Aldo Madariaga: Neoliberalism is not a solution for democracy

Aldo Madariaga discusses his latest book “Neoliberal Resilience: Lessons in Democracy and Development from Latin America and Eastern Europe” with our editor, Giancarlo Grignaschi. You can also read a review of the book by Gabor Scheiring here.

You can listen to the conversation here or read the transcript below:

Giancarlo Grignaschi: The key conclusion of your book is that neoliberalism survived in its purest form in those countries where it was protected from democracy. It does so through the deployment of three mechanisms, which you call support creation, opposition blockade and constitutional lock-in. The functioning of these mechanisms and their respective outcomes are unpacked through four cases – Argentina, Poland, Chile and Estonia – which represent variations on a continuum between neoliberal resilience and contestation. I would ask how you came to write this book in the first place, and why did you choose the four countries?

Aldo Madariaga: Everything started when I went to Budapest to do my MA thesis, where I became acquainted with Eastern European countries’ transitions to democracy and to the market economy, which scholars were depicting as very similar to the transitions occurring in Latin America. There was a whole movement of professors, including at CEU, who were comparing these two regions, especially on common issues such as development, democratic institutions, welfare capacity and so on. 

As a Chilean national, this touched me personally, as I had always understood the Chilean transition as an idiosyncratic phenomenon, but then I discovered that these transformations were somehow universal. Of course, those processes were also characterized by many differences across countries, but some similarities were present as well.

In particular, one can observe a certain degree of stability in these processes over time. It is true that some political turmoil manifested itself in different ways, such as protests or voting abstention, but ultimately the problems that were accumulating over time were not making a difference to the stability of the process. What is more, one can observe that there were other countries that were going down different paths, some of which constituted viable alternatives – especially in terms of durability, although some were more short-lived. The whole project thus came about from these observations.

As you said, the four cases I have selected represent different points on a continuum between experiences of resilience and experiences of contestation. This allows us to observe the concrete mechanisms that explain the variations.

In the book, you review alternative approaches that focus on neoliberalism, namely discursive institutionalism, historical institutionalism and critical international political economy. You do not discard their theoretical tools and categories, but you put the emphasis on domestic actors and institutions by, for example, establishing the role of a strong financial sector and active right-wing parties as a necessary-but-not-sufficient condition for neoliberal resilience. Nevertheless, the main character of your story – neoliberalism – belongs to the ideational world. How would you define neoliberalism and how exactly does your analysis differ from the approaches we have just mentioned?

First of all, you are right in saying that I do not deny the value of these approaches per se – they have often provided us with crucial knowledge on some of the underlying processes. It is not merely a methodological choice, but we can consider it as one for the sake of explanation. When it comes to explaining the resilience – or the continuity – of neoliberalism over time, I would argue that ideas are the wrong place to look. It is true that neoliberalism can be understood as a set of ideas. However, in analysing its resilience over time, we should not look at it as a set of ideas whose power lies in its ability to convince the world due to its ideational features, as I don’t believe that to be the case. The properties usually deemed to characterize neoliberalism as a set of ideas are ones that can be found in almost any set of ideas, yet no idea can be this resilient. For instance, it has been said that neoliberalism is particularly malleable and can be combined with other ideas in order to make hybrids: this can be argued for Keynesianism or democracy too, which have been framed differently to suit different purposes. Therefore, I believe that those characteristics of neoliberalism as a set of ideas do not explain why it is so resilient.

As for international factors, they have to be taken into account as a relevant context or even an active principle that sometimes acts on neoliberalism trajectories. I have however made a methodological choice to keep these factors constant: 

if you take two countries from the same region which are experiencing very similar sets of pressures from international actors and institutions, but they produce different trajectories, it means that these pressures are somehow translated through domestic actors and processes. 

This was an insight from dependency theory: one has to take in the relevance of international factors, but it is very important to understand that their influence is exerted though internal political dynamics.

I believe that my focus, which is closer to historical institutionalism, results from the shortcomings  of the state of research about neoliberal resilience. Besides ideational approaches, another strand of research that became particularly prominent was, so to say, more institutionalist in that it sought to explain the phenomena in these regions through the lens of normal party politics. Nevertheless, I believe that structure matters a lot: parties and institutions matter as well, but structure allocates resources and creates different coalitional possibilities. Thus, I believe that the literature lacks a focus on real political struggle, while it has been overly concerned with ideational differences. It didn’t focus on understanding what was really going on in these trajectories of continuity.

In the book you state that, in order to understand the resilience of neoliberalism, one has to distinguish between two components, policy and polity: what is the relation between these components, on the one hand, and the three abovementioned mechanisms of resilience, on the other? Also, how can one measure how neoliberal a country is? Poland is chosen as a negative case (at least not as a case of neoliberal resilience) and yet some commentators recall that, until 2015, neoliberalism was definitely the most popular way of thinking of the elites; there are sociological studies claiming that the “domestic bourgeoisie” was very weak in Poland throughout the whole transformation period. I would like to hear your thoughts on that.

Firstly, the distinction between policy and politis central to understanding how I conceptualize neoliberal resilience. It relates to a series of recent studies that seek to understand neoliberalism by focusing on the political side: neoliberalism as a political project that is not only concerned with rearranging the economy, but mainly with reshaping power in society. We are not talking exclusively about democratic institutions here, but about the power held by different societal groups in general, such as capital and labour.

If one looks at some of the influential writings by prominent members of the Mont Pelerin Society, for instance, most of them were quite critical of certain ideas we would associate to neoliberalism, such as those of Milton Friedman. They were seen as too concerned with coming up with the right policies to bring about a desired outcome – that is to say, they were too concerned with the policy dimension. Scholars such as James Buchanan or Friedrich von Hayek and their disciples were very aware that the key discussion should not revolve around which policy was best, but rather around the political context in which these policies would be implemented. Their project was, above all, concerned with how to rearrange power in society so that collective actors would not threaten private property      owners and their capacity to use property for any purpose they wanted. These people were particularly aware that democracy posed the worst threat to their project: democracy has ingrained mechanisms to distribute power and to regenerate that distribution over and over again, thereby preventing a single group from dominating. Therefore, their main concern was to find the best way to entrench a given policy so that it could not be subverted.

To understand how these people used to think, it is worth quoting a Chilean lawyer – Jaime Guzmán – who was part of the junta militar, and who was one of the most influential figures in the drafting of the Pinochet constitution, which remains valid today. The basic idea of the dictatorship was to fix key parameters of the political institutions in order to entrench them, even in the case that the dictatorship would not survive or the political majority would change. This what Guzman eloquently said: what we need to do is to set the rules of the game in such a way that, even if the adversaries are governing, they are compelled to carry out policies which are not so different from those we desire. This is, indeed, the distilled      version of neoliberal ideology, which you can read very explicitly in the writings of James Buchanan, for instance. 

The key to understanding neoliberalism is therefore to observe how this ideology and its very blunt way of understanding politics materializes, as well as its success in maintaining certain institutions and politics. 

This is why it is so important to distinguish between policy and polity: the neoliberal project lies in the polity component. We have to analyse how it managed to shape the polity in a way that would imply the maintenance and accomplishment of its goals. 

However, as you said, there is a measuring issue that cannot be neglected. If one wants to determine whether neoliberalism is surviving or changing, one has to define what “surviving” and “changing” mean, and this depends on what policy domain one looks at – be it financial regulation or, in my case, industrial policy and exchange rates, provided you can justify the choice. 

This is the idea behind my operationalization. Of course, there may be policy domains where this understanding of neoliberalism does not work well. However, the ultimate goal was to find a parameter to compare the trajectories of the four countries. In the case of Poland, for instance, one can notice that neoliberal thinking was quite diffuse among the elites and that there was not a clear alternative in terms of different development models. However, if one compares it to Estonia, an interesting pattern emerges: not only were there moments in which Poland moderated its stance and the way in which it embraced neoliberalism, but it also maintained several hybrids over time, involving, for example, large state-owned enterprises or state-controlled economic sectors. Not even the neoliberals were capable of dismantling these sectors. I therefore argue that, in the case of Poland, “neoliberalization” stopped before reaching a point of no return: the country has gone through various hybrids and alternatives, and there was no real hegemonic bloc that had the power to pull the process towards the neoliberal – or the alternative – side.

On the other hand, in the case of Argentina, we see an attempt at restructuring which eventually backfired. I believe that the positions taken by these countries over time allows us to go beyond the mere analysis of their neoliberal nature, which I ultimately find to be a bit of a medieval discussion. The real question is: how were the attempts to bring development models either closer to neoliberal standards or towards alternatives driven by a specific set of actors, and how did the overarching political architecture help those actors in these attempts?

Alongside “support creation”, “opposition blockade” and “constitutional lock-in”, you mention the so-called “legitimizing tools”, which operate at the cultural level. I would like to know more about your stance on this. What do you think about the moral component of neoliberalism as one of the factors explaining its resilience? In Contesting Democracy, Jan Werner Mueller argues that the Thatcherian/Reaganist way of framing neoliberalism was an answer to the social revolution of 1968, and that this was one of the reasons behind its success. These arguments were also used in Poland. What are your thoughts on this?

I take this question very seriously. One has to think carefully about the difference between coercive mechanisms, such as restraining democracy, and the internalization of the principles of neoliberalism. In other words, there are external constraints and internal constraints. I believe one has to distinguish between the rhetorical power of neoliberalism at the moment of its expansion and implementation in different countries – which basically entailed the substitution of whatever was in place before neoliberalism, and required a set of strong actors and ideas – and a charged rhetoric about “leaving the excesses of state interventionism behind” or the compatibility between political and economic liberties, that is, the expectation and promise of a whole new order. I do not believe that the former accounts for neoliberal resilience over time. It’s actually the other way around: the exhaustion of those promises, and their stark contrast with the material reality of the four countries under examination, started eroding the attachment to neoliberalism. This drove a necessity to constantly renew promises and outlooks: for instance, in the case of Latin America, the population realized at some point that not every good was affordable and that they had to repay their debts, so the maintenance of free-market liberalism required its constant justification vis-à-vis an outraged population.

It is in this necessity to renew neoliberalism that political-institutional mechanisms enter the picture. People go to vote, and they may vote for alternatives if these are offered. Thus, neoliberalism seeks to undermine all the alternatives and to make sure that, if new majorities are empowered, they cannot undo the policies previously adopted.

What are the major implications of your analysis? I mean this in reference to two particular areas: firstly, is there a particular research agenda springing from your analysis? Secondly,  referring back to your interesting thoughts about the relationship between neoliberalism and democracy, whereby democracy seems to be better shielded from populism and democratic backsliding in countries where neoliberalism prevails, do you envision a cursed fate for the EU’s promotion of liberal democracy? In other words, if the EU needs neoliberalism to face the populist threat, and given that neoliberalism is hollowing out democratic institutions, is democracy bound to crumble? And is populism actually threatening democracy?

I will try to bundle up these big questions, starting with the relationship between neoliberalism and democracy. Firstly, I offer a provocation: I do not think that neoliberalism is a solution for democracy. If it is, it is the solution for a very specific type of democracy: the one which has been hollowed out, which – as Peter Mair shows in his book – does not need its citizens anymore, which is fully technocratized and where all the decisions are taken by experts, so that no democratic input or output is required. In that sense, neoliberalism can be a saviour, but not the saviour that we would wish for democracy.

This was a provocation to set the terms of the discussion. What really comes out of it, however, is the question as to whether populism is a threat or not, which is clearly another provocation: can populism ever be a corrective to democracy? In a sense, it is indeed a corrective: it brings in the major pillar of representation that was lacking in neoliberal democracies run by technocrats. In a way, once populism reinvigorates representation, alternatives emerge again: the level of politicization rises and people go back to vote. However, one has to ask the price one has to pay for this, how the corrective will evolve and whether it is good for democracy. This is why 

I believe we have to distinguish between two types of correctives, namely right-wing and left-wing populism. The former is likely to become a threat to democracy, while the latter seems to carry with it a more promising reinvigoration of democracy. In particular, it is able to realign underlying political cleavages, as well as the right-versus-left divide, labour-versus-capital, and other general dynamics that have always been at play during moments of democratic expansion.

The main issue we should reflect upon is, undoubtedly, whether right-wing populism is a valid alternative to neoliberalism. What is more, we should ask whether right-wing populism is becoming similar to neoliberalism. There are many authors at the moment – such as Gabor Scheiring, Cornel Ban and others – who are thinking about that carefully. As paradoxical as it may sound, right-wing populism is coming to terms with neoliberalism. In the end, neoliberals have never liked democracy that much, and they have always aimed to constrain it. This sentiment is shared by right-wing populists too. Instead of empowering collective actors, the strategy is to use the masses to get to power. As a result, democracy cannot expand. Naturally, there are differences between neoliberals and right-wing populists, but there are also similarities. We know ideas are very malleable and can be merged into any sort of rhetoric. Hybrids can easily be created and advocated. This is perhaps the greatest threat to democracy at the moment.

To conclude, what would you tell us about the current situation in Chile?

Chile is a mirror for everything we have discussed so far. After massive demonstrations following the end of the dictatorship and brutal repression, a seemingly unthinkable process of constitutional change – and I underline the word unthinkable – shows to what extent several pillars have to be dismantled for neoliberalism to end. However, we do not know yet whether neoliberalism will be dismantled – we only have the window of opportunity. The problem is that, after so many years of a democratic façade, respect for – and confidence in – democratic institutions is very low. This process of constitutional change is the last chance to realign both the development process and the democratization prospects of the population. If this does not work – and there are several reasons that could lead to that outcome, despite my personal optimism – those who inherit the leftovers will be the right-wing populists. They are waiting for this outcome and, at the same time, actively working to undermine the legitimacy of the whole process. They openly support Pinochet’s legacy, also proposing very neoliberal economic programmes.

We still do not know where this process will take us, be it to a restructuring of the polity – and therefore to a different development model – or to the reaffirmation of those constraints within a process of steep delegitimation of political institutions.

In collaboration with Virginia Crespi de Valldaura

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