1. NEOLIBERALISM DEFINED AND DELIMITED

This article argues that neoliberalism, as an ideology and a set of policy prescriptions and institutional designs, has become central to the political commitments of various policy-specific political coalitions and has substantially altered a range of governing institutions over the past four decades. As such, it constitutes an emergent order in APD that is conceptually distinct from liberalism, especially in its “New Deal” form, from the British social democratic “settlement” and from conservatism.

Central to the neoliberal view is the notion that freedom, justice, and well-being are best achieved by competition, ideally fostered by market mechanisms. This foundational idea gives rise to a slew of policies and institutional frameworks, ranging from privatization and deregulation to tax cuts, urban enterprise zones, and austerity economics. As such, neoliberalism has its roots in classical liberalism, but with one crucial exception: the role of the state.Footnote ¹² Whereas classical liberals recommend a minimal state, neoliberals view the state as central for ensuring competitive markets, or “planning for competition,” as Hayek put it.Footnote ¹³ Moreover, while New Deal liberalism and social democracy—to varying extents—sought to aid those who did not benefit from capitalism, neoliberalism seeks to strip those protections away wherever possible, make them contingent on market participation (e.g., welfare reform), or deliver them through market mechanisms (e.g., school vouchers). The neoliberal approach is also distinct from conservatism given its ambivalence toward hierarchy, tradition, and gradual change. Indeed, given the neoliberal penchant for sweeping change, it is radical, not conservative. Finally, neoliberalism sees individuals as the primary unit of society and does not accord a special status to community and is not especially committed to democracy, especially at the local level. As such, it seeks to disrupt not only the liberal and conservative orders but also republican ones.

Neoliberal ideas, policies, and practices have had a direct effect on two crucial elements in recent APD. First, they are responsible for political economic transformations, which in the United States has entailed stagnating median incomes and in both countries is reflected in financialization and spiraling economic inequality. Second, neoliberalism has vastly reduced state capacity and, to a lesser degree, state authority. These phenomena come into sharpest focus when peering below national political institutions to the state and local levels. The most obvious examples include the emergence of austerity economics in states such as Wisconsin and cities like Detroit, in the cuts to basic services, and in the creation of institutions, such as financial control boards, that have undermined democratic decision making.

But, as some of its most noteworthy theorists maintain, the term neoliberalism “appears to have become a rascal concept—promiscuously pervasive, yet inconsistently defined, empirically imprecise and frequently contested.”Footnote ¹⁴ Indeed, there is a tendency among scholars who use the term to deploy neoliberalism to explain the full range of deleterious political developments since the 1970s, irrespective of their ideological content or political sources. As such, it too easily becomes a term of abuse to be hurled at all manner of reactionary forces. It is perhaps for these reasons that scholars of APD have been so reluctant to use the concept. Elsewhere, I have attempted to avoid these lamentable pitfalls by offering following definition, which draws on Harvey:Footnote ¹⁵ neoliberalism is a political economic theory and rhetorical framework that rests on the notion that freedom, justice, and well-being are best guaranteed by a political economic system, undergirded by state power, that promotes private property, open markets, and free trade.Footnote ¹⁶

In practice, neoliberalization entails lowering taxes, deregulating markets, privatization or marketization of public services and state-owned assets, cutting the welfare state, and aggressively confronting union power. As such, neoliberalism repudiated the ideas and institutions of American postwar liberalism (the New Deal and Great Society). Crucially, neoliberalism rests upon the reorientation of the state, not its dismantling. To the extent that it intervenes to promote markets and resist claims on private property, the state is a vital weapon in the neoliberal arsenal. As Peck points out, both Hayek and Friedman emphasized this key role for the state.Footnote ¹⁷ Indeed, Friedman was at pains to show how neoliberalism was far more pragmatic than the “naïve ideology” that characterized nineteenth-century liberalism:

Similarly, Hayek argued:

As such, neoliberalism diverges from both classical liberalism and New Deal liberalism. The contrast between neoliberal ideals and those of New Deal liberalism is brought into sharp relief when considering Franklin Delano Roosevelt's “second bill of rights,” articulated in his 1944 State of the Union, which saw decommodification of key human needs as a vital bulwark against the vagaries of the market.Footnote ²⁰

Among the rights enumerated were the right to work; the right to decent pay and standards of living for industrial and agricultural workers; the right to protection from “unfair competition”; the right “of every family to a decent home”; the right to “adequate medical care”; the right to “adequate protection from the economic fears of old age, sickness, accident, and unemployment”; and the “right to a good education.” These ideals were fulfilled only in part, but the principle that government should intervene to ensure some level of employment and social protection became institutionalized and broadly accepted by all presidents for most of the postwar period until the mid-1970s; they came into question under Carter and were repudiated during Reagan's presidency.Footnote ²¹ As such, one can readily identify how neoliberalism departs from New Deal liberalism in theory and in practice. Certainly, this brand of liberalism has limits and contradictions, particularly in connection with its historical compromises with capital and with racial conservatives who insisted on maintaining racist and sexist hierarchies in place.Footnote ²² Still, I argue that the liberal tolerance for racial subordination until 1960s was not essential to liberalism itself but the product of the intercurrent clash between the liberal and conservative political orders. Indeed, if anything, New Deal policies were subject to attack from what are commonly referred to as “racial conservatives” in both major parties, rather than from liberals. As Eric Schikler has shown, the coalition between the Congress of Industrial Organizations (CIO) and African Americans, forged as early as the 1930s, triggered opposition from Southern Democrats and Northern Republicans who rejected the racial and class egalitarianism associated with the social democratic thrust of the New Deal and the emergent interracial coalition upon which it rested.Footnote ²³ Later, Southern conservatives of both parties would launch explicit or thinly veiled racist attacks on the War on Poverty and AFDC, which precipitated the demise of these programs.Footnote ²⁴

It is more difficult to differentiate neoliberalism, theoretically and practically, from conservatism. This is necessary because a number of the scholars have characterized the shift away from liberalism since the 1970s as “conservative.”Footnote ²⁵ However, I argue that neoliberalism is distinct from conservatism in three key respects. First, it is radical, a point Hayek stressed in his postscript to the Constitution of Liberty, entitled “Why I am not a conservative,” which noted that conservatism “by its very nature … cannot offer an alternative to the direction in which we are moving.” Hayek did not simply want to “apply the brake” to progress, but rather to alter the direction of travel: “the main point about [neo]liberalism is that it wants to go elsewhere, not to stand still.”Footnote ²⁶ Like Reagan and Thatcher, Hayek was appalled by the accommodations British and American conservatives had made with “collectivist” ideas and institutions associated with “postwar settlement.” As such, he and fellow neoliberals advocated radical transformation. Whereas conservatism is defined by reaction, as Corey Robin maintains, neoliberalism does not simply want to restore the ancien regime but wants to use state power to transform society in a particular direction.Footnote ²⁷

Second, neoliberalism is not committed per se to ascriptive hierarchies based on race, ethnicity, or gender, whereas conservatism sees such hierarchies as central to maintaining social order and control. This commitment to order and control be traced back to what Edmund Burke, arguably conservatism's lodestar, identified as the chief threat emanating from the French Revolution. For Burke, that revolution's key objective “was to break all those connexions, natural and civil, that regulate and hold together the community by a chain of subordination; to raise soldiers against their officers; servants against their masters; tradesmen against their customers; tenants against their landlords; curates against their bishops; and children against their parents.”Footnote ²⁸ This commitment to protecting “chains of subordination” is a key signifier of conservative thought, which distinguishes it from liberalism and neoliberalism, whose purposes and effects are to disrupt the societal relationships established by tradition and force. Hence, efforts to characterize the rise of the American “carceral state” as a central feature of the neoliberal agenda should be treated with circumspection.Footnote ²⁹ While it is indeed the case that mass imprisonment may absorb surplus labor and capitalFootnote ³⁰—a neoliberal concern—one cannot fully understand it without reference to racial politics rooted in the conservative reaction to desegregationFootnote ³¹ and the conservative law-and-order stances adopted by a coalition that includes both racial conservatives and racial liberals including African Americans who did not view harsh policing and sentencing practices as inimical to racial equality.Footnote ³²

Third, whereas neoliberals see the market as the key mechanism for ordering society, conservatives are divided on the question. Some, such as philosopher Roger Scruton, dismiss as “simple-minded” the view that markets and competition should predominate, arguing that it seems to “present us with a vision of politics that is desultory indeed, as though the sole aim of social existence were the accumulation of wealth and the sole concern of politics the discovery of the most effective means to it.”Footnote ³³ As he notes, historically, “the English Tory Party stood against the ‘market’ economy, not in the interests of national wealth, but in the interests of a social order which it felt quite rightly to be threatened by it.” Moreover, where neoliberalism is clearly associated with openness with regard to trade and immigration, for conservatives, these issues are vexing as Brexit and the Trump presidency underscore. As Corey Robin points out, the conservative movement includes both those who promote free trade and flexible labor markets and those who seek to restrict it.Footnote ³⁴ Moreover, while both conservatives and neoliberals see a central role for the state, rhetorical objections to “big government” notwithstanding, the key difference is that conservatives want to deploy state power to maintain ascriptive hierarchies, order, and control; neoliberals, by contrast, see the state's primary function as ensuring optimal market functionality. This is why self-described conservatives have embraced neoliberal political projects that stand in tension with conservatism, such as free, or vastly enhanced, movement of labor, goods, and services that have caused wrenching changes in the labor market, which have not only undermined working-class communities in urban and rural America but also facilitated a major increase in immigration, which contradicts conservative nativist commitments.

For each of these reasons, neoliberalism can readily be distinguished from liberalism in both its “classical” and New Deal guises and from conservatism. However, to judge whether the changes in American and British politics since the 1970s signal the emergence of a “neoliberal order,” scholars need to identify the key characteristics of such an order, which necessarily include governing institutions, political coalitions, and overarching purposes.

With respect to purposes, it is necessary to establish the widespread presence and acceptance of neoliberal ideas. These include both abstract commitments—to individualism and free markets—and preferences for concrete policies, such as low taxes, deregulation, and privatization. First, this means reducing labor power, redistribution, and the welfare state. Second, these ideas and policy prescriptions need to be rooted in a set of institutions—such as political parties, the courts, interest groups, think tanks, NGOs, and media groups—that form the basis of the neoliberal political coalition. Third, and most important, these ideational commitments and political coalitions must control, or shape the agenda of, some governing institutions within the policy. Note that this relatively high threshold for something approaching an order does not require that it would necessarily dominate the polity as a whole. Rather, what needs to be demonstrated is that neoliberalism has come to shape the ideological and programmatic commitments of some politically relevant institutions and has promoted a durable shift in some governing institutions.

As I will show, neoliberalism has registered its impact in a sufficient number of domains, and over a sufficient period of time, to form the principal challenge to the New Deal liberal order. But although liberal, conservative, and neoliberal orders can be distinguished theoretically, and even occasionally retain pristine coherence in the real world, the various institutions of the American polity are likely to be transformed differentially and will therefore assume a hybrid character. As such, rather than insisting that neoliberalism now defines APD in toto, I suggest here that APD since the 1970s has been characterized by the intercurrent clash of three political orders: the conservative, the neoliberal, and the American New Deal liberal or British social democratic orders.

It is, therefore, worth pausing to briefly explore what neoliberalism cannot explain in whole or in part. The limits of trying to explain the full range of recent political development in terms of neoliberalism come into focus with respect to race and the carceral state. Indeed, some of the few scholars of American politics who have paid close attention to neoliberalism have argued that the shifts I describe in this article cannot be accounted for without attention to race, racism, and racial politics.Footnote ³⁵ While it is impossible to address fully the deeply complex questions that arise about the connection between ideas about race and neoliberalism, I would like to explore a few tentative arguments that are intended to inform ongoing scholarly inquiry. At the outset, it is worth stressing that the economic order and racist ideology on the American continent have been intertwined since the mid-seventeenth century, when practical considerations about how best to protect the economic interests of slaveholders and impose strictures on the evolving social dynamics of colonial life laid the conditions for what Karen Fields and Barbara Fields call “racecraft.”Footnote ³⁶ Moreover, racist ideology has performed useful tasks for political actors who sought to build coalitions and secure warrants for action at each stage of American political economic development and continue to do this right up to the present. The central question for the purposes of this section, therefore, is not whether racist politics and policies exist in contemporary American politics—they surely do—but to consider in what respects does race figure in the ideology and practices of neoliberalism.

Scholars working on the connection between race and neoliberalism have taken two approaches worth highlighting here. First, some scholars take a broader view of neoliberalism than I have outlined above and suggest that neoliberalism is the primary political order of our time. The result is that all of the major political developments over the past four decades are, by definition, viewed as neoliberal. Hence, those who adopt this approach see racist discrimination and exploitation as a function of neoliberal institutions or ideas. This is most evident with respect to the carceral state, which some regard as both central to neoliberalism and as driven by racial politics. For example, Michael Dawson and Megan Ming Francis argue that the neoliberal turn has given rise to a “neoliberal racial order” that has “facilitated a rebirth of two of [Jim Crow's] flagship elements: race-based crime politics and economic exploitation.”Footnote ³⁷ Lester Spence also views the racist functions of the carceral state to be integral to neoliberalism: “a range of processes—including the turn away from manufacturing, increasing financialization and privatization of a range of public goods, and the growth of the role the carceral state in policing poorer urban populations—are all understood to be crucial components of neoliberalization.”Footnote ³⁸ Similarly, Soss, Fording, and Schram include shifts in economic, welfare, and carceral policy in their account of ongoing racial oppression under a regime of “neoliberal paternalism,” though it is worth noting that their inclusion of “paternalism” signals a reluctance to reduce all these important shifts solely to neoliberalism.Footnote ³⁹

The difficulty with characterizing the carceral state as a fundamentally neoliberal institution is that neoliberal ideas or forces only partially account for the rise and character of the carceral state; many other causal factors in the construction of the carceral state have little or nothing to do with neoliberalism. Indeed, while Dawson and Francis point to a “rebirth” of race-based crime politics under neoliberalism, such politics never really died. After all, racist appeals to “law and order” have been central to Republican efforts to fracture the basis of white support for Democrats since the 1960s at least. Moreover, while it is certain that political actors such as Richard Nixon wanted to use such devices to secure power, this was due to cynical electoral calculations rather than as a corollary to neoliberalism, to which he was not committed in any case. After all, his economic policies worked within the confines of business Keynesianism, his regulatory policies placed more burdens on business rather than fewer, and his social policies did not materially advance the neoliberal cause. Furthermore, as Naomi Murakawa has shown, law-and-order politics stretches further back in time to the 1940s, when liberals saw law and order as a “first civil right” that was necessary to protect blacks from white supremacist violence.Footnote ⁴⁰ From another angle, Marie Gottschalk's work on the emergence of the carceral state shows that some of its important roots lie in political movements far removed from neoliberal politics, such as the women's movement and the victims’ movement.Footnote ⁴¹ Finally, the brutal acts of violence perpetrated by police forces across the country, disproportionately unleashed against blacks, are not signature features of neoliberalism. As horrifying as it seems in light of the shameful police killings that have occurred over the past decade, highlighted most recently by the murder of George Floyd, evidence compiled by the Center on Juvenile Criminal Justice suggests that the rate of killings by police fell significantly during the 1970s and has remained at lower levels under neoliberalism than in the 1960s.Footnote ⁴²

That is not to say, however, that neoliberalism and mass incarceration are unrelated phenomena. Neoliberal considerations have resulted in prison privatization and the blurring of social welfare and penal functions, both of which have propelled the carceral state and made it increasingly abusive and exploitative.Footnote ⁴³ Moreover, one can certainly find evidence that the state deploys the police or other quasi-law enforcement operations to create cordons sanitaire in some urban areas and, of course, malls. However, as Soss et al. indicate by their term “neoliberal paternalism,” there are clearly non-neoliberal drivers of this important political development. Indeed, perhaps the one key benefit that flowed to virtually all African Americans from the black urban regimes of the 1970s and 1980s was the reduction in police violence that they secured.Footnote ⁴⁴ But this was done while these regimes simultaneously pursued neoliberal economic policies. Therefore, rather than trying to use neoliberalism as the central conceptual explanation for the rise of the carceral state, which risks rendering the concept meaningless, a historically informed, dynamic account reveals how the carceral state is the product of the intercurrence of multiple political orders, of which neoliberalism is but one.

The second scholarly approach to the relation of race and neoliberalism that has emerged is a causal one, which maintains that racial politics was the key factor that accounts for the emergence of neoliberalism. Spence, for instance, argues that “ideas about black populations helped generate support for the neoliberalization” of policies around welfare reform, property tax relief, and mass incarceration.Footnote ⁴⁵ Likewise, Soss et al. argue that “racialized political cleavages and institutional legacies helped pave the way for neoliberal reform, just as race-coded discourses fueled the campaign for get-tough paternalism and underwrote the public's support.”Footnote ⁴⁶

While this causal story comes close to the mark, I would suggest a friendly amendment, which is that racial politics was central to the realignment by which white Southern support shifted away from the expansive New Deal liberalism in mid-century and decisively toward the GOP since the 1960s, which resulted in Nixon's victories in 1968 and 1972 and Reagan's electoral successes in the 1980s. However, the racist element to the GOP's coalition building did not necessitate the adoption of neoliberal ideas. After all, Nixon's economic strategy worked within the Keynesian tradition, even as that consensus was breaking down. Moreover, his Philadelphia Plan was attacked by racial conservatives because it sought to advance racially egalitarian hiring practices.Footnote ⁴⁷ Racial politics was again useful in bringing Reagan to power, with the racist and misogynistic image of the welfare queen a motif deployed to build support among whites in particular.Footnote ⁴⁸ However, while racial appeals, both explicit and implicit, helped to build the GOP's electoral coalition both in the 1970s and the 1980s, the Republicans’ economic policies varied over time—indeed, Nixon governed when race was arguably more salient, but his economic policies were more egalitarian than what was to come in the 1980s. Moreover, the neoliberal project is not exclusively an American one, and it has played out in a variety of settings where racial politics either operate quite differently or have not been central to the project of political economic restructuring.Footnote ⁴⁹ This is perhaps most evident with respect to neoliberal policy instruments, such as monetarism and privatization, that were deployed around the world and that cannot be said to have been adopted with racial purposes in mind.

Using the example of urban political development in Philadelphia, I advance an argument that connects racial politics and neoliberal urban political development. In particular, I maintain that racial politics indirectly facilitated the adoption of neoliberal policies by undercutting the ability of political actors to build a biracial working-class alliance.Footnote ⁵⁰ As a result, the city's black urban regime was pushed into an alliance with business, which placed severe constraints on the likelihood that counter-neoliberal policies would secure sufficient political support. Similarly, with respect to British urban politics, Paul Gilroy suggested that racial politics undermined interracial working-class solidarity in the face of Thatcherite economic restructuring.Footnote ⁵¹

The above discussion has offered a definition of neoliberalism and suggested the limits of its explanatory scope. With that in mind, I will now explore the concept of the “neoliberal order” that then gives rise to an account of neoliberal political development at the urban and national levels.

2. THE SEARCH FOR ORDER AND CHANGE IN AMERICAN POLITICAL DEVELOPMENT

Scholars of APD pay special attention to the role of “orders” and “traditions.”Footnote ⁵² But while those such as Rogers Smith have demonstrated that liberalism is but one in a series of multiple traditions—alongside republicanism and “ascriptivism”—that have each shaped a corresponding set of competing political orders, APD analysis pays little attention to “neoliberalism.” This is especially ironic given that the United States represents the “elephant-in-the-room case and supposed ‘home’ of neoliberalism.”Footnote ⁵³ This section considers how scholars of APD have grappled with “order” and “change,” which the leads to an exploration of efforts to examine and conceptualize the dramatic changes in the American and British political economies. I will then turn to a series of examples drawn from national, state, and city politics to examine how neoliberalism has reshaped the political economy and reduced the capacity and authority of the state in both settings.

In their landmark work on APD, Karen Orren and Stephen Skowronek encourage scholars to focus on identifiable and lasting institutional change. In so doing, they provide a definition of political development, which serves as a tool that can be used to separate the day-to-day ephemera from the epochal. Thus, “political development” arises from “durable shifts in governing authority.”Footnote ⁵⁴ As such, of central interest are “all activities and events in which the distribution of governing authority is at issue.” However, to distinguish development from quotidian change, one must identify lasting shifts—involving “rearrangement, redirection, reconstruction”—set to “hold on” into the future.Footnote ⁵⁵

Elaborating upon the work of historical-institutionalists, Orren and Skowronek insist that APD tends not to occur through wholesale institutional replacement, but rather through the “layering” of new institutions atop the extant—often deteriorating— institutional arrangements: “the institutions of the polity are not created or recreated all at once, in accordance with a single ordering principle; they are created instead at different times, in the light of different experiences and often for quite contrary purposes.”Footnote ⁵⁶ This perspective gives rise to the “foundational concept” of “intercurrence,” which captures “the simultaneous operation of older and newer instruments of governance” that characterizes the “normal state of the political universe” and serves as “a standard template for historical institutional research.”Footnote ⁵⁷

Taking up Orren and Skowronek's challenge, I aim to show how APD has changed course due to the intercurrent clash of emergent neoliberal ideas, policy designs, and institutional innovations, on the one hand, and received commitments of the New Deal/Great Society liberal era, on the other. The overall result has not been an eclipse of liberalism but rather a marked shift in which neoliberal currents have flowed through the paths of least resistance to leave some liberal institutions vanquished, with others exposed to erosion via “policy drift.”Footnote ⁵⁸

Furthermore, intercurrence helpfully captures the essence of British political development (BPD). For while the powerful institutions of the British central state gave ideologically motivated Conservative Party politicians the opportunity to institutionalize key neoliberal goals—such as privatization, tax cuts, and flexible labor markets—they were not able to wipe the social democratic slate clean.Footnote ⁵⁹ As such, rather than thinking about the neoliberal order as one that replaced the postwar settlement, scholars should instead grapple with the ways in which British political and economic institutions have been differentially shaped by the friction resulting from the old order clashing with the new.

As Orren and Skowronek note, the concept of intercurrence renders attention to the role of political orders mandatory: “any realistic depiction of politics in time will include multiple orders, as well as the conflict and irresolution built into their reciprocal interactions.”Footnote ⁶⁰ But, as Smith points out, having defined political orders as “constellations of rules, practices, institutions, and ideas that hold together over time,” Orren and Skowronek do not go far enough in explaining “what constitutes an ‘order’ for purposes of ‘multiple order’ analyses.”Footnote ⁶¹

Lieberman's account of political orders is more comprehensive. He suggests that orders have three key dimensions: the governing institutions of states, organizational environments (parties, party systems, organized interests, NGOs), and ideological and cultural repertoires that organize and legitimate political discourse.Footnote ⁶² Like Orren and Skowronek's “intercurrence,” Lieberman shows that we are likely to discover “the seeds of change within politics” if we focus on the “friction” of “multiple concurrent orders.”Footnote ⁶³ In contrast to Orren and Skowronek, Lieberman suggests that close attention to the “ideational orders” that operate alongside “institutional orders” is necessary to explain the shifts in race policy during the 1960s and 1970s. But while Lieberman's argument is persuasive, his framework “leaves ‘ideational’ and ‘institutional’ orders as distinct things, whose relationships are instantiated but not fully explained.”Footnote ⁶⁴ Hence, what is required is an understanding of political orders that has governing institutions, interests, and ideas as interconnected features.Footnote ⁶⁵

Smith rightly suggests that any satisfactory account of “political orders” must include three key elements: “‘governing institutions’ that can assert legal authority to enforce their goals, rules, and policies against at least some outsiders”; “relatively enduring political coalitions that include ‘political institutions’ such as parties”; and “overarching purposes that are expressed in the rules, policies, and roles it promulgates.” The third ideational component is required because ideological commitments “partly explain both why the different components of the political order adhere to it and why its central objectives are what they are.”Footnote ⁶⁶

Here, I attend both to Orren and Skowronek's concern with durable shifts in governing authority and to Smith's challenge of specifying the ideational basis for political orders by charting the ideological foundations of the emerging neoliberal order in the United States and the United Kingdom. I argue that the emergence of the neoliberal order in APD is undergirded by a set of ideas, rooted in mid-century and breaking into political prominence in the 1970s, which, as a result of intercurrent clashes with the liberal/social democratic orders, produced durable shifts in governing authority in terms of national policy and local political institutions.

Some might object that my emphasis on ideas is unwarranted and that the shift identified here is a mere product of materially driven globalization. I would suggest, however, that although capital indeed had a vested interest in addressing the falling rates of accumulation during the 1960s and 1970s and mobilized to promote that interest, there was considerable uncertainty about the specific policies that would arrest capital's decline.Footnote ⁶⁷ As such, ideational explanations are required to explain why political and business forces opted for neoliberal remedies rather than other options.Footnote ⁶⁸ One part of the American political system in which neoliberalism can perhaps be most readily identified is at the urban level, where pro-market policies were adopted by political actors who were Democrats largely unconnected with conservative politics. It is to this scale, therefore, that we now shall turn.

3. NEOLIBERAL URBAN POLITICAL DEVELOPMENT

The preponderance of APD scholarship focuses, quite understandably, on national and state-level political institutions. On the rare occasions that urban-focused research has engaged questions of developmental change, such accounts have proved especially fruitful.Footnote ⁶⁹ As such, the relative dearth of urban-oriented analyses means that existing accounts of political development are incomplete at best; at worst, by ignoring the urban level, certain dynamics central to APD are being missed entirely. This is regrettable not least because, as some have argued, “bringing the city back in” can provide key insights into developmental effects of “multiple and contradictory authority relations.”Footnote ⁷⁰ Indeed, just as Amy Bridges's work shed new light on important elements of nineteenth-century APD, I argue that a focus on the urban level is essential to understanding the neoliberalization of APD in the late twentieth century.Footnote ⁷¹

As Weir points out, New Deal liberalism never enjoyed the same penetration and durability at the state and local levels as it did nationally: “in most states where New Deal liberalism made an appearance, it arrived late and left early.”Footnote ⁷² Weir's “multiple orders” approach to federalism highlights how the institutional failure to enhance local-level executive powers, and the organizational failure to mobilize labor in some states, enabled remnants of the old “conservative” order to hang on. Weak state parties, malappointment resulting in rural overrepresentation, and factionalism among Democrats all constricted the New Deal. Moreover, locally rooted zoning authorities assisted conservatives who sought to maintain racial hierarchies across space. This “geography of exit” fueled “white flight” and residential segregation. As such, “when the New Deal's style of activist government confronted sharp economic challenges in the 1970s, the antitax, small government ideology that had flourished in the hothouse environment of white suburbia was already waiting in the wings.”Footnote ⁷³

Extending Weir's argument, I suggest that cities—where liberalism was immediately compromised—proved especially vulnerable both to conservative efforts to undermine the welfare state, often with a clear racial agenda in mind, and to neoliberals who wanted to maximize the city's potential as a growth machine.Footnote ⁷⁴ Still, there was one key area where New Deal and Great Society liberalism was locally consequential: federal urban policy. In a range of areas, we see government authority deployed to provide various forms of support to urban dwellers. A brief account of the trajectories of public housing and federal urban spending is illustrative.

Liberal urban policy between the 1930s and the 1970s drove the significant expansion of public housing under the 1933 National Industrial Recovery Act (NIRA).Footnote ⁷⁵ According to Hodos, NIRA was a key turning point in federal–urban relations because it required 25 percent of federal appropriations to the states to be spent in cities.Footnote ⁷⁶ In 1937, the Public Housing Act, dedicated funds for “the elimination of unsafe and unsanitary housing conditions,” the “eradication of slums,” and “for the provision of decent, safe, and sanitary dwellings for the low-income families.”Footnote ⁷⁷ Under the aegis of various federal agencies, more than 1.3 million public housing units were built over the next four decades.Footnote ⁷⁸

But under the Nixon administration, public housing began to wither on the vine. Nixon's 1973 moratorium on new federal housing construction precipitated a fall in housing starts from 104,000 in 1970 to 19,000 by 1974.Footnote ⁷⁹ However, the wholesale abandonment of public housing came with the Reagan administration, whose taskforce recommended “free and deregulated” housing markets and voucher programs to replace government-led housing construction. That public housing became a target of neoliberal critique is no surprise, given Hayek and Friedman's antipathy toward it as a policy. According to Hayek, any form of housing support should be sharply limited “in scope and method,” lest the market distortions it entailed set in motion ever-increasing pressure for greater supply of public housing. In effect, Hayek was worried that if the housing provided by the government was of too high a standard, it would become overly popular:

Likewise, Friedman maintained that, like many forms of state intervention, public housing programs have aggravated rather than resolved problems of affordable housing: “Far from improving the housing of the poor … public housing has done just the reverse.”Footnote ⁸¹

These neoliberal ideas, immortalized in Reagan's famous claim made in his 1981 inaugural address that “government is not the solution to our problem, government is the problem,” informed his administration's approach to public housing which reduced spending on public and “Section 8” housing by 50 percent.Footnote ⁸² Moreover, in 1983, the Reagan administration abandoned one-for-one replacement of public housing units. As a result, low-cost rental units (private and public) fell by around 1 million between 1970 and 1985 as the number of low-income households rose significantly, leaving a shortfall of 3.3 million units by 1985.Footnote ⁸³ As homelessness rose during the early 1980s, Reagan appeared indifferent: In a 1984 appearance on Good Morning America, he suggested that “people who are sleeping on the grates … the homeless … are homeless, you might say, by choice.”Footnote ⁸⁴

Thus, in the provision of low-income housing, the liberal commitment was largely abandoned in favor of a neoliberal approach based on cuts to direct government provision of housing and the introduction of housing vouchers. This shift proved durable. Far from reversing this trend, the Clinton administration accelerated the sale and destruction of public housing, most notably under HOPE VI. Indeed, while the 1980s resulted in the destruction of fewer than 15,000 units, 47,000 were removed from 1996 through 1999. By 2008, “222,000 units of public housing had been demolished” with “thousands more sold off or converted to other uses.” The final nail in the coffin for public housing was driven in with the passage of the “Faircloth Amendment,” signed into law by President Clinton in 1999, which expressly prohibited the use of public housing funding for the construction of new housing units above the number of units that existed as of October 1, 1999. As Goetz notes, these measures resulted in this “radical remaking of public housing” and, as such, stands as a stark “repudiation of a New Deal policy orientation.”Footnote ⁸⁵ That said, in a reflection of the intercurrence of the liberal and neoliberal orders, the state retained some responsibility for housing support, but rather than providing subsidized housing directly, it created a new hybrid regime whereby the federal government provided poor families with vouchers to be used on housing in the private market.

Similar patterns are evident in overall urban spending: While the Republicans were unable to sweep all liberal supports aside, such as programs directed at granting aid to people, the Reagan administration instead focused on cutting aid to places, which had enjoyed federal support through programs such as General Revenue Sharing, local public works, urban mass transit, social services block grants, and an alphabet soup of others, including Urban Development Action Grants (UDAG), the Comprehensive Employment Training Act (CETA), and the Community Development Block Grant (CDBG). Having expanded significantly during the 1960s and 1970s, federal urban spending peaked during the Carter administration.Footnote ⁸⁶ At its height in 1978, aid to city and state governments reached $106 billion (in 2014 constant dollars); however, by 1994 it had fallen 53 percent to $50 billion, with programs such as General Revenue Sharing, local public works, and UDAG completely eliminated.Footnote ⁸⁷

Hence, the pattern of place-based urban policy reflects that of housing policy: Significant expansion under the New Deal liberal order is followed by major retrenchment in the 1980s, signaling the arrival of neoliberalism. Crucially, this shift undermined the capacity of cities to deliver high-quality services to their citizens. Moreover, deep cuts forced cities to embrace “entrepreneurial” practices, triggering a process of “neoliberalism by default.”Footnote ⁸⁸ There are various ways of measuring this shift, but they all buttress Demetrios Caraley's claim that “Washington abandoned the cities.”Footnote ⁸⁹

The transformation of federal urban support is also evident when one considers direct aid as a percentage of cities’ own-source revenue. Such aid increased markedly during the 1960s and 1970s, peaking at 25 percent in 1978; thereafter, it “dropped like a stone.”Footnote ⁹⁰ Between 1978 and 1992, federal aid fell to just 4.5 percent of city revenues, climbing marginally to 6.4 percent by 1997, but falling again to 4 percent by 2002. Not only was this shift decisive, it was also durable—subsequent Democratic administrations failed to reverse the trend.

This overall policy shift, begun in the 1970s, but pursued in earnest in the 1980s, was summed up by Reagan when he suggested that urban unemployment was not the government's responsibility and that residents “should vote with their feet” and look elsewhere for work. Moreover, cuts to urban aid were justified on the basis that “the private market is more efficient than federal program administrators in allocating dollars.”Footnote ⁹¹ Therefore, cities would have to compete to attract private investment even as the costs associated with poverty and unemployment grew. Unsurprisingly, the cities in the best position to adjust to such austerity were those with “high taxable resources and low poverty needs.”Footnote ⁹² By contrast, those cities with “high poverty needs” were doubly exposed since they had low levels of taxable resources. This placed those cities hit hardest by deindustrialization, like Baltimore, Cleveland, Detroit, Newark, and Philadelphia, in particular peril. They responded with a series of pro-market policies to maximize their “competitive advantage” and minimize their social costs by cutting the local welfare state.

The neoliberal turn in urban policy was not restricted to the United States, however. Indeed, across the Atlantic, Margaret Thatcher's United Kingdom also transformed its urban policy. But whereas Reagan's primary urban policy was one of abandonment, the Thatcher government saw the urban trenches as a key front in the battle to remake Britain in the neoliberal image. Indeed, the Conservatives’ two major policy innovations—enterprise zones and Urban Development Corporations—were among the government's first forays into the clear blue waters of tax cuts and deregulation, introduced before the more famous examples of neoliberalization: monetarism, privatization, and the sale of public housing. These innovations would have implications for American urban policy. The case of enterprise zones is instructive. Well aware that it would take time and persuasion for the public to support Thatcher's economic agenda, the Chancellor of the Exchequer developed the enterprise zone idea, which promised to stimulate urban growth via deregulation and tax relief, “as a kind of trial run intended to foster support for the other possible changes which we sought to introduce more broadly in the British economy.”Footnote ⁹³ For Howe, urban dereliction resulted from the nation's cities succumbing to the “British disease” of high taxes and burdensome regulations. Thus, the enterprise zone, according to Howe, would be a way of “trying out our ideas” with a view to building popular support for Thatcherite economics more generally.Footnote ⁹⁴

Initially, the Reagan administration, emulating Thatcher's government, sought to force cities to neoliberalize “by design” through the creation of enterprise zones. Along with those such as Jack Kemp, who proposed the elimination of capital gains tax on investments in the zones, Reagan called on Congress to pass enterprise zone legislation in four State of the union addresses. Despite their efforts, Republicans were unable to construct the necessary political coalition in Congress to pass federal enterprise zones, in large part because of recalcitrant Democrats who occupied key veto points in the American institutional matrix. Over time, however, neoliberals in favor of enterprise zones built coalitions that harnessed the institutional avenues presented by federalism: the states. As such, by the mid-1990s, over 2,000 enterprise zones existed in forty states.Footnote ⁹⁵ When President Clinton entered office in 1992, many progressives hoped that urban policy would return from the wilderness, particularly given the urban tensions laid bare by the L.A. riots. However, in a speech to the U.S. Conference of Mayors in June 1992, Clinton reiterated his support for measures that sat firmly within the neoliberal ambit, calling for “new incentives for the private sector, an investment tax credit, urban enterprise zones, new business tax incentives, research and development incentives and others.”Footnote ⁹⁶

As such, enterprise zones served as the template for Clinton's signature urban policy: the Empowerment Zones/Enterprise Communities program, which passed as Title XIII of the omnibus Budget Reconciliation Act of 1993. In describing his new program, Clinton explicitly signaled the degree to which it represented a departure from the expansive liberalism of his Democratic predecessors. Clinton emphasized that the zones were “not about imposing federal formulas; they're about giving communities the right to define a future for themselves and the resources to succeed.” This program was “not the Great Society,” Clinton averred.Footnote ⁹⁷ The central feature of the empowerment zones would be the targeted use of a series of tax incentives, ranging from those to encourage employment of zone residents to relief from property taxes and accelerated depreciation. Unlike the original enterprise zone idea, however, empowerment zones did come with some federal aid: $1 billion was channeled through a Title XX Social Service Block Grant for direct spending on the zones. Thus, the program illustrated the hybridity at the heart of Clinton's third-way approach, which reflected the intercurrence of the waning liberal and waxing neoliberal orders.

As with retrenchment in public housing, the shift toward using place-based tax incentives in “zones” of various descriptions proved durable. Indeed, the George W. Bush administration expanded the empowerment zone program, creating thirty new urban “renewal communities” and eight new empowerment zones. Moreover, as part of the Tax Cuts and Jobs Act of 2017, the Trump administration launched perhaps the purest version of neoliberal urban policymaking with its Opportunity Zone program. In particular, the program finally delivered the elimination of capital gains tax that Ronald Reagan and Jack Kemp placed at the heart of their abortive federal enterprise zone program in the 1980s. The program uses tax incentives to encourage investment in “economically distressed” urban and rural census tracts. The key provision lets participants avoid capital gains tax entirely if they hold investments in an “opportunity fund” for at least ten years. Indeed, Trump identified opportunity zones in support of his ludicrous claim that he has done more for the black community “than any President since Abraham Lincoln.”Footnote ⁹⁸

As the withdrawal from public housing and the acceleration of pro-market mechanisms such as enterprise zones suggest, federal urban policy underwent a major change of purpose. Whereas federal urban policy in the form of housing and public assistance grants sought to protect people and places from the vagaries of the market by creating decommondified resources for citizens buffeted by the routine crises of capitalism, urban policy since the late 1970s has sought to promote market forces, thereby stripping citizens and urban neighborhoods of the protections of social provision and leaving them exposed to the discipline and competition of the marketplace. But as we will see below, the emergence of the neoliberal order has not eliminated the liberal welfare state, but rather reoriented it to make receipt of public support contingent in part on labor market participation.

In addition to the reduction in urban governing capacity, achieved via cuts, urban neoliberalization also involved the creation of novel institutional designs that undermined the city's governing authority. Most conspicuously, this occurred with the creation of “financial control boards,” bodies usually appointed by the state governor in response to urban fiscal “crises.” Indeed, the response to the 1975 New York City fiscal crisis “pioneered the way for neoliberal practices.”Footnote ⁹⁹ The crisis emerged when President Ford refused to offer financial support to the city when it faced municipal default, prompting the infamous headline: “Ford to City: Drop Dead.” In the face of Ford's refusal, the city was forced to seek assistance from the financial markets, which was granted on condition of major restructuring to be overseen by the unelected Emergency Financial Control Board (EFCB) that would assume budgetary authority. Yet, when the board failed to restore the confidence of financial markets, Congress provided loan guarantees but only on the condition of austerity. Indeed, Ford's Secretary of the Treasury, William Simon, saw in the financial crisis an opportunity to use New York as an example that would impose market discipline far beyond the city. In his testimony before Congress, Simon told the Senate that any financial help extended to New York should be made on terms “so punitive, the overall experience would be so painful, that no city, no political subdivision would ever be tempted to go down the same road.”Footnote ¹⁰⁰

As a result of the EFCB's and Congress's demands, New York City's local state institutions were eviscerated—services were cut, workers were laid off—and financial interests were now in control. As Kim Phillips-Fein documents meticulously, New York City had not only been the beneficiary of expansive support from liberal urban policy; it had also expanded the local state in myriad respects that reflected a commitment to urban social citizenship. In particular, the city developed an extensive network of municipal hospitals, pediatric clinics, and drug-treatment centers; offered systems of public education from kindergarten through college; constructed public housing units and controlled private rents; built and maintained world-class parks, libraries, and museums; and maintained a network of efficient and affordable public transportation. The city also functioned as an employer of last resort. As Phillips-Fein puts it, “New York City stood for urban liberalism, an example of the central role that government might play in addressing problems of poverty, racism, and economic destruction.”Footnote ¹⁰¹ However, as the crisis struck, these institutions and provisions became the targets of the neoliberal assault launched by the EFCB and its allies.

As William Sites explains, this crisis “not only became a watershed in the redirection of local policy and urban growth, but would contribute to reshaping the nation's understanding of the appropriate relationship between government and economic development in the new global environment.”Footnote ¹⁰² Similar institutions, which shifted governing authority to politically insulated officials, were created in Philadelphia (1991), Washington, DC (1995), Pittsburgh (2004), and Detroit (2013). Moreover, as Jason Hackworth shows, as federal aid fell, cities became increasingly reliant on debt and thereby vulnerable to the demands of bond-rating agencies, which reward austerity and privatization and balk at redistribution.Footnote ¹⁰³

As the example of Detroit underscores, the Great Recession resulted in the “downloading” of austerity measures to the urban level, terrain that had already undergone major cuts to state provision in the 1980s.Footnote ¹⁰⁴ With respect to both ideology and institution building, neoliberalism was the touchstone. Rather than placing blame for Detroit's parlous condition on long-term structural tends associated with automation and deindustrialization, or on the short-term shock triggered by the 2007–08 financial crisis, the city's detractors deployed the standard neoliberal tropes. For example, the Cato Institute's Michael Tanner cited the city's “excessive” taxes, regulations, and employee benefits to justify his claim that “the city's own choices, not free markets and limited government, are really responsible for Detroit's failure.”Footnote ¹⁰⁵ Framing Detroit's woes as the result of profligacy gave cover for the Michigan governor, Rick Snyder (2011–19), to usurp the powers of the city's political institutions and place it in the hand of the state's Local Emergency Financial Assistance Loan Board, which in turn appointed Kevyn Orr as Detroit's financial manager. It is worth noting that, just as the Ford administration rebuffed New York City's calls for federal financial assistance in 1975, so too did President Obama reject pleas coming from Detroit. The reorientation and commodification of the local state, as a result of the imposition of austerity on the city, involved major cuts to the municipal workforce and pensions, the shutting off of water to over 100,000 residents, reductions in a wide range of city services, the privatization of city services, and the emergence of a greater role for nongovernmental actors in city governance.Footnote ¹⁰⁶

As would be the case for neoliberal reform more broadly, such measures gained support from a wide spectrum, which included those who deployed neoliberal, color-blind rhetoric to attract the support of racial conservatives who sought to withdraw support from programs they viewed as disproportionately serving minorities from “black” places.Footnote ¹⁰⁷ As a result, the neoliberal coalition comprised a broad swath of actors among whom were leading Republican and Democratic politicians, right-wing think tanks, racial conservatives, and business interests that have always been at the heart of the “growth machine.”Footnote ¹⁰⁸

Given that majority black cities, such as Detroit, have often been the targets of neoliberal policies, it might be tempting to suggest, therefore, that neoliberalism is a tool of white supremacy.Footnote ¹⁰⁹ However, as numerous scholars have pointed out, neoliberal ideas were adopted by black elites and institutionalized in the 1980s and 1990s by black urban regimes in ways that complicate a straightforward view of black cities as the victims of austerity driven by white racial resentment.Footnote ¹¹⁰ In his now classic work on the matter, Adolph Reed Jr. showed how black urban regimes often adopted neoliberal measures with alacrity in part because the benefits seemed clear, especially to upper-strata blacks who stood to gain from pro-growth politics.Footnote ¹¹¹ Lester Spence has recently amplified this point, though, as noted above, he suggests that racial politics and neoliberalism operate in concert.Footnote ¹¹² Regarding black politics vis-à-vis neoliberalism, therefore, it is clear that a combination of externally imposed material constraints (some of which were likely driven in part by racial politics) and commitments of ideology and interest held by some black elites explains why black urban regimes adopted pro-market policies and deployed neoliberal arguments in favor of policies such as school choice, housing vouchers, and privatization.Footnote ¹¹³ As such, the analytical pay-off from attending to the urban scale becomes clear: this perspective highlights intraracial class differentiation, which in turn can help resolve the apparent puzzle as to why black-led cities might adopt policies that disproportionately harm African Americans.

When seen in historical and comparative perspective, it is clear that neoliberal ideology has a long transatlantic trajectory that cannot simply be traced back to post–civil rights American conservatism. That said, the neoliberal commitments to individual self-reliance in competitive market systems clearly share an “elective affinity” with the emphasis racial conservatives have placed on individually focused, color-blind public policies that included resistance to explicitly or implicitly race-targeted aid. The neoliberal political coalition was forged, and the neoliberal order constructed, because political actors were in a position to exploit this compatibility. These urban transformations came at the cost of eroding the role of the local state and silencing the voices of urban citizens. If the tax-cutting and deregulatory posture of the enterprise zones represents the first face of neoliberalism, whereby the state withdraws, financial control boards illuminate the second, in which state authority is deployed to force subordinate political units to accept market rationality. In both cases, urban political development was shifted in a neoliberal direction as political entrepreneurs reconfigured political institutions to advance pro-market goals. Moreover, the post–Great Recession imposition of austerity measures in both countries has further undermined the standing of urban governments.Footnote ¹¹⁴ Thus, when considered alongside the corresponding loss of financial capacity, it is clear that by viewing APD through a multiscalar lens—local, state, and national viewed together—we gain a richer appreciation of how neoliberal innovations become durable via institutionalization.

This section has used the urban scale to show concretely how neoliberal ideas have shifted policy in identifiable ways. We can readily see, therefore, how neoliberalism shapes urban political development: new institutions, such as housing vouchers, emerge from the intercurrent clash between liberalism, with its commitment to government support for housing, and neoliberalism, which sought to infuse public policy with market rationality. Having established some of the ways neoliberalism has shaped political development, we can now reconsider the political development of national economic policy. Here, too, we can identify the emergence of new ideas and institutional innovations, which suggests the emergence of a neoliberal order.

4. THE AMERICAN POLITICAL ECONOMY RECONSIDERED

In recent years, scholars of APD have been grappling both with the rise of inequalityFootnote ¹¹⁵ and the apparent rightward shift that has been evident since the 1980s.Footnote ¹¹⁶ Thus, there is a growing scholarly consensus that the American political economy has undergone major changes since the 1970s, but less clarity about whether these changes constitute development and a marked reluctance to relate these shifts to neoliberal ideas.Footnote ¹¹⁷ Therefore, through a reexamination and reinterpretation of the evidence already highlighted by a range of scholars, I will show how in the realm of economic policy, neoliberal ideas and interests have shaped the transformation of American political institutions and suggest that, as such, the shifts in the American political economy are better understood as being driven in significant respects by an emergent neoliberal order rather than through reference to conservatism. The difficulty with existing accounts is that while they clearly identify consequential political changes, they are unclear about whether these shifts constitute developmental change and how they are related to the postwar liberal order. In doing so, I will focus primarily on the influential work of Paul Pierson, Jacob Hacker, and Stephen Skowronek.

Before delving into these scholars’ perspectives, however, it is important to outline the key political developments of the past forty years that need to be explained. The key intellectual shift was the pivot away from Keynesianism toward neoliberalism as the basis for economic policy.Footnote ¹¹⁸ Just a few short years after Richard Nixon declared “I am now a Keynesian in economics” in 1971Footnote ¹¹⁹ and called for expansionary fiscal and monetary policy to promote full employment in his 1972 budget, the country became gripped by a crisis of stagflation that left the credibility of Keynesian demand management in tatters. By the time Nixon's successor, Gerald Ford, took the oath of office in 1974, inflation had begun to replace unemployment as the overriding economic concern of policymakers. Shortly after becoming president, Ford identified inflation as “public enemy number one,” telling Congress that “we must whip inflation right now.”Footnote ¹²⁰ Still, just as Nixon had done, Ford tried to deal with inflation with the standard techniques associated with centralized Keynesian economic interventionism: wage and price controls. Notably, Ford's monetary policy continued to be expansionary. Yet, ongoing stagflation—high unemployment combined with rising inflation—made Keynesianism intellectually suspect and politically vulnerable.Footnote ¹²¹

The failure of Ford's interventionist stance, and the broader crisis of Keynesianism, created an intellectual vacuum into which a range of heterodox ideas poured, promoted by neoliberal economists Friedrich Hayek, Milton Friedman, Gary Becker, and Robert Lucas. Their ideas offered putative solutions to the considerable uncertainty about how best to promote growth alongside low inflation. Business interests, alarmed by falling rates of capital accumulation, mobilized to make their presence felt in Washington and to bankroll the creation of new or the expansion of already existing right-wing think tanks that would propagate pro-market ideas. As Mark Blyth illustrates, one response to the political economic headwinds of the 1960s and 1970s was to expand business's presence in Washington, DC. In 1972, the National Association of Manufacturers moved its headquarters to the capital and switched its orientation from straightforward antistatism to lobbying, often in conjunction with the American Chamber of Commerce (ACC).Footnote ¹²² Indeed, the ACC expanded from 60,000 member firms in 1972 to 257,000 in 1982,Footnote ¹²³ and the National Federation of Independent Businesses doubled its membership between 1970 and 1979.Footnote ¹²⁴ Moreover, new business organizations, such as the Business Roundtable, were established with the specific aim of transforming economic and regulatory policy.

But business mobilized not simply to gain political influence but also to fund ideas. An array of think tanks were created or expanded their operations significantly during the 1970s due to investment from wealthy businessmen, corporations, and right-wing foundations. These included the Heritage Foundation, the Cato Institute, the Hoover Institution, the Manhattan Institute, and the American Enterprise Institute. The Heritage Foundation offers a useful illustration. Established in 1973 with a donation of almost $1 million from Joseph Coors, Richard Mellon Scaife, and William Simon, Heritage's purpose was to challenge what its backers saw as an almost hegemonic liberal consensus that had pervaded the Nixon administration. As such, Heritage's role would be to fight on the front lines in the battle of ideas that would need to be won in order to transform the American economy. By 1981, the Heritage Foundation's annual budget had risen to $7.1 million. This money was invested in developing policy expertise, drafting legislation, and pressing Congress to pass bills in keeping with its pro-market outlook. The Cato Institute, the Hoover Institution, the Manhattan Institute, and the American Enterprise Institute all performed similar functions and, when taken together, helped shift the ideological landscape in a neoliberal direction and operated as conduits between the academy and the Republican Party. Alongside these more famous think tanks were lesser-known institutions such as the Center for the Advanced Study of Business, whose central purpose was to dismantle the intellectual foundations of the regulatory state. Through a vast increase in the capacity of right-wing think tanks, and the forays into the public sphere, the key ideas of neoliberal economic policy—monetarism and supply-side economics—were transformed into comprehensible, seemingly coherent, and attractive alternatives to a moribund liberal status quo.

Despite his hopes, President Ford's wage and price controls failed to “whip” inflation. Although inflation had fallen from 12.3 percent in December 1974 to 4.9 percent in 1976, by the end of 1978 inflation stood at 9 percent and was rising fast. Hence, when President Carter came to office in 1977, pressure for a major policy shift had been building for some time. Ultimately, Carter set the stage for the embrace of monetarism through the appointment of Paul Volcker as chairman of the Federal Reserve in August 1979. Shortly thereafter, Volcker established targets for monetary growth and raised interest rates from 11 percent to a peak of 21 percent in 1981. Volcker's monetarist techniques to lance the inflationary boil worked, but did so at the price of recession and mass unemployment. As Blyth stresses, because key actors in the market had come to accept the logic of monetarism—that increased money supply would necessarily result in inflation—the approach became a self-fulfilling prophecy.Footnote ¹²⁵ He maintains that the dominance of monetarism in the Fed and in the markets “augured the real beginning of the end of embedded liberalism. By binding the authority of the Fed with the beliefs of the financial markets, the changes made the state's role in economic management almost obsolete at a stroke.”Footnote ¹²⁶ This was because the dominance of tight money ideology, now politically insulated within the Fed, restricted the range of economic policy options open to Congress and the president.

Despite the importance of the Fed's enhanced position, supply-side economics would arguably have an even greater effect on the American political economy than monetarism, especially over the long term. Like monetarism, supply-side economics rests on a simple—and intellectually suspect—premise. It suggests that overall levels of economic output are delimited by the level of taxation and regulation (rather than by levels of aggregate demand, as Keynes argued). As such, high levels of taxation and regulation are viewed as fetters on economic growth because they undermine incentives for investment and work. One version—popularized through an application of the “Laffer curve”—claims that if the government reduced exceptionally high rates of taxation, it could, counterintuitively, reduce government's deficit through the higher tax revenues that would accrue from the greater levels of economic activity that would be induced by the new tax regime. These views were popularized by various organs including, famously, by Jude Wanniski in the pages of the Wall Street Journal. It is worth noting that some fiscal conservatives were deeply suspicious of this approach, which George H. W. Bush called “voodoo economics,” worrying presciently that it would explode the U.S. deficit.Footnote ¹²⁷ Indeed, Bush argued in 1980 that deficit reduction and tackling inflation should have priority over tax cuts. By contrast, Reagan's neoliberal view—that such cuts would result in higher government revenues—took a radical departure not just from Keynesians but also from some conservative elites of the day.

The impact of supply-side economics on the American political economy is perhaps most dramatically illustrated in tax policy, especially by the reductions in the top rate of taxation and capital gains tax. On both these fronts, the United States underwent major changes that have proved durable. With respect to the top rate of tax, which ranged from 92 percent in 1952 to 70 percent in 1964, the Reagan years proved transformative. Shortly after entering office, Reagan signed the Economic Recovery Tax Act (ERTA) of 1981, which reduced the top rate from 70 percent to 50 percent;Footnote ¹²⁸ five years later the rate was further cut to 38.5 percent under the Tax Reform Act (TRA) of 1986.Footnote ¹²⁹ Notwithstanding the deep complexities involved in the ERTA and the TRA, the overriding point is that they combined to reverse the downward redistribution of wealth that had been effected via the tax code between the 1930s and the 1970s: now wealth was being redistributed upward.

The 1980s and the 1990s also saw major reductions in capital gains tax. As with the emergence of monetarism, the shift began in the 1970s and accelerated in the 1980s. Having been increased under President Nixon in 1969 and President Ford in 1976 to a maximum rate of 39 percent, reductions in capital gains tax became a holy grail for neoliberals such as U.S. Representative Jack Kemp (R-NY) and Senator William Roth (R-DE), who cosponsored ERTA. In 1978, President Carter signed the Revenue Act, which reduced the maximum capital gains tax from 35 to 28 percent. President Reagan further reduced the maximum rate to 20 percent with ERTA, though it was raised to 28 percent under the 1986 TRA. In contrast to some of the mildly progressive changes to personal taxation under President Clinton, the Taxpayer Relief Act of 1997 reduced the top rate of capital gains tax from 28 to 20 percent and the lower rate from 15 to 10 percent.Footnote ¹³⁰ The effect of the act was to reduce overall taxation by 1 percent. Economist Flavio Romano estimates that 68 percent of the total tax cut went to the top 1 percent, who gained an average of $7,135, while those earning under $59,000 received an average tax cut of just $6.Footnote ¹³¹ Under George W. Bush, the maximum capital gains rate was further reduced to 15 percent and with the lower rate cut to 5 percent. Hence, regarding both income tax and capital gains—despite fluctuations—the past forty years saw a decisive shift in a regressive, neoliberal direction.

With respect to taxation, Clinton's presidency was Janus-like. On personal tax rates, he restored a measure of progressivity, but cut capital gains. Clinton's Omnibus Budget Reconciliation Act of 1993 raised taxes on those earning over $140,000 from 30 to 36 percent and created a new 39.6 percent tax bracket for those earning above $250,000. However, President George W. Bush restored the downward trend, cutting taxes across the board, with the top rate pushed back down to 35 percent, and the 36 percent rate reduced to 33 percent.

Deregulation and welfare reform experienced similar shifts: The 1970s saw a dramatic pivot away from the institutional arrangements of New Deal liberalism that were retained, and in some respects expanded, by conservatives when Republicans occupied the Oval Office. During the Reagan administration, deregulation occurred through a variety of mechanisms. First, Reagan's agency appointees were openly hostile to the regulations that their agencies were meant to enforce. Second, cuts to agencies such as the Environmental Protection Agency (EPA) blunted the enforcement of new regulations. Third, upon entering office, Reagan issued executive order 12291, which required all significant new regulations to undergo a new cost-benefit analysis. Finally, Reagan begun a process of financial deregulation that would most profoundly reshape the contours of the American political economy, beginning with the bipartisan Garn-St. Germain Depository Institutions Act of 1982. The act deregulated the savings and loans associations and empowered banks to offer adjustable-rate mortgages. The net effect of these changes was to lower lending standards, thereby introducing riskier lending practices, which economist Paul Krugman argued gave rise to the Savings and Loans Crisis of 1987.Footnote ¹³²

The changes in Garn-St. Germain were followed by a series of regulatory measures that chipped away at the institutional edifice erected by the Glass-Steagall Act (part of the Banking Act of 1933) that separated commercial and investment banking. These occurred in 1987, 1989, and 1997, before its ultimate repeal under the Gramm-Leach-Bliley Act of 1999, signed by President Clinton and backed forcefully by former cochair of Goldman Sachs, Treasury Secretary Robert Rubin.Footnote ¹³³ During the lame-duck session, Clinton went further with the Commodity Futures Modernization Act of 2000, which “essentially exempted derivatives and other exotic instruments from regulation by the agencies that regulated more conventional financial assets.”Footnote ¹³⁴ The combination of what Hacker and Pierson call policy enactment and “drift” thus created the highly deregulated financial environment that both made the American economy vulnerable to the financial crisis that would arrive in 2008 and underwrote the vast expansion of economic inequality that reshaped the American political economy beginning in the 1980s.Footnote ¹³⁵ Similar trends occurred in the United Kingdom when the Thatcher government deployed signature neoliberal techniques to tackle stagflation and promote supply-side economics: monetarism, tax cuts, and deregulation.Footnote ¹³⁶ Privatization was also a favored technique that served the dual purposes of weakening labor and transferring wealth upward. As with the Clinton administration, Tony Blair's New Labour government did not stray far from the neoliberal position.

Regarding revenues, Blair exhibited the classically neoliberal position that taxes should be low because “the presumption should be that economic activity is best left to the private sector.”Footnote ¹³⁷ This helps to explain why he and his chancellor, Gordon Brown, reduced corporation tax from 33 to 30 percent, the world's lowest at the time. Brown also introduced a lower rate of corporate tax of 20 percent for companies with annual profits less than £300,000. Most symbolically of all, Labour by 1997 had abandoned its pledge to raise taxes on the wealthiest and stuck to that commitment until 2008. To set this in historical context, Margaret Thatcher had reduced the top rate of personal tax from 83 to 60 percent in Geoffrey Howe's first budget of 1979 and reduced it further to 40 percent in 1988. Once again, Labour had come to accept this fundamental shift, which in part set the stage for the spiraling inequalities of the 2000s.

Labour's key innovation with respect to monetary policy was the decision to grant independence to the Bank of England through the Monetary Policy Committee, which was charged with targeting an inflation rate of 2.5 percent per year. Hitherto, decisions about interest rates had been in the hands of politicians. The removal of such power was intended to eliminate political manipulation of interest rates in order to enhance the credibility of Labour's economic policy in the eyes of the financial markets.Footnote ¹³⁸ Labour also expanded the neoliberal program to privatization of air traffic control, student loans, and defense research. It also extended significantly the Conservatives’ Private Finance Initiate, whereby private-sector finance was used in the construction, maintenance, and delivery of public services in return for a guaranteed income stream from the government.Footnote ¹³⁹

Finally, I identify Anglo-American parallels with respect to welfare reform. Government expenditure on AFDC was eroded by the Reagan administration, and again during Clinton's first term before being abolished with the passage of the Personal Responsibility and Work Opportunity Act of 1996, which replaced AFDC with Temporary Assistance for Needy Families (TANF). The beginning of the end for AFDC was forged in the context of the economic crises of the 1970s. Both conservative and neoliberal ideas were marshalled to lay the blame for stagflation, rising taxes, and the “urban crisis” on the poor themselves and on the “enabling” liberal welfare state.Footnote ¹⁴⁰ The decisive developmental shift—the abolition of the program—would not come, however, until the Democrats broke with New Deal liberalism and aligned themselves with this emergent antiwelfare consensus.Footnote ¹⁴¹ As Clinton proclaimed upon signing the welfare reform bill, the “era of big government [was] over.”Footnote ¹⁴²

In the United Kingdom, a corresponding trajectory is evident with respect to Labour's welfare-to-work program, whereby the social democratic concept of income support as a right of social citizenship was replaced with the principle of time limits and compulsion.Footnote ¹⁴³ Indeed, the parallels between Tony Blair and Bill Clinton are striking. Through its New Deal for the unemployed, Labour's welfare-to-work program, more people would be pushed into the labor market with the hope that competition for employment would lower wages and thereby expand the total labor pool, which would in turn lower unemployment without inflation.Footnote ¹⁴⁴

How have scholars characterized these changes with respect to taxation, deregulation, and welfare reform?

In contrast to more recent work, Pierson's influential account of the American and British welfare states highlighted durability rather than retrenchment: “there is little basis for the claim that the Reagan and Thatcher era was one of radical transformation in the provision of social benefits.”Footnote ¹⁴⁵ Although Pierson saw little in the way of fundamental programmatic retrenchment under Reagan in pensions, income support, healthcare, and disability and sickness support (though housing did see a major shift), he was alert to the key possibility that Reagan's efforts at defunding the welfare state set the stage for systemic retrenchment later on. Still, for Pierson, there was no “Reagan Revolution” in any substantive sense and therefore nothing that could plausibly meet Orren and Skowronek's developmental standard.

In addition to expressing skepticism about the degree of retrenchment in the United States and the United Kingdom, Pierson also “downplayed the independent role of ideas and learning processes in policy formation”:

As such, from his first effort to understand the effects of Reagan on the American welfare state, Pierson saw little evidence of major change and, despite the rhetoric of the time, what change there was could not be attributed to ideology.

In a critique that Pierson ultimately came to accept and incorporate into his own work on the U.S. case, Jacob Hacker pointed out that, while the 1980s and 1990s did not see a sweeping repeal of liberal programs, “crucial policy changes have in fact taken place.”Footnote ¹⁴⁷ In Hacker's view, “political conservatives” during this period deployed strategies of “drift, conversion, and layering” that accelerated a process of “risk privatization.” That is, through a series of deliberate efforts, the American state failed to address the increased risks to income faced by citizens in the face of deteriorating socioeconomic conditions. Whereas the “old order” engaged in social insurance strategies—pensions, health insurance, unemployment compensation, survivors’ benefits, and public assistance (“welfare”)—which spread “threats to income … across citizens of varied circumstances,” the new order involves efforts “to fragment and undermine collective insurance pools that offer reduced-cost protection to higher-risk and lower income citizens in favor of arrangements that leave individuals and families responsible for coping with social risks largely on their own.”Footnote ¹⁴⁸ Thus, in contrast to Pierson's initial conclusions, the 1980s and 1990s did result in a “significant erosion of U.S. social protection.”Footnote ¹⁴⁹ For Hacker, this is not mere “change” but an “abandonment of the old order” in which new goals were institutionalized.

In a further intellectual development, Hacker and Pierson together offer a political economic account of spiraling economic inequality in the United States.Footnote ¹⁵⁰ They identify three key features: the concentration of economic gains at the very top of the income distribution (the top 1 percent and even the top 0.1 percent), the durability of growing inequality since 1980, and the relative dearth of “trickle-down” benefits for the rest of society. These changes, they note, cannot be accounted for simply in reference to the changing structure of the economy but result from the “politics of organized combat,” that is, “the role of interests in shaping large-scale public policies that mediate distributional outcomes.”Footnote ¹⁵¹

These changes are no small matter. Quite the contrary: They highlight “an economic transformation that has touched virtually every aspect of Americans’ standard of living” due to a “thirty-year war,” during which “public officials have rewritten the rules of American politics and the American economy in ways that benefitted the few at the expense of the many.”Footnote ¹⁵² The transformational effects of these shifts include a substantial cut in corporate and individual tax rates, the weakening of organized labor caused by “policy drift,” changes in corporate governance that promote maximization of shareholder value and “backdating” of stock options, and financial deregulation.Footnote ¹⁵³ In sum, these major developments fundamentally undermined the New Deal liberal order.

With respect to the role of economic ideas, Hacker and Pierson's position is somewhat dismissive. Their analysis roots these transformations in the strengthening of organizations favorable to capital—business interests and right-wing think tanks—alongside the weakening of those responsive to labor and other elements of the working and middle classes—such as unions—which have declined in political as well as in economic influence.Footnote ¹⁵⁴ Hence, there is a consistent pattern of policies that benefit the wealthy and fail to address the growing risks faced by everyone else. In many respects, this story of “organized combat” is convincing and impressive. But, in light of the centrality of neoliberal ideas about supply-side economics especially, this framework should be augmented with an ideational dimension afforded coequal analytical weight in order to complete the picture.

Notably, Hacker and Pierson seem fully aware that ideas are central: “We do not wish to deny that changes in ideas have played an important independent role in the restructuring of public policy over this period.”Footnote ¹⁵⁵ But soon after, their position becomes more equivocal: “We see the main role of pro-market ideas as helping to provide intellectual backing for demands already voiced and to channel the shifts in the organized landscape … into concrete policy changes.”Footnote ¹⁵⁶ Therefore, far from operating independently, ideas seem to merely amplify the existing concerns of capital.

As if to underscore their circumspection regarding ideas, Hacker and Pierson suggest that “a good number of the policy changes we chart … occurred before the development of strong intellectual rationales for them.”Footnote ¹⁵⁷ If true, this would be powerful evidence indeed. However, it does not bear scrutiny. Most obviously, some of the major neoliberal tracts—Hayek's Road to Serfdom and Friedman's Capitalism and Freedom—were published long before the 1970s, in 1944 and 1962, respectively. Furthermore, think tanks such as the American Enterprise Institute and the Foundation for Economic Education had been promoting neoliberal ideas since the 1940s.Footnote ¹⁵⁸ Moreover, key neoliberal ideas—monetarism and rational expectations—were already in circulation by the 1960s.Footnote ¹⁵⁹ Thus, while it is undoubtedly true that the breakthrough decade for neoliberalism was the 1970s—what Stein insightfully terms the “pivotal decade”Footnote ¹⁶⁰—it was in the “1950s and 1960s [that] neoliberal thought established a distinct and coherent identity.”Footnote ¹⁶¹ Hence, it was the deliberate and sustained intellectual construction of neoliberal ideas that laid the foundation for the construction of the neoliberal order that began in the 1970s.

Arguments such as Hacker and Pierson's—that rest on material and organizational analytical foundations—have considerable merit, but they encounter difficulties when trying to explain, for example, why business's policy preferences shifted from support for long-term agreements with labor in the 1940s and 1950s to an antilabor and antistatist position from the 1970s onward.Footnote ¹⁶² As Blyth notes: “Both embedded liberal and neoliberal ideas did not simply provide a justification of preexisting interests. Instead they succeeded in creating those interests among important sections of the population.”Footnote ¹⁶³ Moreover, scholars still need to explain why politicians and think tanks advanced neoliberal policies (from monetarism to urban enterprise zones) that were not being demanded by business elites. In light of the insufficiencies in interest-based or “organizational” arguments about why neoliberal policies were pursued, scholars need to add, but not substitute, the crucial role of neoliberal ideas.

In terms of the relation of political orders and neoliberalism, Hacker and Pierson's perspective may align with the analysis offered here. While they do not consider in detail the implications of the “winner-take-all economy” for the status of the liberal order, they come tantalizingly close to recognizing the emergence of neoliberalism when describing the rise of liberal “affluent activists”: “As the new liberalism replaced the old liberalism, Democratic politicians came to rely heavily on well-off social liberals to meet the increasing cost of electoral campaigns.”Footnote ¹⁶⁴ Moreover, they characterize this development as a “decisive break with our not-too-distant past,” implying that a new order, characterized by a “new liberalism,” has been established.Footnote ¹⁶⁵

From a different perspective, Stephen Skowronek examines the significance of the “Reagan Revolution.”Footnote ¹⁶⁶ On the one hand, Skowronek suggests that the Reagan presidency was transformative. Reagan, he avers, “reset political time,” having “repudiated the priorities of fifty years of liberal government, reset the national agenda, and [become] the touchstone of legitimacy for a new politics that would revolve around conservative priorities through ensuing decades.”Footnote ¹⁶⁷ But, on the other hand, Skowronek strikes a more equivocal note, viewing Reagan's gains as ultimately limited:

For Skowronek, “most of what [Reagan] accomplished was conceptual.”Footnote ¹⁶⁹ Hence, Reagan's impact was projected through time to the present. Therefore, “Reaganism” only crystalizes with Bill Clinton's presidency, whose third-way stance acknowledged “the new political standards that had been established by the Reagan Revolution.” As such, the ramifications of Reagan's repudiation of the old liberal order were reflected both in Clinton's rhetorical stance and in his key legislative achievements: deficit reduction, NAFTA, the crime bill, and “welfare reform.”Footnote ¹⁷⁰ In Skowronek's lights, these policy shifts “all tended to play against type, that is, against the interests expressed by … traditional liberal constituencies.”Footnote ¹⁷¹

Skowronek's perspective is close to the reconceptualization I am suggesting. That is, by viewing the Reagan presidency in relation both to the old liberal order and to the way it constrained his successors through a “redefinition of the terms and conditions of legitimate national government,” the developmental impact of Reaganite ideas comes into focus.Footnote ¹⁷² Moreover, Skowronek draws our attention to the interplay between ideology, which led the way, and the institutional transformation that eventually followed. However, his analysis is encumbered by viewing these shifts through the liberal-conservative binary. For the reasons given above, Reagan's ideas and policy commitments owed as least as much to neoliberalism as to conservatism. More importantly, seeing this phase of political development through a neoliberal lens resolves the apparent paradox of Bill Clinton's “playing against type.” To the extent that Reagan and Clinton shared neoliberal commitments and a critique of the old liberal order, NAFTA, welfare reform, and deficit reduction all played with type. To that, one might add financial deregulation, empowerment zones, and HOPE VI. In this way, we could see Clinton's relation to Reagan in similar light to Nixon in connection with FDR: Both Clinton and Nixon disagreed, respectively, with Reagan and FDR on important policy areas, but did not repudiate the received commitments of their respective political orders and, in some cases, extended them. Examples include Nixon's wage and price controls, urban spending, and environmental regulation; and Clinton's legislative achievements on finance, trade, and welfare. The claim here is not that Clinton was an ardent neoliberal but rather that, like an important segment of the Democratic establishment embodied in the Democratic Leadership Council, he ultimately accepted some of the major tenets of neoliberalism, and the net effect of his presidency was the consolidation of neoliberalism in key policy arenas.Footnote ¹⁷³ This is most striking in the case of welfare reform, which abolished the New Deal entitlement to protection from penury for single mothers and their children, created under the AFDC program. As Soss et al. show, the new TANF program would reduce the welfare rolls but systematically fail to alleviate poverty among the nation's neediest individuals.Footnote ¹⁷⁴ In proclaiming that the “era of big government [was] over” and institutionalizing that principle, Clinton tolled the death knell for New Deal liberalism and consolidated the neoliberal turn.Footnote ¹⁷⁵

Given of the transformations in the American political economy, including key institutional innovations and ideological shifts, it is clear that there are solid grounds for the claim that the politically inspired changes of the past forty years meet the standard of “development”—we can identify durable shifts in governing authority. Indeed, as Skowronek argued in 2008, “politically speaking, America is still working its way through the Reagan era” with Reagan's successors “subject to political expectations he set.”Footnote ¹⁷⁶ This view was confirmed in the aftermath of the 2016 election. Skowronek suggested that the trajectory of the Obama presidency revealed that the “Reagan era is not over.”Footnote ¹⁷⁷ For just as Wilson and Nixon probed for “points of weakness” in their respective regimes, so too did Obama find that even his muted efforts to repudiate the Reaganite (or one might say “neoliberal”) order provoked “a reaction that ended up reviving that orthodoxy in an even more virulent version.”Footnote ¹⁷⁸ Thus, we can demonstrate the emergence of a neoliberal era in which we remain mired, at least insofar as key elements of the urban political order, and the national political economy, are concerned.