The Covid-19 pandemic is shaping up to be a defining moment in modern history. Thus far, the use of neoliberalism throughout it has been a series of success stories.
To start, it has reminded us that our goal is not small government but rather lean, efficient and capable government – what Tyler Cowen terms “state capacity libertarianism”. Governments have a vital role to play in public health and disaster response, which requires a narrow focus on doing these things well. For example, this means ensuring our public health authorities dedicate themselves to facilitating research and excelling at disaster preparedness and responses, rather than meddling in personal decisions.
Even as governments and public health institutions have been slow to respond effectively to the pandemic, we have observed private individuals’ and firms’ abilities to effectively organise economic activity and relief efforts, keeping the shelves stocked and developing testing and therapeutic breakthroughs. This amazing feat corroborates what neoliberals already know – markets work, even when governments don’t.
Recent experiences have also confirmed that many licensing regulations often provide no public benefit or are even counterproductive. When faced with a shortage of medical workers, the state of New York waived licensing requirements which mandated that medical professionals could not practice if they were licensed in another state or country rather than New York.
In addition, many states in the U.S. have waived telemedicine requirements to allow doctors in one state to conduct virtual consultations with patients in other states. Given that the evidence suggests these policy changes have helped patients receive the care they need and not brought them undue harm, we are now in a stronger position to permanently relax these types of licensing restrictions moving forward.
While these experiences are all consistent with long-held free-market principles, neoliberal thought has also been challenged in interesting ways, such as the issue of how neoliberals should think about tail risks. In recent decades, the financial crisis, 9/11 and the coronavirus pandemic have been just as impactful for our long-term economic and cultural trajectories as the secular trends which preceded them. As a result, developing effective neoliberal policies which address tail events should be just as worthy of attention as work to expedite the long-running trends towards global technological and material progress.
One feature of neoliberalism is its emphasis on evidence-based policymaking. However, events which are without precedent in the modern age pose a challenge to a policy-making framework of doing what has worked in the past. Where there is little evidence upon which to base decisions, we must rely in part on a priori approaches.
This is business as usual for ideologues who routinely practice a priori deduction from their base assumptions. For example, if one believes that the solution to every problem is larger government and to “eat the rich”, the pandemic and its consequences present nothing other than a convenient excuse for this view. But to the decidedly unideological governing philosophy of neoliberalism, this is unfamiliar territory.
The best fallback is a greater focus by neoliberal thinkers on preparing for and responding to improbable yet consequential events, even during normal times where such discussion is considered unfashionable or alarmist. The intellectual challenge for neoliberals going forward is developing a framework for how best to apply principles which work well under normal circumstances, such as free markets, rule of law and property rights, to edge cases where certain market activities or personal liberties may need to be curtailed.
Similarly, some have argued that the experiences of past months have challenged the orthodox neoliberal position of unfettered free trade and suggest that the status quo view may warrant some stipulation. While trade remains a massive net positive and continues to lift living standards worldwide, trade policy must balance these benefits with ensuring that supply chains for essential goods like food and medicines are robust to severe disruptions such as pandemic or war.
Overreliance on essential items imported from geopolitical adversaries can lead a country to have less leverage in the geopolitical arena, and international trade without proper safeguards can lead to environmental damage, potential security threats and transfer of invasive species. Neoliberals should not ignore these costs just because they are difficult to quantify and incorporate into economic models which demonstrate gains from trade.
In the post-pandemic discourse on the future of global trade, neoliberals must take seriously these valid concerns about unfettered trade without giving way to creeping protectionism. The neoliberal position should involve narrowly focused market-based policies, not arbitrary restrictions or politically-motivated protectionism, as a means to correct for these hidden costs of trade, much in the same way that we advocate a border-adjusted carbon tax to account for the hidden carbon cost of goods produced overseas. Other free-market policies, such as deregulation and full expensing of investments in plants and machinery, can serve the dual purpose of accelerating economic growth as well as robustifying essential supply lines by expanding domestic production.
The coronavirus pandemic has put neoliberal political thought to the test, and it has passed resoundingly. Nevertheless, it is worth reflecting on the challenges these unprecedented times pose to the prevailing wisdom and the ways in which neoliberal thought should face these challenges.
Even when the future courses of the virus, the economy and the political landscape are all uncertain, one thing is clear – neoliberal thinkers are needed now more than ever.
