Adam Smith was born 300 years ago. Since then, two related traditions have significantly shaped our world: liberalism and its relative, economic thinking. Adam Smith understood liberalism to mean man’s self-organization within rules free from privilege. 300 years ago that was a liberation idea. But now it has fallen into disrepute in parts of society. Who is to blame for today’s crises? For many fellow citizens, the question is quickly answered: neoliberalism. In economic policy discourse, he is held responsible almost every day for everything that has gone wrong. His overcoming is demanded.
Liberal modernity does not need the abolition of neoliberalism, but the opposite: a renewal. 300 years after Adam Smith, the time has come for a new neoliberalism that links its old successes to the new era.
Let’s assume for a moment that liberalism – whether neo or paleo – is partly responsible for our world. We have to realize that we live in the best of all worlds. There has never been a world where so many people lived freely and where so few people worldwide were poor as a percentage. Never before have technologies been so evenly distributed that they have enabled access to knowledge and the global digital division of labor even from poorer countries. Smartphones are not reserved for the elite.
So we certainly don’t live in the best of all possible worlds. Today’s problems also require economic and social reforms. This constant rethinking and ordering is the DNA of liberalism and has never stopped since Smith’s time. It has made liberal modernity fragile. Sometimes it has also tipped over into superfragility: the citizens have withdrawn their trust and have sought a new order. That can happen again today.
But it is precisely neoliberalism that can stabilize liberal modernity. Change is inherent in neoliberalism. Not just in the literal sense. The history of liberalism is a history of the many neoliberalisms, the constant reinvention and adaptation of liberalism. The major liberal thinkers and practitioners were neoliberals: innovators who added something new to the previous liberal tradition, adapting it to the times and their challenges, instead of just preaching the old. Smith was a neoliberal towards John Locke and Bernard Mandeville. John Stuart Mill, on the other hand, was a neoliberal towards Smith, Locke and Mandeville and so on.
Each generation has to formulate its own neoliberalism for the problems of its time. What could neoliberalism be for our time? Here are seven accents.
Today’s neoliberalism should be optimistic and humanistic. Optimism does not mean believing in “progress” – but in “the many advances”. The focus is on the basic trust that people can solve many of their problems through self-organization. Whether climate change or poverty: If freedom is granted and the regulatory framework sets the right incentives, ordinary people can achieve the unusual and solve the seemingly unsolvable.
The new neoliberalism must also be resilient. This requires a promise of stability to the citizens: only if there is a minimum of rules and security will the citizens be willing to adapt to the dynamics of the global digital order.
Today’s neoliberalism must be affinity with technology and innovation. In solving today’s problems, it would be foolish not to use technology because we don’t know what the best solution will be in twenty years’ time. A liberal error culture consciously tolerates the fact that some sometimes go the wrong way. Technophobic societies, on the other hand, will see creative people migrate and innovations will have to buy expensively from elsewhere.
The new neoliberalism must be prosperous and pro-growth. Individuals remain free to increase their own prosperity, which often leads to macroeconomic growth. But that doesn’t have to consume more resources – our creativity pushes forward to ever more careful use of resources relevant to climate change if the individual is liable for the damage caused by paying the right prices. However, a climate policy will hardly find any imitators internationally if it leads to new poverty in the West.
Neoliberalism should be cosmopolitan. This also includes an open immigration policy. And the factual discussion of the individual problems of living together in the immigration society, without falling into collectivist categories.
The new phase of globalization after the Russian war of aggression also needs a neoliberalism that is based on a defensive peace. The liberals must manage the balancing act between affirming peace and being prepared to defend themselves. Otherwise they leave the defense of democracy to those who abuse the new geo-economy with friend-foe schemes to remilitarize globalization.
In addition, during the super-fragile interwar period, the neoliberals built “social irenics” into the social market economy, a culture of reconciliation and the search for compromise. Despite all the remaining differences, it is always necessary to look for solutions that everyone can live with. In view of the authoritarian fringes that are gaining strength, it is all the more important for the political center to cultivate such a culture.
300 years after Smith’s birth, the longing for a liberal modernity in Ukraine tragically illustrates that liberalism – despite all imperfections in the process of its constant reorganization – remains an attractive order.
Stefan Kolev is the scientific director of the Berlin Ludwig Erhard Forum for Economics and Society and Professor of Economic Policy at the West Saxon University of Applied Sciences in Zwickau.