity coalition, thus muting their capacity to articulate a political alternative. Second, levels of international financial integration and increased political hegemony of the financial sector allowed a better coordinated, globalized financial elite to articulate and impose is policy preferences, even in the face of popular opposition.

Author

• Barry Eidlin, University of Wisconsin-Madison