Some moments in US history need decades to be fully grasped—they aren’t bound by the two-,
four-, and six-year election cycles. Such periods, called “political orders” by US historian and
Cambridge professor of American history GARY GERSTLE, author of The Rise and Fall of the
Neoliberal Order, are a new way of rethinking political time. The New Deal and the
neoliberalism that followed were political orders that shaped US policy—and greatly influenced
the global order—from the 1930s to the 2010s.
In a conversation with former IMF official Sunil Sharma, Gerstle discusses how the neoliberal
order—committed to releasing capitalism from state-imposed constraints—failed in its
promises, the contours of an emerging political order, and what this means for globalization.
SS: Let’s start with the basics—What is a political order?
GG: A political order is a way of rethinking political time. It arises when a political party wins not
just one election but several, and develops an enduring appeal in American politics. A political
order must be undergirded by a programme of political economy that can plausibly claim to
promote prosperity and opportunity and connect that programme to a vision of the good life
that appeals to voters.
A mark of a political order’s success is when it compels the opposition party—the Republicans
during the New Deal order, the Democrats during the neoliberal order—to accept the dominant
party’s political economy and vision of the good life as its own.
SS: To understand the rise of the neoliberal order, it’s important to understand the preceding
New Deal order. What circumstances led to the New Deal?
GG: The New Deal order, lasting from the 1930s to the early 1970s, arose out of a moment in
US history where capitalism was substantially unregulated by the state. The levels of
unemployment, bankruptcies, poverty, and insecurity were such that many people concluded in
the 1930s that capitalism, left to its own devices, was destructive—too prone to depressions
and speculations to survive.
The simple but powerful idea of the Democrats’ New Deal order was that a strong
interventionist state was necessary to regulate capitalism. This would both stabilize markets
and redistribute the wealth via progressive taxation, support for strong unions, an expanded
welfare state, and greater educational opportunity. The idea of states regulating markets in the
public interest became so compelling that the Republicans, when taking back the presidency in
1952, didn’t roll back the major New Deal programs that had government intervening in the
economy. This was a sign that a political order had triumphed.

SS: How did the neoliberal order emerge from the demise of the New Deal order?
GG: New political orders tend to emerge in periods of economic crisis. There was nothing new
about neoliberal ideas in the 1970s. But they had been marginal. The economic crisis of the
1970s gave those ideas an opportunity to become mainstream. Keynesianism had dominated
economic decision-making for decades; it was a tool kit central to the New Deal order. But
those tools were no longer delivering economic prosperity. Unemployment and inflation had
both spiked, plunging the economy into crisis. The Democrats were turned out of power, and
Ronald Reagan transformed the Republican Party into a free market party. This free market
orientation is best understood by the label “neoliberal,” which connotes injecting dynamism
into a capitalist economy by freeing markets from state constraints.
The 1970s and 1980s marked the moment of this new political order’s ascent. It triumphed in
the 1990s under the Democrat Bill Clinton. When he led the Democrats to power in 1993, he
didn’t roll back the Reagan revolution of deregulation. I interpret his actions as signifying the
triumph of a new political order—a neoliberal one.
SS: In your book, you discuss how globalization helped entrench the neoliberal order while
also bringing about its demise. Can you explain?
GG: Neoliberalism promised that societies adopting free market practices would unlock the
secrets to growth in ways that had been denied before. At its best, it imagines a world of peace,
where people everywhere are trading, improving their livelihoods, realizing opportunities long
denied to them.
Neoliberalism did allow capitalism to become global in ways it hadn’t been since before the
First World War. Some of the wealth that had been concentrated in the West, for example, has
been redistributed to places that had been denied that wealth. But neoliberalism overlooked
the way in which this unleashing of economic power advantages elites who control the levers of
capitalist development, deepening inequality. The justification is that economic growth will be
so substantial that the difference between rich and poor won’t matter much because all boats
will rise.
Neoliberalism’s greatest weakness—not only in the moral but also in the economic sense—was
its inability to address economic inequality. Rather, it papered the matter over with promises of
dramatic growth and then by coughing up easy credit when that growth failed to materialize.
After the global financial crisis, it was no longer possible to believe that all boats were rising.
There were clearly losers as well as winners in the globalization struggle.
SS: How did the global financial crisis delegitimize neoliberalism?
GG: The global financial crisis fractured the neoliberal order, costing it the power and legitimacy
that neoliberalism possessed in the 1990s and first decade of the 21st century. That’s not to say
that neoliberal policies aren’t still around. But their authority began to be challenged in ways
they weren’t during the heyday of the neoliberal order.

Quantitative easing during the financial crisis opened all kinds of possibilities in the US. That
was the moment to engage in a massive infrastructural improvement project. President Obama
wasn’t able to do that. He was in a sense the last of the neoliberal presidents, operating within
the constraints of the neoliberal order. One of the principles of that order is that state
intervention in the private economy must be strictly limited.
The course of history might have been quite different had there been a big infrastructure
investment in 2009–10 to reboot the economy. The recovery would have flowed more quickly
and directly to ordinary people. Had this kind of political leadership emerged sooner in the
neoliberal order, the world might have been spared some of the political volatility that has
rocked so many countries in the last 10 years.
SS: Given where we are, what are the contours of an emerging political order?
GG: We can see that the Biden administration has a plan for a new political order grounded in a
political economy that looks more like the New Deal order than the neoliberal order, one that is
trying to make some corrections for the errors of the neoliberal order.
Neoliberalism was mistaken in thinking that markets could be insulated completely from
politics. Any set of economic policies, even the ones that encouraged the freest markets, has
political and social consequences. For the economic realm to prosper, state involvement is
needed at a level that was deemed unacceptable during the neoliberal era. There is a growing
recognition that states must intervene in markets to address questions of economic security,
opportunity, and welfare. Beneath some of the hubbub of American politics, a new political
economy along these lines is indeed taking shape.
SS: How have the pandemic and the war in Ukraine affected the emergence of this new
political order?
GG: They both have had a major impact. In the neoliberal heyday, the aim was to have output
produced in the cheapest way. It didn’t matter where—as long as transportation was
inexpensive and reliable. During the pandemic, goods couldn’t move, or they moved much
more slowly and unpredictably. Neoliberalism also presumed a world of peace; few worried
about a war obstructing international trade. That world vanished with Russia’s attack on
Ukraine and the threats that China is making toward Taiwan. Governments now ask, What
goods and services are essential for national security? What resources must every nation have
for ensuring that the core needs of its people are met?
Suddenly, it matters where semiconductor chips and pandemic protective gear are produced;
so, too, does secure access to rare minerals to build batteries and to energy supplies that can’t
be interrupted by war.
National security always has had an economic component to it. What does a nation have to do
to make sure that it has what its economy needs? Once you enter that frame of mind, you’re
not in a neoliberal world anymore, because now you’re privileging national security over

market freedom. This kind of thinking—underway in virtually every nation right now—is
profoundly recalibrating the relationship of states to markets, of politics to economics.
SS: What does this mean for the future of globalization?
GG: It doesn’t mean we stop thinking about globalization. It doesn’t mean that countries
become islands with no connection to each other. It means a strategic globalization—a
globalization where nations can manage the flow of capital, commodities, energy, goods, and
supply chains under adverse circumstances.
This points us away from free trade and financial flows, which was the model of globalization
under a neoliberal world, and points more in the direction of managed trade and finance for
the sake of some national or public interest.
Sunil Sharma is a distinguished visiting scholar at George Washington University’s Elliott School
of International Affairs and senior associate, Council on Economic Policies, Zurich, Switzerland.
 Editor’s Note: Opinions expressed in articles and other materials are those of the
authors; they do not necessarily reflect IMF policy. This interview has been edited for
length and clarity.
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