II The Great Recession in context

For more than three decades, the contours of global governance have been shaped relentlessly by the imperatives and omissions of neoliberal governance. It was grounded in the maxims of neoclassical economic theory which, initially at least, gave this real-world experiment in market utopianism the gloss of scientism, efficiency and authority that partially insulated it from political contestation. In fact, democratic debates about distribution and regulation were progressively trumped by the alleged imperatives of the market. From its inception, the neoliberal project was propelled by the foundational claim that ‘there was no alternative’ to its model of limited government, privatisation, deregulation and financialisation on a global scale. This new governing formula projected an abiding antipathy to the very ideas of the public and the social, and an unflinching faith in the elemental authenticity of the self-seeking individual and the superiority of the market mechanisms in determining social outcomes. These ideas were embraced and propagated by the most influential international financial institutions and global policy networks, the most powerful economic regions and national states, and, eventually, whether by acquiescence or coercion, all but a handful of marginal states around the world.

After three of decades of experience, however, it is apparent that neoliberalism had failed to deliver on its exuberant promises of unfettered growth spanning the globe and trickle-down prosperity for all. Instead, the neoliberal era has been marked by stagnant wages, precarious jobs, and unemployment, especially among vulnerable groups and youth. However, two core failures, economic instability and income inequality, top the list of neoliberalism's inherent flaws. Across its short history, neoliberalism has staggered from one self-inflicted financial crisis to another (McBride and Whiteside, Reference Mcbride and Whiteside2011, pp. 2–3; Brenner et al., Reference Brenner, Peck and Theodore2010). Although largely confined to emergent economies, these crises left in their wake intolerable hardships for working people and families, straining established patterns of social organisation and social reproduction. International bailouts of already fragile economies invariably came only on the condition that receiving governments implement rigid austerity programmes, reduce social spending, privatise public services and assets, and liberalise domestic markets. In this way, developing countries were integrated into the fiercely competitive and asymmetrical game of global capitalism. And, as Stiglitz concluded, ‘the losers are clear: countries that pursued neo-liberal policies not only lost the growth sweepstakes; when they did grow, the benefits accrued disproportionately to those at the top’ (Stiglitz, Reference Stiglitz2008). Invariably, however, the recurrent financial crises of neoliberalism were interpreted as a one-off, the product of a unique constellation of unanticipated anomalies or local maladies such as political corruption or the misapplication of neoliberal policy prescriptions. The model itself was sheltered by an unshakable faith in market fundamentals, which progressively skewed the distribution of wealth and income to a select few – the global plutocracy of the neoliberal era (Freeland, Reference Freeland2012).

The structural and systemic liabilities of unprecedented income inequality in both developed and emergent economies did not overly alarm neoliberal enthusiasts, however, largely because such inequalities were entirely consistent with the ambitions of the neoliberal project. Neoclassical economics dressed up income inequality in the garb of marginal productivity theory, which pronounced that higher incomes for some merely reflected and rewarded their greater contributions to the success of an enterprise and, by extension, to broader society (Stiglitz, Reference Stiglitz2012, p. 29). Similarly, trickle-down theory, another innovation in neoclassical economics, anticipated, and indeed celebrated, income inequality because it allegedly spawned entrepreneurship, economic growth and job creation. Markets rightly paid an entrepreneurial risk premium to those who took greater risks and invested in productivity and competitiveness. The benefits of this entrepreneurial activity, so the story went, trickled down to everyone else in the form of jobs and cheaper consumer products. It was, as neoliberals were convinced, a win–win scenario.

Neoliberal governance was further fortified by the ‘epistemic hubris’ (Blyth, Reference Blyth2013, p. 91) of abstract mathematical modelling and the generation of new financial instruments that supposedly took much of the risk and instability out of the system. In the early 2000s, investment houses and financial regulators alike celebrated the death of the business cycle, firmly believing that new risk management practices had tamed the recurrent boom–bust cycles of capitalist economies. The Great Recession thus took the governing classes by surprise. The proximate cause of the crisis was a bubble in the US housing market, which had been pumped up to the point of implosion by subprime mortgages, the bundling of risk in paper assets and, ultimately, by unmitigated greed and outright fraud. Nevertheless, at the outset of the crisis, the OECD forecasted ‘a soft landing in the United States’ and ‘a strong and sustained recovery in Europe’ (OECD, 2007). This assuredness soon dissolved with the realisation that the global financial system was saturated with American toxic assets, and global credit markets seized up.

Many critics of neoliberal globalism, including many feminist political economists, had long argued that the system was a ticking time bomb because it was economically, socially and environmentally unsustainable and because financial deregulation, in particular, tied the global economy together with invisible threads of vulnerability. Not surprisingly, then, many pronounced that the neoliberal paradigm had been mortally wounded by the 2008 financial crisis and that this governing model would be replaced by new institutions and a much stricter regulatory regime. In the early months of the crisis, indictments of neoliberal principles and practices were harsh, pervasive and increasingly shared by long-time critics and former proponents alike. Former World Bank economist and Nobel Laureate Joseph Stiglitz, for example, dared to articulate what neoliberal policy networks were loath to acknowledge. ‘Neo-liberal market fundamentalism’, he wrote, ‘was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy’ (Stiglitz, Reference Stiglitz2008).

Earlier predictions of neoliberalism's swan song, however, were perhaps too quick to discount the pattern of neoliberal responses to its previous financial crises. The near collapse of the American financial sector clearly was met with shocked disbelief because, according to prevailing logic, the crisis should not have happened. Such incredulity, as Peter Gourevich found in his study of economic crises in the twentieth century, is typical among policy-makers at the outset of a crisis. Betrayed by familiar assumptions and policy tools, political actors soon grasp at novel and improvised strategies, which often contradict previously held dogma and stray from existing policy inventories (Gourevich, Reference Gourevich1986, pp. 9–10). Jamie Peck, Nik Theodore and Neil Brenner argue persuasively, however, that such policy inventiveness has always been part of the neoliberal policy repertoire. They suggest that a key feature of neoliberal governance has been its capacity to change its complexion, formative discourses and policy commitments as it lurches from one crisis of its own creation to another (Peck et al., Reference Peck, Theodore and Brenner2009, p. 116; Brenner et al., Reference Brenner, Peck and Theodore2010). More important, they contend that the recurrent economic and social crises generated by neoliberal governance typically have been met with more extreme market-based solutions. The experience of the last thirty years reveals a governing experiment that is in constant motion, misnaming, postponing and displacing crises, and ‘instilling a satiable need for next stage reforms’ which, in time, spiral into deeper crises and more extreme responses (Brenner et al., Reference Brenner, Peck and Theodore2010, p. 210). Part III of this paper describes how governmental responses to the 2008 global financial crisis unfolded according to this logic. Restoration and retrenchment embody the experimental and cascading reflexes of the neoliberal governing formula.

III Restoration strategies

In the early days of the crisis, calls for a new regulatory regime that would discipline global financial markets and hold them accountable echoed through elected assemblies and the media and topped the agenda of an emergency G20 meeting held in Washington a few weeks after the stock market crash. However, within a matter of months, demands for institutional and regulatory change were deflected because the financial crisis was reframed as an anomaly, an exceptional event precipitated by overzealous wealth-creators and a few ‘bad apples’ (Clarke, Reference Clarke, Rutherford and Davison2012, pp. 44–45). As was the case with previous financial crisis in the neoliberal era, the global financial meltdown was misnamed as an unanticipated bump-in-the-road that could be corrected with targeted stimuli to stabilise financial markets and prime labour markets. This discourse conveniently erased from public memory the recurrent financial crisis that had plagued neoliberal globalism from its inception and had enormous implications both for building consensus around remedial responses and for generating buy-in on the ground among those immediately impacted by the crisis. An exceptional but temporary crisis required an equally exceptional but temporary response. The United States and other advanced economies thus deployed unprecedented levels of public borrowing to increase liquidity, jump-start industry, stimulate employment and get on with business as usual (Peck et al., Reference Peck, Theodore and Brenner2009, p. 101).

While the fine print in the restoration packages varied from one country to the next, their primary goal was to pump money back into the financial sector, especially into banks deemed too-big-to-fail, and, secondarily, to create temporary employment through so-called ‘shovel-ready’ infrastructural projects. Elected officials repeatedly underlined that there was no alternative to the bailouts and stimulus packages, but arguably there were other ways in which they could have been implemented. The inequities and contradictions were palpable, reflecting the promiscuity of neoliberal governance in practice. Corporate entities, both responsible for the crisis and fundamentally antagonistic to government intervention in the economy, had been thrown a lifeline by the state and largely unprotected taxpayers, whose jobs, savings and equity had vanished into thin air. The bank bailouts, moreover, came with few strings attached and little assurance that rescued banks would relax lending conditions for struggling industries or, in the case of the United States, the hundreds of thousands of families that faced foreclosure on their homes. Late entrants to the American housing market, seduced by the siren call of subprime mortgages, lost whatever equity they had built in their homes or forfeited their homes altogether. It was not uncommon for homeowners to owe more on their mortgages than their houses were worth in a tanking housing market. Many simply walked away from their mortgages, further fuelling the financial crisis. Subsequent analyses indicated that the housing crisis virtually wiped out the wealth of African-Americans who were overrepresented among the ranks of the late entrants (Reich, Reference Reich2012).

The crisis had also decidedly gendered impacts in labour markets as the weight of the abrupt and severe economic downturn initially appeared to fall on men, especially those employed in the construction and manufacturing sectors. The contraction was so dramatic in these traditionally male-dominated sectors that commentators dubbed the downturn a ‘he-cession’ or a ‘man-cession’ and, for a short time, women constituted the majority of the American workforce (Rampell, Reference Rampell2010). Shovel-ready infrastructural projects targeted these male-dominated sectors and unemployment soon edged downwards, if only temporarily. But many well-paying and unionised jobs in the manufacturing sector simply disappeared, while manufacturers that survived the financial meltdown extracted significant concessions from workers and unions on pay, pensions and working conditions. It also was not uncommon for new employees to receive far inferior pay and employment benefits than long-term workers doing the same work. Since the Great Recession, job creation has been largely confined to part-time, contractual and/or low-wage jobs in the service sector. Very little in the restoration strategies implemented in the immediate wake of the crisis was targeted at low-income earners, predominately women, immigrant and racialised workers, or to families that had been transformed from dual earner to single earner units as a result of the crisis (McBride and Whiteside, Reference Mcbride and Whiteside2011, p. 12). Thus, already unprecedented income inequalities intensified.

As in previous instances, restoration strategies misnamed, displaced and postponed (Brenner et al., Reference Brenner, Peck and Theodore2010, p. 210). The stimulus packages may have prevented a complete collapse of the global financial system, but this outcome also caused a sharp rise in public debt, destabilising the public finances of many countries with already fragile balance sheets (Piketty, Reference Piketty and Goldhammer2014, pp. 472, 553). The financial crisis soon rolled over Europe, particularly to the so-called PIIGS countries (Portugal, Ireland, Italy, Greece and Spain), and G20 governments quite inexplicably turned to retrenchment as a second experimental response to the crisis. As Paul Krugman (Reference Krugman2012, p. 188) explained: ‘A funny thing happened in 2010: much of the world's policy elite – the bankers and financial officials who define conventional wisdom – decided to throw out the textbooks and the lessons of history, and declare that down is up’. In the process, the Great Recession was reframed once again, this time as a sovereign debt problem that demanded immediate and determined action to cut the public sector and social programmes. This about turn required new rationales, especially since it seemed so at odds with the prescriptions of mainstream economic theory. As Part IV of this paper explains, austerity also rendered equality more elusive for women and vulnerable groups.

IV Retrenchment and the austerity cure

The abrupt shift in mid 2010 from stimulus spending to public austerity as a preferred collective response to the Great Recession seemed to defy common sense and the lessons of both conventional public finance and historical experience. Mainstream economics had long held that recessions required more not less public spending and that sovereign debt was best retired during periods of economic growth, better still in inflationary times. Mark Blyth's detailed study of the application of public austerity in recessionary times, including in the early years of the Great Depression, recounts how these measures typically fail to put depressed economies back on course. Instead, austerity policies tend to further destabilise fragile economies, often pulling them further into a deflationary spiral from which it takes years to recover (Blyth, Reference Blyth2013). There is no question that sovereign debt grew precipitously in the wake of the 2008 financial crisis – restoring ‘free markets’ had proved ‘astonishingly expensive for the public pursue’ (Hutton, Reference Hutton2012). The spectre of public debt was even more daunting in the European Union (EU), where some Member States had been engaged in deficit spending for years (e.g. Italy and Greece), while others had been caught up in the banking crisis through contagion, over-leveraging and real-estate speculation (Spain, Ireland). The liabilities of some of Europe's largest banks were too great for their host countries to underwrite, while EU rules constrained bank bailouts. In the American case, bank bailouts were premised on the logic of ‘too-big-to-fail’, but in Europe troubled banks were ‘too-big-to-bail’ by their host countries (Blyth, Reference Blyth2012). When financial help eventually came from the so-called Troika (the International Monetary Fund, the European Central Bank (ECB) and the European Commission (EC)), the strings attached demanded the immediate imposition of harsh austerity measures and the sale of public assets. This said, the austerity option was also embraced by countries that did not have a banking or debt crisis and were not constrained by the particularities of the Eurozone. In both Europe and elsewhere, austerity provided a crisis-template to realise long-standing neoliberal ambitions to shrink the state, accelerate privatisation, flexibilise the public sector and further dismantle social programmes. The austerity turn, to borrow a phrase, was a crime of necessity and a crime of opportunity.

The Toronto G20 meeting in late June 2010 appeared to mark a shift in understanding austerity, not as a localised and exceptional measure, but as a collective response to the ongoing crisis. While G20 leaders were divided on the question of additional stimulus or public austerity, in the end they agreed to cut their deficits in half within three years and to lower government debt by 2016 (G20, 2010). In so doing, the working and middle classes, still reeling from the aftershocks of the financial meltdown, were positioned to pay for the bailouts and stimulus packages with their government services and social programmes (Blyth, Reference Blyth2010). Put differently, the consolidation of private profit and wealth would come at the cost of increasing public poverty (Piketty, Reference Piketty and Goldhammer2014, p. 567).

Of course, there were competing and more empirically grounded ways to understand the debt crisis, not least as a crisis in government revenue. In the neoliberal era, governments had progressively cut taxes for upper income earners and corporations, thereby significantly reducing the fiscal capacities of national states to balance their books. Relatedly, the crisis could have been understood as a crisis of inadequate demand, resulting from the long-term growth in income inequalities and the devastating impacts of the Great Recession itself. Moreover, there was increasing evidence that corporations were sitting on vast capital reserves, an estimated three times more than the historical average, apparently waiting out the storm. This capital could have provided a way of growing out of the recession and debt through increased investments in employment, labour force productivity and research and development (Economist, 2012a). Chronically insufficient revenues, insufficient consumer demand, and so-called ‘dead money’ obviously demanded different kinds of policy interventions than those proffered by austerity. The abrupt shift to austerity thus required inventive manoeuvring, which would both ground this unconventional and inequitable strategy in the familiar certitudes of market governance and place the burden of political and financial accountability for the crisis squarely at the feet of the public sector.

Austerity has varied intellectual lineages, beginning with early liberal statecraft's rigid adherence to balanced budgets, a logic that was surpassed by Keynesian-inspired counter-cyclical policy instruments in twentieth-century statecraft (Blyth, Reference Blyth2013).Footnote ² The founders and early adopters of neoliberalism, however, endowed the concept with different nuances that were aimed squarely at minimising the size and the scope of postwar social and developmental states. Neoliberalism's intellectual godfathers, Friedrich von Hayek and Milton Friedman, condemned government spending as a distortion of and constraint on markets, consumer choice and individual freedom. Early adopters of neoliberalism, such as the World Bank (WB) and the IMF, imposed public austerity on debtor nations precisely to minimise the social arm of developmental states and to open new markets to global capital. Margaret Thatcher, in turn, likened governmental austerity to the principles of good housekeeping, something which, as a woman, she said she understood intuitively. Women knew how to live within their means, stick to the family budget, and defer non-essential purchases to another day. But, as critical economists point out, the household metaphor does not translate well to the economy, especially in recessionary times (Krugman, Reference Krugman2012, p. 50). When households, corporations and governments all cut back at the same time, the economy shrinks and governments fall further into debt (Blyth, Reference Blyth2010). Even in robust economies, public austerity invariably depresses economic growth and employment in the short and often medium terms (IMF, 2010).

The revival of the austerity doctrine was premised on two novel amendments to neoliberal doctrine that embodied the sheer inventiveness of this governing strategy (Brenner et al., Reference Brenner, Peck and Theodore2010). The first, published by Harvard economists Carmen Reinhart and Kenneth Rogoff, was widely circulated among global policy networks in the period leading up to the 2010 Toronto G20 meeting. Their research purportedly discovered a tipping point in the ratio of public debt to GDP: if sovereign debt passed 90% of the GDP, the model demonstrated, a recession would likely follow (Reinhart and Rogoff, Reference Reinhart and Rogoff2010). This finding fortified the Austerians, as Krugman (Reference Krugman2012) calls them, who argued that to restore growth there was no alternative other than to cut government spending until their sovereign debt fell below this threshold.

The second scientific rationale for austerity grew out of a series of scholarly papers published since the mid-1990s, which queried whether public austerity, under specific conditions and contrary to conventional wisdom, could be strategically deployed to stimulate economic growth (Alesina and Perotti, Reference Alesina and Perotti1995; Blyth, Reference Blyth2013). The new doctrine of ‘expansionary austerity’, or, more formally, ‘expansionary fiscal contraction’ (EFC), emerged from these selective academic conversations. The EFC hypothesis ventured that a reduction in the size and scope of government, even in recessionary times, generated economic growth because of changed investor expectations. Thus, in defence of the deep cuts to the public sector and the social safety net exacted in the UK's 2010 emergency austerity budget, Chancellor of the Exchequer George Osborne explained that knowledge alone that the government was tackling the debt was enough to encourage private investment. This investment, in turn, would more than replace the public money extracted from the economy through public-sector lay-offs and cuts to social programmes (Elliott, Reference Elliott2011).

Feminist economists have pointed out that the burden of this attack on the public sector fell especially hard on women and other vulnerable groups, whether as recipients of social services and income supports, as public-sector workers, or as unpaid providers of social reproductive care (Brodie, Reference Brodie2010). Such cuts typically intensify women's unpaid social reproductive work, while the attendant privatisation of care increases the feminisation and racialisation of this precarious work (UNRISD, 2005, p. xxiii). For women, who make up the vast majority of public-sector workers, the impacts of cutbacks were immediate and severe (Young and Schuberth, Reference Young and Schuberth2010). The UK's Fawcett Society (2012) explained that austerity policies placed women in triple jeopardy: ‘Women are hit hardest by cuts to public-sector jobs, wages and pensions’; they are hit hardest as benefits they need and use are cut; and they are hit hardest because they ‘are left filling the gaps as state services are withdrawn’. These negative outcomes, moreover, are especially severe at the intersections of gender, race and generation. Women of colour are overrepresented among recipients of social assistance, in precarious work, and among the ranks of public-sector workers that stand to benefit from employment equity policies. The systematic undermining of equality politics, characteristic of the neoliberal era, accelerated in the so-called ‘age of austerity’ under the guise of public restraint. As a consequence, both public and private sector employers have backed away from the principles of pay and employment equity, as luxuries that prudent management can no longer afford. Public austerity budgets, moreover, pay scant attention to previous commitments to gender mainstreaming, gender equity or the principles of gender-based budgeting (Brodie and Bakker, Reference Brodie and Bakker2008). At the same time, public austerity effectively has closed the door to public-sector employment to a whole new generation of workers, who were trained to launch careers in, among other fields, medicine, education, community service and public administration. While youth unemployment is unacceptably high around the world, it has reached crisis proportions in countries subjected to the austerity cure.

The Austerian's bolstered their assault on the public sector with a series of discursive manoeuvres. First, entrepreneurial confidence was elevated as the necessary and sufficient condition for economic recovery. The ‘confidence fairy’, as Krugman calls it, was conjured up in defence of national austerity initiatives while the G20 prioritised measures to ‘strengthen global growth and restore confidence’ (Krugman, Reference Krugman2012, p. 143; G20, 2012). Second, the case for austerity was interwoven with the time-worn story of the profligate son in which the EU played a starring role in this saga. The chickens always come home to roost when a country extends too much social protection to its citizens, especially when it does so with borrowed cash (ABC, 2011). The bearers of this tale conveniently overlooked the fact the financial crisis itself, and not programme spending, had played havoc with government finances (Blyth, Reference Blyth2012). Finally, the Austerians fuelled social antagonisms to deflect public attention away from the uneven impacts of austerity and the growing gap between the rich and the rest. While distinctions were drawn between nationals and immigrants and the young and the old, the primary focus was the supposed tension between private- and public-sector workers. The latter, typically unionised with decent incomes and pensions, job security, benefit packages and equity programmes, were represented as underserving workers whose privileged position was subsidised by ordinary taxpayers who were afforded none of these securities (Greenhouse, Reference Greenhouse2011). These representations of the pampered public-sector worker helped to justify slashing public-sector jobs and employment benefits and advanced neoliberalism's long-held ambitions to reduce the state, flexibilise the public sector, and privatise public assets and services.

The retrenchment response to the Great Recession, however, had two fatal flaws: it was informed by dubious theory and, more critically, it made matters worse. The first domino to fall in austerity's theoretical scaffolding was the claim that sovereign debt had a statistical tipping point. In 2013, a University of Massachusetts graduate student and his supervisors published a scathing refutation of the influential Reinhoff and Rogoff study, which had quickly become gospel in some policy circles. The paper found that this study had employed highly questionable statistical techniques and skewed the data through selective omission and coding errors. Rerunning the data, the University of Massachusetts paper found no empirical grounding for arbitrarily cutting a path to this fabricated debt threshold (Krugman, Reference Krugman2013). The second domino was the progressive erosion of confidence in the predictions of the expansionary fiscal contraction hypothesis. EFC, also referred to as the ‘German hypothesis’, gesturing at the strong economic growth that followed budget-cutting in that country in the 1980s, had promised to restore business (Fidler, Reference Fidler2012). The German exception, however, did not prove a rule. IMF data summarising national economic forecasts from 2007 to 2015 indicated that one-quarter of the 181 countries reviewed were undergoing excessive contraction (measured as government expenditure as a percentage of GDP), but corporations continued to sit on historically unprecedented reserves of capital (Sassen, Reference Sassen2014, p. 24). In fact, as many economists predicted at the outset of the public austerity experiment, countries subjected to the harshest austerity measures fell deeper into recession while elsewhere signs of economic recovery remained tentative and insignificant. In 2012, seventeen countries sharing the Euro were in recession, followed by France in 2013; government deficits were 40 per cent higher in 2012 than they were 2010; and unemployment grew to depression-like levels, especially in countries that were subjected to the austerity cure (Quiggin, Reference Quiggin2013). In Spain and Greece, for example, unemployment edged over to over one-quarter of the workforce. Most troubling, youth unemployment in 2012 stood at 58 per cent in Greece and 55 per cent in Spain (Economist, 2013b). In 2012, the IMF conceded it had underestimated the ‘braking effect’ of austerity policies which were two to four times more severe than its models had predicted. Both the IMF and the OECD thus urged governments and international financial institutions to ease up on their austerity targets (Elliott, Reference Elliott2012; Isfeld, Reference Isfeld2012). As Krugman summarised, ‘the austerity doctrine that has ruled European policy [was] a big fat failure’ (quoted in Castaldo, Reference Castaldo2012). Adding fuel to the fire, Oxfam (2013a) issued a scathing critique of the austerity experiment in the UK and Europe, arguing that this policy had massively increased poverty and inequality and predicted that it may take a quarter of a century before poverty levels return to pre-crisis levels. The report concluded that austerity policies were ‘moral and economic nonsense’.

V Reinvention and redistribution

Across its short history, neoliberalism has reinvented itself in times of crisis, typically by intensifying market-oriented strategies (Brenner et al., Reference Brenner, Peck and Theodore2010) and downloading the costs of market failures on governments, communities and families. In the case of the Great Recession, the private liabilities of market failure were shifted to the public sector, while the costs were downloaded onto families and individuals in the form of lost jobs, eroded social programmes, increased social inequalities, and diminished life chances for youth, the economically vulnerable and equity-seekers. After over a half decade of misnaming, postponing and policy inventiveness, the global economy remains slack and fragile. Yet, as a 2012 IMF report underlined: ‘the basic financial structures that we found problematic before the crisis are still with us: financial systems are still overly complex, banking assets are highly concentrated, with strong domestic inter-linkages, and the too-important-to fail issues are unresolved’ (Kodres, Reference Kodres2012). In 2013, global financial elites warned that the global economy continued to teeter on the brink of another collapse (Telegraph, 2013). As the spectre of another lost decade, similar to that of the 1930s, becomes a growing reality, the governing assumptions and policy instruments of neoliberal governance have fallen under intense re-evaluation and critique. In many ways, post-crisis debates have come full circle, returning to the systemic critiques that were displaced by restoration strategies in the early months of the crisis. The growing consensus is that economic recovery awaits a calculated shift away from neoliberal dogma.

The past half-decade has witnessed an ever-louder chorus of systemic critiques of the neoliberal growth model. One major thread of critique has focused on the inherent instabilities of global financial capitalism. As advanced economies continue to struggle to gain traction, mainstream economists are increasingly wondering aloud whether the neoliberal growth model itself was a mirage all along. This possibility was flagged in Reference Rajan2010 by Raghuram Rajan, former IMF economist and current governor of India's central bank, in his controversial book, Fault Lines: How Hidden Fractures Still Threaten the World Economy. He argued that pre-crisis economic growth in the United States and around the world had been fuelled by the American housing bubble, the democratisation of credit, and unsustainable consumer debt. Building on Rajan's observation, contemporary critics suspect that the appearance of growth in the neoliberal era actually only reflected the effects of a succession of economic bubbles, rounds of hyper-speculative activity that eventually ended in busts, deep social dislocations and inequality. The Economist (2013a), for example, reported that, between 1720 and 2013, there have been 330 economic bubbles, but the preponderant majority of these have occurred in the past three decades, as deregulated capital scoured the globe for the next financial gold rush.

More telling, many economists now argue that the bubbles and the bravado simply masked a long-term trend towards secular stagnation in advanced economies. Among these, Larry Summers, a Harvard economist and one of the architects of American restoration strategies, contends that advanced economies had been artificially sustained by bubbles and borrowing long before the 2008 financial crisis struck. Without significant income redistribution and public investment, economists fear that advanced economies will keep inflating bubbles in a doomed attempt to resurrect growth (Economist, 2014c). Mainstream economists warn that there is growing evidence of speculation and overvaluation in the financial sector as well as the reinvention of complex financial instruments which lend instability to the system (Economist, 2014d). Pointing to these worrisome trends, in mid-2014 both Mark Carney, head of the Bank of England and the International Financial Stability Board, and Christine Lagarde, head of the IMF, expressed their concerns that the financial sector had not changed fundamentally since the crisis and had not learned from its mistakes (CBC, 2014; Eichelberger, Reference Eichelberger2014). At the same time, some economists and money managers speculated that the risk of another financial crisis might be preferable to an aborted recovery and ongoing economic stagnation (Economist, 2014a).

The second and loudest critique of neoliberal fundamentals, however, has centred on the economic, social and political liabilities of economic inequalities (Brodie, Reference Brodie and Gill2015). The 1 per cent (and the 99 per cent) has become the dominant political motif of the Great Recession. Although the gap in income, wealth and life chances began to widen early in the neoliberal era, social movements such as Occupy Wall Street, which spread around the world in 2010, and the Indignados and Syriza, which grew out of austerity-ravaged Europe, ignited popular indignation about neoliberalism's propensity to concentrate income at the top (Economist, 2012b). According to the Credit Suisse 2013 Global Wealth Report, just 7 per cent of the global population own 41 per cent of global wealth and 10 per cent hold 86 per cent (Eichelberger, Reference Eichelberger2014). In contrast to neoliberal dogma that emphasised individual responsibility for both success and failure in market economies, these spontaneous social movements have provided a systemic explanation for the inequalities and insecurities of everyday life, especially in the aftermath of the financial crisis and austerity programmes.

Since 2010, there also has been a growing tide of books, written by respected economists (Reich, Reference Reich2012, Krugman, Reference Krugman2012, Stiglitz, Reference Stiglitz2012, Piketty Reference Piketty and Goldhammer2014), as well as detailed studies, emanating from influential policy networks, which point to wealth and income inequality as an unsustainable flaw in the neoliberal governing template. In 2011, for example, the OECD took aim at neoliberalism's winner-take-all culture and policies, which have created ‘deeply rooted social imbalances’ and a system that makes inequalities grow in unsustainable ways. Contrary to the pronouncements of trickle-down economics and other neoliberal innovations, the OECD pronounced, in capital letters, that ‘the benefits of economic growth DO NOT trickle down automatically’ and that ‘greater inequality DOES NOT foster social mobility’. The report recommended a new policy agenda that promoted employment, tax reform and reinvestment in education, health and family care. It reminded member countries that ‘addressing the question of fairness is the sine qua non for the necessary restoring of confidence today’ (Gurria, Reference Gurria2011; Lansley, Reference Lansley2012). The following year, United Nations Conference on Trade and Development (UNCTAD, 2012, pp. i–ix) called for a ‘rethinking of the principles underlying the design of national economic policy and supportive international arrangements’, calling for active employment and redistributive measures. A 2013 Oxfam study, in turn, has called for a new global initiative to end extreme wealth by 2025, recommending that governments implement a package of policies that would return income inequality back to 1990 levels (Oxfam, 2013b; Elliott, Reference Elliott2013). Even the Economist (2012c), a bastion of neoliberal policy prescriptions, called for a new era of ‘True Progressivism’ that would attack inequality with progressive social spending and tax reforms.

Five themes weave through these varied empirical analyses: first, income inequality is largely attributable to changes in public policy during the past three decades, especially tax policy and deregulation, rather than to such fluid processes as globalisation and technological change; second, more equitable societies do better on all manner of social indicators and recover more quickly from economic downturns; third, economy recovery is unlikely to occur unless and until governments intervene to ensure a more equitable distribution of income and social goods; fourth, income inequality makes everyone worse off as it depresses demand and increases social liabilities; and fifth, income inequalities intensify political instability.

Global policy elites are increasingly concerned about the political fall-out from economic inequality and austerity policies and the growing realisation that they are losing control of the economic narrative – the story we tell ourselves about how the economy works. In 2012, for example, the World Economic Forum (WEF) published a Global Risks Report (GRR) warning of the dangers of growing austerity protests and the election of what it termed ‘rejectionist’ governments. These concerns are not unwarranted. A 2013 Pew Center poll of fourteen developed countries revealed a remarkable legitimacy deficit that spans across advanced democracies. The majority of respondents in all but one of these countries (Australia 44 per cent) agreed with the proposition that the system favours the wealthy and is rigged against ordinary people. Across continental Europe, the disaffected constituted the overwhelming majority: to wit – Italy 86 per cent; Spain 89 per cent, Greece 95 per cent (Pew Research Center, 2013; Tencer, Reference Tencer2013).

Christine Lagarde reminded a gathering of the world's top money managers in the spring of 2014 that ‘democracy begins to fray at the edges once political battles separate the haves against the have-nots’ (quoted in Eichelberger, Reference Eichelberger2014). Undoubtedly, her most immediate point of reference was the 2014 election for the European Parliament, in which a third of the successful candidates came from a potpourri of populist parties from the extreme right and left. While most are anti-European, anti-austerity and anti-free trade, some are decidedly anti-immigrant and a few are overtly racist (Economist, 2014b). As Karl Polanyi's (Reference Polanyi1944/2001) enduring analysis of the Great Depression underlined some seven decades ago, systems in crisis give rise to the spontaneous eruption of all manner of counter-movements, both progressive and pathological. Although consensus may be building in some circles around redistribution and reinvestment as a response to the ongoing crisis, the precipitous growth of anti-immigrant, xenophobic, racist and fundamentalist movements around the world remind us that systemic crisis can spiral into illiberalism, the outright rejection of equality-seekers, and the scapegoating of the displaced, the vulnerable and the different.