The coronavirus pandemic has required states to take unprecedented steps to backstop the world capitalist economy. This has included enormous liquidity injections into financial markets, guaranteeing the wages of furloughed workers, and temporarily requisitioning and coordinating parts of the private sector. Yet last year a different threat – not epidemiological but proletarian – similarly forced states to adopt redistributive policies against their wills, albeit on a smaller scale.Ìý

From the vantage point of the current uprisings against racist police violence, the empty streets of the early 2020 lockdown appear as a brief exception to the broader trend of mass unrest. In , streets, avenues, and squares in different parts of the world flooded with protestors decrying the pro-rich policies of their respective governments. The scale, endurance, and spectacular disruptiveness of these popular explosions pressed governments from Western Asia to Europe to Latin America to abandon so-called neoliberal fiscal rectitude and reluctantly embrace Keynesian stimulus policies.

In Chile, on the eve of the autumn 2019 revolt, billionaire austerian president Sebastián Piñera a classic metaphor of neoliberal stoicism to explain how he would resist popular opposition to his painful reform programme: ‘Ulysses tied himself to a ship’s mast and put pieces of wax in his ears to avoid falling for the … siren calls’. Less than one month later, this modern Ulysses had broken free from his tethers, announcing increases in the minimum wage, healthcare benefits, pensions, electricity subsidies, and the reform of Chile’s very constitution. There are clear with France’s Emmanuel Macron, a former investment banker who assumed power in 2017 on a platform of market discipline, only to buckle under the weight of the relentless Gilet Jaunes movement and announce a €17 billion package of concessions.

How are we to grasp the jarring Keynesian U-turns of such cartoonish neoliberal governments in the face of mass protest and pandemic? It is commonly assumed that the neoliberal project represented the shrinking of the state sphere and its replacement by the cold logic of the marketplace. The 2008 bank bailouts appeared to buck this trend, as states were called upon to undertake drastic interventions. But this turned out to be a hiccup in neoliberalism’s larger narrative arc, as austerity quickly took hold. Yet perhaps this latest accumulation of crises will at last force states to reclaim the territory they had ceded to the market. After its ‘’, is neoliberalism finally dying?

The IPE of states and markets

Underpinning this question of neoliberalism’s impending demise (which has been proclaimed and ) is an implicit understanding of states and markets as opposed entities engaged in a zero-sum power struggle. This framing echoes early interventions in International Political Economy’s (IPE) ‘globalisation debate’. In the wake of the collapse of the Bretton Woods system in the 1970s and the rapid globalisation of economic relations, such ‘globalist’ accounts heralded a new ‘borderless world’ in which the state would ‘wither away’ under pressure from unrestricted capital flows. Neoliberalism was presented as the political manifestation of this phenomenon, whereby free-market ideologues captured the reins of state power for the purpose of overseeing the state’s retreat in the face of metastasising and globalising market logics.

While this notion of a state-market tug-of-war is still presented as the IPE mainstream, this characterisation is in fact long outdated. In our New Political Economy , we argue that a critical consensus has emerged within the discipline around the concept of the ‘mutual constitution’ of states and markets. According to this approach, states do not intervene at the expense of markets, but rather markets only exist because states reproduce them. The intellectual scaffolding of the mutual constitution thesis is provided by Karl Polanyi’s concept of embeddedness, whereby states and markets are understood to constitute an interwoven social whole. Market mechanisms are always embedded in and underpinned by specific arrangements of political authority, institutional design, and ideational paradigms.Ìý

For this approach, which emphasises states’ market-making powers, the question of whether increased state intervention signals the demise of neoliberalism is incoherent. Neoliberalism never entailed the advance of a self-regulating market at the state’s expense – this was sheer mythology. Rather, neoliberalism denotes a particular pattern of state-market relations, in which the state forges the framework for free commerce and polices the market’s functioning. This follows from Polanyi’s insight that laissez-faire was, and continues to be, planned. Perhaps a better question, then, is: given today’s unprecedented conditions, what new political-economic constellation is emerging to replace the neoliberal one? According to the mutual constitution thesis, the horizon of possibilities is broad: there are innumerable potential combinations of state and market authority. Which combination will prevail is a matter of politics.Ìý

While the mutual constitution thesis is a welcome improvement on globalist IPE accounts, it ultimately relies on a false dichotomy: either the capitalist market is reproduced by state power (a view it endorses), or the capitalist market has a self-regulating character that disciplines states (which it rejects). In reality, both propositions are simultaneously true. In all social orders, economic activities are rooted in a thick network of political relations. Yet the uniqueness of capitalism is that the specific form that this political-economic matrix takes gives rise to an autonomous, dominating logic that imposes itself back upon state and market actors alike.Ìý

The mutual constitution thesis therefore offers a transhistorical truism, inadequate for grasping this historical particularity of capitalism. Further, as this approach denies the capitalist market’s inherent disciplining logic, it cannot but frame neoliberalism as one contingent institutional set-up among others. Neoliberalism is a ‘dangerous idea’, but nothing more.

Alienation in the global economy

In contrast to ‘mutual constitution’, we propose Marx’s concept of alienation as a way to grasp capitalism’s historically unique double-sidedness, whereby economic reality is regulated by states, yet appears as an externally imposed logic. Unlike common interpretations, we understand alienation not as a description of workers’ subjection to the denigrating nature of capitalist work, but as the objective domination of the whole of society by the profit-or-perish dynamic of capitalist competition.Ìý

This generalised alienation stems from the peculiar role that money plays as the key medium of socialisation in capitalism. Capitalism is a fragmented society whereby the mass of people lack direct access to the necessities of life and where production is carried out independently by competing private firms. Money re-socialises this atomised society by bringing firms and people together within the marketplace, the former seeking profits and the latter looking to satisfy their needs.

In the capitalist market, the value of different goods is measured not by their beauty, weight or utility, but by the labour time society expends on average for their production. Money communicates these average productivity levels through the mean prices that different types of goods obtain on the world market. The profitability of market agents thus rests on their capacity to produce their goods within this timeframe. Money brings to life a compelling system of labour time commensuration which rewards laggard firms with ruinous sales and those at the productivity frontier with high profits. Although market exchange is a process carried out by real individuals, it nevertheless escapes the control of social agents whose economic survival now rests on their capacity to produce in accordance with prevailing productivity norms.

It is states themselves that breathe life into this alienated system at the level of the global market. By interlocking their currencies through exchange rate systems, individual nations enable a systematic comparison of one another’s productivity levels and in doing so give rise to world productivity averages. Once brought into the web of international commerce, then, each national economy must constantly adapt to world market standards in order to secure its viability. Despite the market’s reliance on political authority, states inadvertently propel a dynamic of worldwide competition over labour productivity that in turn disciplines and regiments state action. In short, the market-making powers of the state amount to one’s capacity to make the rope that ties one’s own hands.

Thus, power rests neither in the market realm nor the state; neither in the hands of the most powerful governments nor the so-called 1%. Instead, the agents of capitalist society are impersonally dominated by the objective necessity to abide by the world market’s productivity standards for the sake of their own survival.Ìý

Governing Alienation

Understanding the world market as a realm of impersonal domination bears crucial implications for making sense of the different forms that liberal governance can take, from neoliberalism to Keynesianism. To maintain the viability of the national economy, states must adapt to world market productivity standards, while to ensure political legitimacy, the interests of the people must be defended. Caught in between the competitive pressures of the world market and the spectre of revolt at home, the government of the day is called to simultaneously enact competitiveness-enhancing policies and ensure a degree of social cohesion. Liberal governance thus involves the anxiety-riven management of this alienated world, in which productivity averages clash with people’s needs.

Neoliberal and Keynesian variants of liberal thought respectively articulate the two ends of this governing contradiction. As shows, neoliberalism is not a mere ideological current, but a theorisation of the governing principles objectively required to ensure the smooth functioning of the market economy. Liberal governments must constantly resist the pressures of the demos for greater involvement in policy-making, as this could inhibit market actors’ capacity to respond to the price signals of the world economy and raise their competitiveness. Various forms of depoliticised policy-making, from central bank independence to the ratification of international free market treaties, reflect the different ways governments seek to enforce market discipline across social spheres while keeping political pressures at bay.

For Keynesianism, as brilliantly demonstrates, the promise of greater wealth through increased market competitiveness is insufficient to secure a stable, governable social order. Precarity, unemployment, and poverty breed social restlessness and threaten the liberal order with disintegration. To placate unrest, Keynesianism calls for a discretionary state that is able to strategically intervene in key economic areas, through for instance fiscal expansion, and render the proletarian condition more bearable.

Mutual constitution approaches fail to account for the contradictory tendencies of modern state economic management. Governing alienation requires governments to loosen the purse strings when a riotous mass or a pandemic threatens the social order, but to govern in an authoritarian fashion when macroeconomic indicators reveal a decline in national competitiveness relative to world market standards. Macron or Piñera’s aforementioned U-turns demonstrate the impossibility of coherently navigating the double pressures of liberal governance, as political elites are called to abide by both imperatives simultaneously.Ìý

By emphasising the regulatory powers of the state, the mutual constitution approach insinuates that a socially sustainable form of political control over the capitalist market can eventually be instituted. However, the burden of governing alienation confronts every aspiring state manager. This is evidenced by the history of pro-market U-turns by left parties, from the French Socialists in the 1980s to Syriza in Greece more recently. Governments of varying political colours attempt to straddle the line in different ways. Yet none can escape the necessity to impose market discipline when the balance of payments is in the red, or the temptation to enact stimulus packages when social fissures widen dangerously.Ìý

Neoliberalism and Keynesianism are not expendable paradigms that can be declared dead when governments tilt to one side or the other under the threat of capital outflows or the pressure of the street. They are rather fundamental expressions of an inescapable antinomy inherent to liberal governance between the necessity to obey market dictates and the need to palliate the accompanying social misery.Ìý

The choice of human dignity over market competitiveness – of human health over economic growth – seems obvious enough. Yet it is impossible to pursue within the alienated world of capitalism, where nations are locked in a productivity race that can only be won at the expense of life itself.

Jack Copley is a Lecturer in Political Economy at the University of Bath. He tweets atÌý.

Alexis Moraitis is an Associate Lecturer at the University of York, but will soon be joining Lancaster University as a LecturerÌýin International Political Economy. He tweets atÌý.

Photo byÌýYannes Kiefer.