Colin Crouch, Professor Emeritus, Warwick Business School, University of Warwick

Published February 2011

The 1970s, 1980s and beyond saw the rise, and eventually dominance, of neo-liberalism in the West. This set of economic policies, championing a market-driven approach to monetary policy and advocating the transfer of control of the economy from the public to the private sector, held sway during the boom of the 1990s and the subsequent economic crash that followed in the 21st century.

With current bank bailouts costing governments (and therefore taxpayers) billions of pounds, and international finance organisations criticised for continuing to pay out bonuses to their staff despite huge losses, some have forecast that the tide has turned against neo-liberalism. Clearly its free-market approach hasn’t worked.

Not so, says Professor Colin Crouch, what’s strange is the ‘non-death’ of neo-liberalism. In a video of a recent critical governance conference he argues that the ideology will shrug off the challenge of the financial crisis and emerge more politically powerful than ever.

According to Prof Crouch the economic crisis will not lead to a change in the neo-liberalist economic model because the structure of power in the Western world is such that those who have an interest to keep the system going are in a dominant position. “My prediction is that though the model is one that will continue to have crises because of the inherent instability of the financial model, people will just keep on putting it back on the road, fixing it, putting it back on the road because there’s no counter hegemonic.”

My prediction is that though the model is one that will continue to have crises... people will just keep on putting it back on the road...

The issue is one that Prof Crouch explores in his recent book, The Strange Non-death of Neoliberalism, published in June 2011. He says that often there’s confusion about how markets work. “What’s seen as an opposition between government or state, and the market, is actually frequently a triangular relationship between market, state and corporation.” Increasingly, following neo-liberalist ideals, corporations are involved in some sort of governance within society, despite the fact they have not been democratically elected to do so.

Corporations have taken on a form of governance in our society for a number of reasons. These include the fact that some giant firms compete in a number of sectors; the increasing role of networks such as distribution chains which enable corporations to drive out competitors; Western multinationals in developing countries gaining a prominence in that society beyond their role in the market; and the privatisation and contracting out of public services, supported by bodies such as the EU and World Bank, bringing corporations into the public decision-making process.

The idea that the private sector is more efficient than the public sector has risen with neo-liberalism. As a consequence persons from the private sector, encouraged by government, now play a role in advising public policy and the running of organisations. This is particularly the case in the UK. Yet this approach cannot be explained by the theory of the market or the theory of democracy. The nearest explanation is the theory of consumer welfare and large corporations which emerged as part of the general neo-liberal model in the 1970s and 1980s. This theory espouses the idea that it is in the consumer’s interest for there to be more wealth in society. Therefore if corporation mergers and acquisitions create wealth then this justifies the reduction of competition, even if inequality subsequently increases. Understandably, this is not a politically popular stance.

How can big business and the public good meet in the middle?

However, Prof Crouch says, in theory the interference of business in government is just as bad as the interference of government in business. So what is the way forward? How can big business and the public good meet in the middle?

The answer is corporate social responsibility (CSR). “As corporations have become more and more obviously public actors, so attention starts to get fixed on them”. A change has taken place in the significance of CSR as a public relations strategy over the last five years. Campaign groups have sprung up to challenge big business on their record in areas such as environmental damage, the use of child labour in supply chains and the impact on HIV/Aids of large Western corporations in Africa. This is pure people power and to rise to it corporations are shouting ever louder about their efforts for the public good.

This, says Prof Crouch, displaces the locus of political conflict away from government parties to a nebulous space, largely cyberspace due to the number of anti-corporation campaigns that begin online. Governments are in the business of electoral competition. Opposing a corporation is no use to a political party unless it embarrasses their opponents. With the advent of groups critically challenging the power of big business, a new politics of the corporation is developing.

Neo-liberalism as a model is one that’s adaptable and can take on all sorts of forms in different countries, according to Prof Crouch, which has made the ideology far more successful than communism turned out to be. It will continue “so long as the basic model is not threatened – which is that large capital will continue to make very high rewards”.

Big businesses are not forced to be publically responsible and there is incentive for them to do anything other than maximise their own interests. According to Prof Crouch neo-liberalism, checked by strong campaign groups, “is quite likely the best politics we are going to get in a period increasingly dominated by the role of large corporations that governments daren’t say boo to very loudly”.

The paradox is, however, that neither the corporation nor the campaigning interest groups have to be publically responsible, leaving neither forms of governance answering the requirements of the public good.

View the whole of Prof Crouch’s lecture below.

Leave your comments on the subject below. Do you think there any viable alternatives to the current set-up? What do you think is the worst aspect of the present structure? We are keen to hear your views.

Professor Colin Crouch is Professor Emeritus at Warwick Business School. Previously Professor of Comparative Social Institutions at the European University Institute, Florence. Also held positions at LSE and Oxford. Chairman of The Political Quarterly, and past President of the Society for the Advancement of Socio-Economics (SASE). Fellow of the British Academy, member of the Academy of Social Sciences, and External Scientific member of the Max Planck Institute for Social Research at Cologne. Expert consultant to the Directorate for Public Governance and Territorial Development, OECD.

Images: The Market by Iman Mosaad (via Flickr).
XYZ by Gonzalo Saenz (via Flickr).