Pivotal Crisis: State Power and Social Forces in the Making of Neoliberal Capitalism

The thesis uses original archival research to outline a novel account of social and world order change in the 1970s—from the collapse of Bretton Woods to the Reagan Revolution—that shifts the focus of explanation from the strategic vision and unilateral capacity of the US to determine outcomes to the pragmatic attempts of West German political and economic elites to cope with the crisis of post-war capitalism and to harness American power to this end. The main argument is that the parochial way in which German state managers sought to preserve the domestic compact between capital and labour prevented a more progressive and solidaristic resolution of the crisis and created the conditions for the neoliberal counterattack. Anxious to defend its export model against protectionism and inflation, German policy makers mobilized their country’s financial power to counter the interventionist and expansionary remedies of the European Left and to commit the United States in particular to monetary and fiscal discipline. While initially successful, this strategy proved self-defeating as it pushed the US into the Volcker interest rate shock that radically disinflated the world economy and ultimately undermined the basis for the German welfare state and its corporatist balance as well. The dissertation enriches and broadens our understanding of the origins of neoliberal globalization by focusing on an economically dominant state/society complex that is normally held to be inimical to the neoliberal onslaught. The crucial, but largely unintentional, German contribution challenges some of the critical accounts that see neoliberalism as an American imposition (Gowan 1999), a financial coup (Duménil and Lévy 2004), or an ideological conversion (Blyth 2002). My dissertation offers an alternative interpretation of the rise of neoliberalism as driven by a complex process of disembedding in which state power, class interests, and ideas are refracted through the prism of an interdependent world economy, and where the strategic and creative choices that some actors make to deal with the problems they confront reshape the range of options available to others.