The Neoliberal Legitimation Crisis of 2008

Abstract

This paper will discuss how the Financial Crisis of 2008 has thrown neoliberalism into a deep legitimation crisis. Over the past four decades the neoliberal ethic of Ronald Reagan and Margaret Thatcher has permeated American life both public and private. The principles of the laissez faire markets and of individual responsibility have guided most if not all national policy. Central to these principles was deregulation. As the Financial Crisis shifted into high gear, the tenants of neoliberalism, such as deregulation, became the target of considerable criticism. Section I will begin with an explanation of Jurgen Habermas’s theory of the legitimation crisis. In particular, this section will discuss how an economic crisis can lead to a legitimation crisis. Section II will briefly sketch the rise of neoliberalism in America, flag the key tenants of neoliberalism, and highlight the key 'contradictions' of neoliberalism. Sections III will layout a history of the Financial Crisis and the backlash to the neoliberal position. Finally this paper will consider what the consequences of this Crisis will be for the neoliberal establishment.

Keywords: Habermas, legitimation crisis, financial crisis, neoliberalism, deregulation, auction rate securities, Obama, election, McCain, 2008 election, legitimacy, economic crisis, meaning crisis, Tea Party, Foucalt

JEL Classification: A1, A12, B15, B22, C8, D31, D7, D71, E12, E13, E17, E22, E24, E25, E42, E51, E52, E53, E58, E5, E6