The Washington Post, Argentina’s “Renaissance” and the Milei Mirage

A recent Washington Post editorial, “Argentina’s renaissance continues,” offers a nearly perfect example of the Milei success story now circulating in the financial press. According to this view, inflation has fallen mostly as the result of the fiscal adjustment, exports are rising, as a result of market confidence, and Moody’s, Fitch and S&P have upgraded Argentina’s debt. The latter in and of itself shows that markets approve, and what else would you need, really? From this, the editorial concludes that Milei’s free-market reforms are working, that life is improving for Argentines, and that the country offers a model for other stagnant economies.

The problem is not that these developments are invented, but that the editorial provides the wrong explanation for them. Inflation fell primarily because the government slowed the rate of currency depreciation after Milei’s initial maxi-devaluation had pushed monthly inflation to roughly 25 percent and caused a collapse in real wages. Fiscal austerity contributed by producing a deep recession, weakening employment and reducing wage demands, but balancing the budget was not the central anti-inflationary mechanism. Exchange-rate stabilization reduced inflation, and austerity produced the contraction.

The same confusion appears in the discussion of the fiscal surplus. Argentina’s fundamental constraint is not the government’s ability to balance a budget denominated in pesos, but its capacity to obtain the foreign currency needed to pay external debts and finance essential imports. Milei inherited a heavily indebted economy with few reserves and has remained dependent on support from the IMF, China (the swap in 2024) and the United States (last year). A fiscal surplus may reassure creditors, but it does not create dollars, expand productive capacity or resolve the external constraint. Indeed, cuts in public investment may weaken precisely the productive capabilities Argentina needs in the longer run.

Nor did Milei create the export recovery, which is entirely related to foreign markets. Agricultural exports benefited from the end of the drought, while increased energy production reflects investments in Vaca Muerta and related infrastructure made before he came to office. Recession also reduced imports, mechanically improving the trade balance. The Post therefore credits free-market reform with the effects of favorable weather, previous investment, state-supported energy development and depressed domestic demand.

Credit-rating upgrades indicate that bondholders now believe they face a lower perceived risk of default.  That might or not be true (hint, probably not, and markets often make mistakes). They do not demonstrate that Argentine workers are better off or that a sustainable development model has emerged. The real questions concern wages, employment, poverty, public services, investment and the capacity to earn foreign exchange without repeated dependence on external borrowing. Milei may have achieved a politically important stabilization, but it remains fragile and externally dependent. What the Post calls a renaissance looks much more like another familiar Argentine cycle of austerity, financial enthusiasm and growing foreign obligations.

Óscar Ugarteche (1949-2026)

 

At the Institute of Economics in México in 2018

I was traveling attending a conference in Rio, and didn't have time to write a post on the passing of my good friend Óscar Ugarteche. IDEAS published an obit here. I met Óscar at UNAM many years ago (way before that photo, btw). Later, when I worked at the Central Bank of Argentina, I invited him to speak there. His work was an important influence on my own understanding of sovereign debt and the international financial architecture.

Óscar's central insight was that sovereign-debt crises should not be understood simply as the result of irresponsible borrowing or excessive government spending. They form part of recurrent international credit cycles. Periods of abundant liquidity and low interest rates encourage lenders to expand credit aggressively. When interest rates rise, commodity prices fall, or capital flows reverse, countries that appeared solvent suddenly face an external constraint and may be forced into default. The debt cycle is therefore produced by creditors and the international monetary system as well as by debtors.

Debt restructuring is necessary when the original payment schedule has become economically impossible, but the existing system is fragmented and biased. Bondholders, commercial banks, official creditors, multilateral institutions, and suppliers are treated through different forums, while multilateral institutions generally refuse to restructure their own claims. Collective-action clauses can limit holdouts within a particular bond issue, but they cannot coordinate all classes of creditors. Óscar therefore favored a comprehensive, multilateral sovereign-debt restructuring and arbitration mechanism capable of imposing comparable treatment and preventing vulture funds or individual creditors from benefiting from concessions made by everyone else.

 

His view of the IMF was correspondingly critical. He wrote a brief history of the IMF that is worth reading, but I think is only in Spanish. After the end of Bretton Woods, the Fund ceased to be principally an institution of international monetary stabilization and became, in his phrase, a kind of "policeman for the banks." It supplied finance and imposed adjustment so that private creditors could be repaid. Responsibility was placed almost entirely on debtor governments, while neither creditors nor the international financial conditions that produced the lending boom were held accountable. Conditionality imposed the costs on wages, public services, growth, and state capacity, while the United States remained largely exempt from the disciplines imposed on the Global South. His preferred alternative was to reduce the IMF's power, transfer stabilization functions to regional monetary funds, and create an independent international debt-arbitration framework.

 

He wrote the entry on "Sovereign Default" for the New Palgrave Dictionary of Economics. An interesting point that he discusses is the forgotten history of the Confederate external debt. While cases of defaulters that do not pay their debts are almost nonexistent, contrary to common belief about deadbeat countries, Óscar discussed in his entry the only  historical exception, which involved the unresolved debts of several former Confederate and Southern states, with Mississippi providing Óscar's principal example of outright and permanent debt repudiation.

 

In Óscar's account, the decisive role of the US government during the 1930s was to construct the legal and diplomatic conditions under which confederate debt could remain unpaid and eventually disappear. The federal government denied any responsibility for contracts entered into by individual states and claimed that it lacked the constitutional power to compel Mississippi and the other states to pay. The Eleventh Amendment also protected states from suits brought by foreign citizens. At the international level, the southern bloc in the Senate had repeatedly inserted reservations into arbitration treaties precisely because arbitration might reopen the repudiated Southern debts. Ugarteche says that in 1930 the United States prevented the creation of an international arbitration tribunal in Geneva for fear that the bonds would be brought before it. This left British bondholders without either access to the debtor states through diplomacy or a neutral international court.

 

Óscar's hypothesis is that after World War II, the United States effectively forgave Britain’s inter-Allied war debt, and British bondholders may in return have abandoned their claims against the American states. In other words, the power of the US made the enforcement of debt contracts impossible and then helped shape the postwar settlement in which the claims disappeared.

Robert Blecker (1956-2026)

Robert with Jane, that also passed away recently

I've just heard the news that Robert Blecker passed away. I've known him since the 1990s, when I was a graduate student at the New School. His books on the US economy for EPI were particularly important for the work I did with Wynne Godley on the external accounts of the Levy macro model.

He will be remembered for his several contributions to Post Keynesian open macroeconomics. His contributions include extending Kaleckian theories to open economies, in particular the distributive implications of wage-led and profit-led regimes, advancing debates over balance-of-payments-constrained growth and Thirlwall's Law, and extensive work on exchange rates, Mexico, NAFTA and international trade policy.

ROKE devoted its the 2nd issue, this year to his work. You can read about his work in this article by Ricardo Summa, Gustavo Bhering and Nathalie Marins in the introduction to the symposium.

Decolonizing Keynesian Macroeconomics by Jayati Ghosh

 

The 9th Godley-Tobin Memorial Lecture was delivered by Professor Jayati Ghosh, from UMass, Amherst, one of the leading development economists. Jayati argues that Keynesian economics must be further “decolonized” by recognizing how financial globalization and currency hierarchies constrain developing countries. Even fiscally disciplined poorer countries face higher borrowing costs, capital volatility, and reduced policy autonomy, so effective Keynesian policy requires tighter regulation of finance and reform of the international monetary system.

Smith, Hamilton, and the Revenge of the Mercantilists

Heinz Kurz recently gave a very stimulating lecture, "The Wealth of Nations (WN) at 250: The Revenge of the Mercantilists" at the Federal University of Rio de Janeiro, and I was the commentator. His central point was that Adam Smith has been badly served by both his admirers and his critics. Smith was not the apostle of selfishness, laissez-faire, and the minimal state imagined by later free-market ideologues. Political economy was, for him, a branch of the science of the statesman, concerned with the institutions and policies required to promote prosperity, liberty, and justice.

Kurz rightly emphasized Smith’s distrust of merchants and manufacturers. Smith understood that business interests do not automatically coincide with the public interest. Merchants frequently seek monopoly, protection, and political privilege. The “mercantile system” was objectionable not simply because it involved state intervention, but because the state had been captured by particular interests. This reminded me of what Bob Heilbroner used to say, the enemy in the WN is not the state, but monopolies.

Kurz also criticized the revival of economic nationalism associated with Donald Trump. Trump’s policies reproduce some of the errors criticized by Smith, especially the obsession with bilateral trade balances and the confusion of particular corporate interests with the national interest. But Trumpism is not really a restoration of historical mercantilism. Mercantilism was part of a broader process of state formation, institutional development, naval power, public finance, and industrial transformation. Trump has tariffs, but no coherent development strategy.

This is where I would place the emphasis somewhat differently. The historical success of the Italian City States, Netherlands, Britain, and later the United States rested not simply on trade protection and some degree of what today is called industrial policy. It depended on the construction of a fiscal and monetary architecture based on the so-called Military-Fiscal State. Taxation, public debt, public banks, central banking, infrastructure, where central elements of the Military-Fiscal, and Fiscal-Naval, state. These institutions made sustained developmental policy possible. Trump revives the rhetoric of mercantilism while neglecting the other elements that successful countries actually used. I discussed why Trump's protectionism would not birng back manufacturing jobs here.

Kurz’s discussion also raises an old notion about Smith’s “Physiocratic prejudice.” Following a line of interpretation originating with Piero Sraffa, Kurz argues that Smith continued to give agriculture and “corn” a privileged position within his analytical system, even though Smith explicitly rejected the Physiocratic doctrine that agriculture alone was productive. On an analytical level, there is no doubt that Professor Kurz is correct and that the foundation of the Smithian growth model is Physiocratic. 

Kurz's argument is subtler than simply saying Smith believed only agriculture was productive. Instead, Kurz reconstructs Smith's analytical system in Sraffian terms and argues that Smith distinguishes "necessaries" (corn) from luxuries. Corn is treated as the only genuine basic commodity, because every production process ultimately requires workers' subsistence. Manufacturing therefore cannot become the independent engine of cumulative growth. Consequently Smith retains what Sraffa calls a "Physiocratic prejudice." Notice that Kurz's criticism concerns the architecture of Smith's growth theory, not Smith's explicit statements about productive labor.

Tony Aspromourgos provides a counterpoint, with a more direct textual reading of Smith. Textually, Smith clearly regarded manufacturing, transportation, and commerce as contributors to the social surplus. Aspromourgos stresses that Smith rejected the Physiocratic view outright: "The capital error of this system ... seems to lie in its representing the class of artificers, manufacturers and merchants, as altogether barren and unproductive." He notes that Smith systematically repudiates the Physiocratic limitation of productive labor to agriculture in Book IV of WN. This reflects the difference between a historical-institutional reading of Smith's aims and the theoretical basis of his model.

Ronald Meek, in a classic paper, suggests another way of looking at the issue. Smith was not primarily constructing a timeless model of production in the manner of Ricardo or Sraffa. His central concern was historical development, in particular the movement from hunting to pastoral, agricultural, and commercial society, and the corresponding transformation of property, law, government, and social classes. Agriculture may therefore be historically central without being the only analytically productive sector.

This has implications for the interpretation of Alexander Hamilton, and Hamiltonian protectionism, often defended as the first in a long line of American protectionists, an American School, as Michael Hudson has called it.* Hamilton’s Report on Manufactures should not be read as a theoretical rejection of Smith. Hamilton relied on distinctly Smithian mechanisms, the division of labor, the extent of markets, the vent for surplus that created demand for agricultural output. His disagreement concerned the policies appropriate to a new, agrarian republic rather than the underlying theory.

Hamilton did not believe that the policy appropriate to an already industrial and financially developed Britain could simply be transferred to the United States. Public credit, a national bank, taxation, and the encouragement of manufacturing were historically specific applications of political economy to American conditions. In that sense, Hamilton was not a mercantilist in Smith’s pejorative meaning. He was a Smithian developmental statesman.

Paradoxically, Jefferson’s agrarian ideal was closer to the Physiocratic privileging of agriculture, while Hamilton’s emphasis on manufacturing, urbanization, finance, and the division of labor was closer to the dynamic elements of Smith’s commercial society. Kurz’s lecture therefore provides an excellent starting point for recovering a Smith who was neither a free-market ideologue nor an opponent of developmental statecraft.

* On the American School or Political Economy Tradition see my substack post here. 

Right-Wing Populism Did Not Kill Neoliberalism

My new piece is out in Jacobin. I argue that neoliberalism is not dead simply because governments now use tariffs, sanctions, subsidies, or industrial policy more openly. The core of neoliberalism was never only about free trade, but the insulation of markets and capital from democratic control. Right-wing populism has changed the rhetoric, but it has largely preserved the underlying neoliberal order. Contemporary right-wing populism should not be mistaken for a clean break with neoliberalism.

Donald Trump's tariffs, sanctions, and attacks on globalization are often presented as a rejection of the old free-market consensus. But the underlying arguments remain deeply neoliberal. The entrepreneur is still the hero (Tech and crypto-bros). Government is legitimate when it protects national business, punishes foreign competitors, or clears obstacles to private accumulation. Tariffs are sold less as a challenge to markets than as a way of restoring a supposedly fair market order against cheating foreigners, bureaucrats, and global elites.

The same point applies more broadly to the new industrial policy, which was never completely abandoned in the United States or Western Europe, one might add. States may subsidize national champions, direct investment, or protect selected sectors. Yet they can still treat profitability, competitiveness, shareholder value, and private returns as the ultimate criteria of success. Protectionism is not, by itself, an alternative to neoliberalism. Nor is a larger state. States have always intervened in markets. The question is whether intervention changes the social hierarchy of power or merely uses public resources to secure a more competitive capitalism.

Read it here.

On the Fiscal-Military State

The fiscal-military state was not simply a state that spent more on war. It was a new institutional form in which taxation, public debt, public banking, naval procurement, bureaucracy, and war-making capacity were joined together. I discuss it in a longer post on substack. I argue that the British case shows how this system became a foundation of capitalist development. Also, ancient Athens shows that public finance and naval power could be constitutive of state formation much earlier, but it lacked the permanent funded debt, central banking, and capitalist financial system that made Britain distinctive.

Jane D’Arista, 1932–2026

 

From the right, at the top and only the back of the head, José Antonio Ocampo, then Robert Blecker, and then Jane. I'm next to her to the left. In 2000, I think

I was saddened to learn of the passing of Jane D’Arista, economist, poet, and one of the most insightful analysts of money, finance, and financial regulation of her generation. Jane died on July 4 at the age of 94.  I had been in contact with her last year about her lovely memoir. Her long career included work as a staff economist for the US House Banking and Commerce Committees, as a principal analyst at the Congressional Budget Office, and later as a teacher and researcher at Boston University, PERI, the University of Utah, and The New School. She authored important work on the evolution of U.S. finance, monetary policy, regulation, and financial crises, including The Evolution of U.S. Finance and All Fall Down.

Her memoir tells the remarkable story of how she became an economic analyst almost by accident. Hired initially to organize the papers of Congressman Wright Patman, she entered the world of banking policy through archives, hearings, investigations, and congressional staff work. From Patman’s populist battles against concentrated financial power, to her work on the Reconstruction Finance Corporation, the Federal Reserve, foreign bank regulation, offshore banking, and the CBO, Jane learned economics from the inside of institutions. That practical knowledge gave her work unusual depth. She understood finance not as an abstract market mechanism, but as a political and institutional structure shaped by law, power, public purpose, and regulation. She famously anticipated the concept of shadow banking in the early 1990s, referring to it as the parallel banking system.

 

Jane between me and Robert Blecker at an event at American University honoring her late husband in 2018

I was fortunate to meet Jane while working for Lance Taylor at The New School. She was incredibly generous with younger economists and a profound source of wisdom. During my time at the University of Utah, she taught briefly, and she later visited the Federal University of Rio de Janeiro, my alma mater, for a conference I co-organized. I am deeply saddened by her passing, but grateful to have had the opportunity to know her.

Jane belonged to a tradition of economists who took institutions seriously, understood the dangers of unregulated finance, and believed that public policy could and should discipline financial power. She will be missed, but her work remains essential reading.

Prices, Quantities, and the Problem of Inflation

A recent exchange on X (Tweeter) pointed to a paper that proposes to separate demand from supply-driven inflation by looking at the relation between prices and quantities. According to the paper, if both rise, inflation is treated as demand-driven (as shown below). If prices rise while quantities fall, it is treated as supply-driven (no figure, but easy to visualize, a shock to Ys, the aggregate supply). The problem is that this does not identify the cause of inflation.

Prices can rise because of higher costs (e.g. energy, imported inputs, etc.) while quantities increase for independent reasons (e.g. increase in government transfers to the unemployed). The economy may be recovering, public spending may be growing, credit may be expanding, or firms may be drawing on unused capacity. In that case, prices and quantities rise together, but it does not follow that demand caused the price increase (old post on why prices and quantities can and should be treated as analytically separate here).

The real issue is capacity. Higher demand becomes inflationary when it encounters binding limits on production. But full capacity is not fixed or directly observable. It depends on the technology, on the availability of labor and inventories, on access to imported inputs, and sector-specific bottlenecks. There are many measures of capacity utilization, non perfect, obviously. Most of my discussion of why the inflationary acceleration of the pandemic was not demand driven is based on looking at different measures of that.

A growing economy can therefore have rising prices and rising output for many different reasons. Cost pressures may push prices up while demand supports expanding production. The sign of price and quantity changes cannot tell us which force caused inflation. The procedure classifies observed co-movements. It does not establish the structural source of inflation. To do that, one must examine costs, mark-ups, distributional conflict, supply disruptions, and the actual conditions of production, not simply whether prices and quantities move in the same direction.

Rogoff on debt, growth, and the return of the New Consensus

Professor Rogoff has written an unusually angry letter to the New York Review of Books in response to Trevor Jackson’s critical review of his recent book, Our Dollar, Your Problem. It seems that someone never had a bad review before. Rogoff seems particularly offended that the reviewer did not sufficiently appreciate the success of his book or its favorable reception elsewhere (boo hoo).

But the substance matters more. Rogoff returns to the old argument that very high legacy debt weighs on growth. He acknowledges that the infamous 2010 Reinhart-Rogoff paper contained “one mistake,” but insists that the error did not affect the later and more complete work, which reached the same conclusion. He also argues that high debt may limit a government’s capacity to respond to financial crises, pandemics, and wars. Finally, he complains that progressive economists who once believed in a fiscal “free lunch” are now walking back their views because of the post-pandemic rise in inflation and interest rates.

The first problem is that the 2010 result was not a trivial early-stage slip. The Herndon, Ash, and Pollin replication found selective exclusion of available data, coding errors, and an inappropriate weighting procedure. Correcting those problems changed the alleged result dramatically. For the postwar sample, countries with debt ratios above 90 percent of GDP had averaged growth of 2.2 percent, rather than the minus 0.1 percent reported by Reinhart and Rogoff. More importantly, there was no robust historical cliff at the supposedly fateful 90 percent threshold.

That mattered because the paper was not merely an academic exercise. It became a central intellectual prop for post-2008 austerity. It was cited by US and European officials eager to defend smaller fiscal packages, and to present fiscal retrenchment as a matter of arithmetic rather than of class politics. The notion was that public debt above a certain level produces stagnation, so governments must tighten their belts even in the aftermath of a financial crash. That was always bad economics and worse policy.

Even the IMF later concluded that there was no magic threshold. Growth rates (that reduce the burden of debt), interest rates (that determine the growth of previous debt), currency denomination (never discussed), and the political limits of state action (often related to class issues) are the real issues. A country that issues debt in its own currency and has a central bank willing to act as the fiscal agent of the Treasury is in a radically different position from one that borrows in foreign currency or, as in the eurozone, lacks a genuine lender of last resort and unified fiscal policy.

Note that Rogoff does not discuss the distinction between debt in domestic and foreign currency. The relevant issue is not a universal public debt-to-GDP ratio in domestic currency that slows down growth. The issue is, for most countries, whether they have an external constraint and need debt in foreign currency. Hegemonic countries with the key currency don't face that constraint.

This is hardly a novel insight. Britain’s eighteenth-century experience should be enough to make anyone wary of universal debt thresholds. British public debt rose through the century and reached roughly 260 percent of GDP after the Napoleonic Wars. Yet that debt did not bankrupt Britain. It happened as the Industrial Revolution was underway (perhaps a coincidence). It financed war, helped sustain a powerful fiscal-military state, and formed part of the historical conditions under which Britain industrialized and became the dominant global power. The question, as I argued years ago, is not the size of debt in the abstract, but how it is used and how it is funded. Deficits that create employment, build infrastructure, expand public services, and increase productive capacity are not equivalent to deficits that rescue banks, subsidize rentiers, or finance tax cuts for the wealthy. Functional finance begins from that elementary point.

Rogoff’s invocation of the post-pandemic inflation episode is revealing. The issue is whether inflation and higher interest rates prove that the return of fiscal restraint was necessary, as he seems to think. To be clear; they do not. The pandemic inflation was shaped by supply disruptions, energy shocks, and bottlenecks. It was not a straightforward result of excess demand generated by government deficits, even if government spending did maintain demand and allowed for a fast recovery (that was the point, BTW). What Rogoff’s language reveals is the return of the New Consensus. In this view, inflation is presumed to the result of excessive demand, and higher rates restore discipline. In this context, fiscal policy must once again be constrained by fear of debt.

That was precisely the framework that made austerity appear reasonable after the Global Financial Crisis and the European Debt Crisis. The return of inflation anxiety now performs a similar ideological function. It allows the old argument to be revived in a new form. For Rogoff and the defenders of the old New Consensus, governments spent too much, public debt is dangerous, and the space for public action must therefore be narrowed. The danger is not simply that this misreads the causes of recent inflation. It is that it prepares the ground for the next round of fiscal restraint when public investment, housing, infrastructure, climate policy, and social protection are badly needed.

There is one final issue. From Rogoff’s letter alone (since I haven't read this great book that is immensely popular and everyone liked but Mr. Jackson), his argument about the dollar appears problematic. He emphasizes the forces that might weaken dollar dominance, including the weaponization of finance, fiscal policy, and threats to Federal Reserve independence. A confidence argument. The overuse of sanctions, to the extent that it leads to the search for alternatives, might be a real source of pressure, the others are more doubtful.

What he does not say is that there are also powerful reasons to expect continuity of dollar hegemony. The dollar is  not sustained by confidence in US market-oriented policies and rule of law abiding institutions, but by deep Treasury markets, a global payment infrastructure, and its correspondent banking and legal jurisdiction, which, in turn, rest upon American military power. The dollar system is resilient, as I noted recently, precisely because it is embedded in a broader fiscal-military architecture. That does not make it eternal. It does mean that predictions of imminent decline are exaggerated. Predicting catastrophe might sell books, but is often poor scholarship.

Quote of the day

Transcription (not that it is needed): "The fatal mistake of Economics is that it is not true to its statical assumptions. They believe that, by introducing complicated dynamic assumptions, they get nearer to the true reality; in fact they get further removed for two reasons: a) that the system is much more statical than we believe, and its “short periods” are very long; b) that the assumptions being too complicated it becomes impossible for the mind to grasp and dominate them -- and thus it fails to realise the absurdity of the conclusions" (Sraffa's Papers: D3/12/11: 32).

Alan Greenspan’s legacy

 

He was not a crook!

If Volcker symbolized the neoliberal turn in monetary policy, Greenspan embodied its financial side. He saw enough of the late-1990s stock-market mania to warn of “irrational exuberance,” but he treated the bubble as something the Fed should not seriously confront and continued to promote deregulation, including the dismantling of Glass-Steagall and the resistance to controls on derivatives.

That was not merely an error of forecasting. Greenspan’s faith in self-regulating finance helped produce an economy in which asset prices and executive compensation surged while wages stagnated. Financial deregulation and the gains accruing to finance were central to the rise of inequality, together with the destruction of unions and the weakening of workers’ bargaining power that had begun under Volcker.

The political consequences were predictable. Rising inequality, economic insecurity, and the sense that democracy no longer responds to ordinary people created fertile ground for the radical right. Greenspan’s late admission that laissez-faire had failed was not meaningless, but it was too little and far too late. By then the financial crisis had already revealed what his market discipline meant in practice, private gains, public rescues, and a more unequal and politically unstable society.

Milanovic and the end of neoliberalism

Branko’s FP piece argues that neoliberalism, understood as the form of globalization dominant from the early 1980s to around 2020, was built on the principles of cosmopolitanism and competition. Cosmopolitanism meant treating individuals everywhere as equally entitled to pursue improvement through private property, free trade, low taxes, and limited government. Competition meant allowing and encouraging people and firms to compete across borders.* In his view, these principles generated exceptional global growth, above all because of Asia’s and especially China’s rapid expansion.

He acknowledges that this period greatly increased global output and income. Average world income per person more than doubled between 1980 and 2020–21. To a great extent as a result of the growth of the East Asian Tigers, and then China and India. Total global production therefore expanded enormously. But Branko notes that this aggregate success did not translate into political support for neoliberal globalization in the rich countries, because much of the electorate there experienced weak real-income growth while the rich did much better. His elephant graph explains this.

For him, this uneven distribution was crucial. Neoliberalism was not merely pro-rich. In the United States and much of the West, it also produced slower broad-based growth than the preceding postwar period. The global gains associated with China’s development and international integration were real, but politically abstract for workers in advanced economies who experienced deindustrialization, stagnant wages, insecure employment, and the erosion of local economic opportunities.

His point is that cosmopolitanism and competition eventually undermined one another. Cosmopolitanism treated the welfare of foreigners and compatriots as morally comparable, while national political systems remain organized around citizens who expect some degree of national solidarity. The winners of globalization, he argues, often appeared indifferent to compatriots who lost from import competition, offshoring, or the reorganization of production. Worse, they tended to interpret failure in competitive markets as evidence of personal or moral inadequacy.

The 2007–08 global financial crisis made these tensions unmistakable. It showed, in his account, that the rich and the financial sector could be rescued while those who had lost economic security were expected to absorb much of the cost. The center-left was poorly positioned to capture the resulting discontent because it was either discredited by the history of “real-existing socialism” or associated, through Third Way politics (New Dems, New Labour, etc.), with the very neoliberal globalization that had alienated working and middle-class voters.

This helps explain why the backlash moved predominantly to the right. Right-wing nationalist parties promised national solidarity, limits on the equal economic treatment of citizens and foreigners, the return of industrial employment, and a restoration of dignity and traditional values. In the international sphere, Milanovic sees neoliberal globalization being replaced by neomercantilist policies, protectionism and the increase in tariffs, import restrictions, the use of economic sanctions, including asset seizures, and a much more politically acceptable restriction of migration.

In somewhat Marxian fashion, he says that the internal contradictions of neoliberal globalization produced the conditions for its own demise. Globalization’s success created global growth but generated domestic inequality, social resentment, and political nationalism in the rich countries. Neoliberalism is therefore being replaced by a more protectionist, nationalist, and economically coercive international order.

Branko thinks neoliberalism has genuinely ended and has been replaced by neomercantilism. I’m more skeptical about that. The United States and Europe may now use industrial policy, tariffs, subsidies, and geopolitical controls, but it’s not clear that they ever stopped using them. Meanwhile a good part of limits imposed on the working class in advanced economies and in the periphery, remains subject to the old neoliberal discipline. In other words, the attachment to free-market ideology was always qualified in the center, and the complete reversal of policies should be taken with a grain of salt.

It is clear that neoliberal globalization generated political discontent, weakened labor, intensified inequality, and helped create the conditions for nationalist backlash. It is also true that the old cosmopolitan language of free trade and borderless markets is no longer adequate to describe the behavior of the major powers. But it doesn’t follow that neoliberalism itself has ended. In my account, the system has adapted remarkably well because its core purpose was never simply free trade or small government. It was the reorganization of society in favor of capital, the discipline of labor, and the restriction of democratic policy space.

The main thing that Branko underestimates is that cosmopolitanism was never the whole substance of neoliberalism, and that the underlying logic of competition was never fully abandoned. That is why the underlying project was the protection of capital, the weakening of labor, and the encasement of markets against democratic control could survive. When the ideology ceases to serve those purposes, neoliberalism can survive through protectionism, industrial policy, militarization, fiscal rules, and geopolitical coercion. Let alone that in good parts of the periphery – certainly in many parts of Latin America, like in Argentina – the old neoliberal free-market ideology and policies are alive and kicking.

The essential point is that the free-market ideology has not been completely abandoned by right-wing populists such as Trump. The celebration of entrepreneurship, of techno-billionaires, and crypto bros, the belief that markets are the most effective mechanism for coordinating information, and the idea that there are no workers, only potential entrepreneurs, remain central to the MAGA revolt. The self-made-man myth is still doing much of the ideological work. Tariffs and sanctions are therefore presented less as a rejection of markets than as a means of leveling the playing field against foreign competitors and unfair practices. Financial deregulation, and Musk's failed Department of Government Efficiency (DOGE), celebrated the efficiency of the private sector, and the waste of the state. In other words, the ostensibly post-neoliberal right maintains core neoliberal ideological commitments, they abandoned cosmopolitanism, but not free-market individualism.

* I’m not sure that people, or more precisely, workers were, at any point in the more recent neoliberal era, allowed to move freely. There was an asymmetry between the mobility of labor and capital for sure. Free labor, in the neoliberal context, often meant free from unions, which are seen as an impediment on the individual bargaining position.