“What really distinguishes our neoliberalism from the long vanquished paleo-liberalism of ... laissez faire? The distinction is this: we do not expel the state from the economy ... Right from the start, we assign to the strong and independent state the foundational task of market-police to secure economic freedom and complete competition.”

— Alexander Rüstow, the originator of the term neoliberalism.

Is Sally McManus a neoliberal? The question might at first glance seem preposterous. After all, we’re talking about a leader of the trade union movement who denounces neoliberal ideology as “the cause of record inequality” and who wrote a defence of law-breaking to further the conditions of the working class. Yet it’s worth pondering as an entry point to thinking about how the broad left in Australia remains mired in such a mess.

But first, what is neoliberalism? Often, the term is used as though it just means the privatisation of state assets, deregulation of markets, lower taxes for the rich etc. Proponents of this “let the market rip” conception of neoliberalism usually point out something irrefutable: under the leadership of political figures such as Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States, capitalism was transformed in the 1980s and into the 1990s. It got nastier, more confrontational, with more and more areas of life opened to global market competition and fewer areas of life subject to state protection from those forces. And, of course, trade unions were casualties of what was a pretty one-sided class war.

Neoliberalism thus conceived is little more than a set of policies enacted in a historical period that many, if not most, people would prefer to leave behind. If this were all there were to neoliberalism, then its reversal would be remarkably simple: put more aspects of the economy under state control, regulate companies more, reintroduce more progressive taxation, increase social protections. Just elect a left-wing government, basically, and neoliberalism is history. It’s an attractive proposition that allows people to talk about the capitalism that could be—a more rational and fair capitalism—if it weren’t for this neoliberal bastardisation.

But what if neoliberalism is all this and less? What if it’s little more than liberal capitalism given the label “neo” so that its differences from preceding eras can be overemphasised to the neglect of examining the system’s continuities? What if neoliberalism is simply the practice of governing a deeply complex society requiring permanent political and legal interventions to prevent its own collapse? And what, then, if many of those who claim to oppose neoliberalism are in fact its most effective props?

Well before anyone was talking about any of this, Karl Marx wrote of the most basic acts of economic exchange expressing themselves in contracts. “Whether such contract be part of a developed legal system or not ... [it] is but the reflex of the real economic relation between the two” people exchanging goods, he noted. That is, there is no market without agreement, and market agreements take a legal form. But the greater the complexity of economic arrangements, the greater the complexity of the law and the greater the role of the state in ensuring an orderly process for engaging in and settling agreements.

As he and his long-time collaborator Frederick Engels vividly described in the Communist Manifesto, capitalist markets cannot be separated from state power: the former are structured and regulated to ensure the smooth functioning of economic life: anti-trust laws, labour regulations, taxation and subsidisation, incorporation procedures, a national currency, shared infrastructure and so on. As an example, you only have to browse the draft of the now shelved Trans-Pacific Partnership agreement to see just how involved states need to become—more than 600 pages of text, not including the annexes, outlining everything allowed and disallowed in proposed “free market” areas.

A central concern of those describing themselves as neoliberals (or in Germany “ordoliberals”, expressing a desire for ordered liberalism) from the 1930s was to structure and regulate the capitalist economy to prevent communism and depression. They understood that capitalist markets were fragile human creations; that laissez faire liberalism—“let the market be” and keep the state out of it—was folly. So when Alexander Rüstow in the aftermath of the Second World War wrote about the state as “market police”, he was expressing a preference, but also describing the only way that capitalism could be made stable.

Today’s neoliberals are generally hostile to social welfare, which gives the impression that this must be the essential, defining feature of their project. But in the early days, when the main enemy was communism, ordered free markets could more clearly be seen as the principle of neoliberalism; some of its proponents even believed that their project was compatible with social democracy.

“If we say ... ‘we can develop an interventionism which protects the free market, within the limits necessary if we want to protect the economically weak, etc.’, if we say this, then there is hope of getting over the fatal split in the humanitarian camp, and of uniting the vast majority of liberals and socialists”, Karl Popper wrote to Friedrich Hayek in 1944. “This is why an explicit recognition of the need for some interventionism is not only necessary in the interest of clarity, but also in the interest of that union in the camp of freedom which is necessary if collectivism is to be avoided. From all you have written to me, I feel that you are sympathetic to this line of thought.”

Popper and Hayek were two of the intellectual founders of neoliberalism. And while the project took different directions over the course of the second half of the twentieth century, the correspondence suggests that, at least initially, they viewed social democracy as a theoretical ally that perhaps could be turned into a practical partner.

“My own position, as you will remember, was always to try for a reconciliation of liberals and socialists [social democrats]; with this tendency you were in sympathy”, Popper wrote in a subsequent letter to Hayek. “This does not, of course, mean that the emphasis on the dangers of socialism (dangers to freedom) should be suppressed or lessened. On the contrary. But it means that everything should be avoided that widens the gulf between those who really love freedom, and might yet be won for co-operation.”

Clearly, cooperation was not at the heart of every neoliberal project, certainly not in the Pinochet dictatorship in Chile or the Chicago School economics applied in Latin America, or in Thatcher’s UK and Reagan’s USA. But its consideration highlights that neoliberalism is not simply economic policy, but a political project to secure a particular type of freedom: one measured in market terms. Outside of the German social market economy—arguably the first neoliberal state, constructed in West Germany following the devastation of the Second World War, in which the economy, social order and freedom were supposed to fully integrate—there is perhaps one place that exemplifies the spirit Popper hoped to harness: Australia.

It was here that social democracy, in the form of the Labor Party, the Australian Council of Trade Unions and the by-then reformist Communist Party, became the most enthusiastic cooperative partners in constructing a monolithic “market police” apparatus.

In regular times, a key function of trade unionism is indeed to police the market—to ensure that the terms of an agreed labour contract are upheld, that workers are paid at the correct rate, that they receive compensation for extra or unsociable hours etc.—in short, that the bosses don’t get more than they pay for. As the umbrella bureaucracy of the trade union movement, the ACTU has always been more removed from the workforce than this. But its participation in the formation of a monolithic managerial bloc was of a qualitatively different order.

In Australia, it wasn’t just the state that became the market police, but the state in partnership with, and incorporating, the largest and most powerful civil society institutions. As Liz Ross notes, the Australian Financial Review was one of the first to recognise in the 1980s what would become a pillar of neoliberalism: “The Hawke [ALP] government has become a jailer for unions which dare to buck the ... consensus and the ACTU has become an industrial police force”.

This was not simply a means to a strictly economic end, a policing operation carried out only to reduce wages, increase profits and open further profitable avenues of investment for capitalists. It was a project to push liberal market logic into every corner of society—an epic experiment to reconfigure human reflexes to treat every interaction as a transaction and see nothing but the leviathan of the market police if ever one tried to look beyond the horizon of the economic logic that encroached on everything from social services to education. For all its variations in different countries around the world, it’s the market police apparatus that is the heart of neoliberalism.

The ACTU has never walked away from its history of ordering Australian capitalism. In fact, it’s an approach that it continues to promote. The National Economic Reconstruction Plan, a proposal to rebuild the economy after the pandemic, is a case in point. Taking it at face value, you’d think it has nothing to do with neoliberalism—if you think the essence of neoliberalism is just a particular set of policies like privatisation and lowering business taxes. (The document attacks “trickle-down economics, wage suppression and austerity”.)

But looking at neoliberalism from the angle outlined above, the form of the ACTU’s policy proposals is beside the point. The ACTU could write a document calling for the nationalisation of industry or even full communism—but if it were yet another five-point plan announced at the National Press Club with a call for “constructive collaboration”, the substance would be nothing but neoliberalism: the same technocratic managerialism oriented to ordering capitalism that has been the council’s beating heart for several generations.

We’re in the middle of, potentially, a once in a century crisis, and the peak body of the workers’ movement has spent almost all its time in meetings with the government and industry groups attempting to be part of a national unity crisis management team. The early Popper and Hayek would be proud—social democrats mobilised for the so-called freedom agenda, and the ACTU as an institution of market policing trying to work with a Liberal government and the capitalist class to configure the recovery.

What’s the alternative? The very thing the neoliberals fear most: “collectivism”. The way out of neoliberalism is not more neoliberalism under the name “Keynesianism” or “fairness” or whatever else the latest position paper claims is an alternative. The only thing that can break through institutionalised market police is class struggle. The independent action of workers has an altogether different logic to top-down managerialism. It transforms workers from objects in the economy to subjects shaping their world. And it challenges the order so cherished and painstakingly constructed by the state and its collaborators. While the ACTU is not part of that agenda, it, and its leaders, are part of the neoliberal behemoth—no matter what talking points they put to government and industry.