The generally flaccid response of liberal and libertarian scholars to nearly four decades of expansive leftist critique of the concept of “neoliberalism” has left a lacuna in academia even as capitalism in its various guises has spread globally. For the first time in human history, almost all of the planet is economically organized under the flag of capitalism. And while liberal governance is increasingly in retreat globally, it remains an admired ideal.  In this context, a mechanical form of economic policy- making (i.e., a revived laissez- faire) has come to legitimate itself solely on the promise of economic growth— a benchmark that may have limited connection to the expansion of individual freedom— while masking increasingly rigid income inequality and a crony- capitalist actuality. It is time to update and reinvigorate the cause of economic and political liberalism, to cast off the cronyism and state protection that bleeds the economy of its vigor and face the intellectual challenges emanating from all parties on the horizon.  

Friedrich A. Hayek’s Road to Serfdom (1944) is the seminal twentieth-century text in defense of economic liberalism. Hence, any recovery and restatement of economic liberalism for the twenty- first century should begin by sifting the arguments laid out there. Published near the end of World War II, the book sought to steel Britain against the intellectual battle with centralized planning that lay ahead of victory by once again restating the liberal values on which Britain’s freedom and prosperity were built. Hayek argues that liberalism faced a challenge from the import of German ideas (e.g., Hegel’s statism, Marx’s socialism, List’s economic nationalism, Schmoller’s historicism). Defeating those ideas by defending the rationale of liberal political economy, Hayek thought, would clear the terrain for a revival and restatement of liberalism. 

To some, the need for an intellectual revival of liberalism may seem less pressing today, given the near universality of capitalism and the lingering prestige of liberal democracy, but clouds of dissent from the liberal order have been amassing for some time. Liberalism once more faces threats from revived and intellectually reconstructed communists and fascists as well as less systematic new challenges from environmentalists and (in some regions) religious textualists. And while socialism, understood as control of the commanding heights of the economy, centralized planning, and one- party domination, has been marginalized in high- income countries, it remains popular as an ideology in middle- and low- income countries, particularly in South America.5 Moreover, “democratic socialism” has demonstrated significant popular appeal in high- income countries in recent years. However, the twenty- first century is unlikely to be characterized by a simple ideological reenactment of the Cold War, in large part because the failed and discredited ideologies of fascism and communism lack broad popular appeal today. 

The most pressing new challenge to liberalism in the twenty- first century stems not from a nostalgic revival of communism or fascism— although paroxysms are to be expected— but from the emergence of what Milanovic has labeled “political capitalism” in countries such as China, Vietnam, and Singapore. Political capitalism is an alternative form of capitalism associated with efficient technocratic bureaucracy, the absence of the rule of law, and the autonomy of the state in matters of private capital and civil society. Political capitalism, as an ideal- type model, is usually the product either of a communist revolution or of a revolutionary one- party state that successfully leveled precolonial cultural impediments in order to achieve economic transformation and political sovereignty. These states are technocratic and oriented toward legitimacy based on economic performance and political competence under the banner of a ruthless one- party state that rules by selectively using the law as a weapon against dissidents and opponents. Political-capitalist states are highly autonomous from the owners of capital when they need to be and capable of formulating a nationalist (i.e., mercantilist) policy agenda. The selective use of anticorruption purges is one mechanism for maintaining state autonomy (although a highly disciplined party apparatus could achieve the same effect without tolerating high levels of corruption). These societies are highly inequitable, owing at least in part to the discretionary authority of the law- administering bureaucracy and decision makers’ public policy preferences for economic performance over social equity. The state keeps corruption and dissent in check because of its need to deliver tangible economic performance and to demonstrate competence in crisis management. Despite the authoritarian nature of political capitalism, these are capitalist economies characterized by (1) a majority of production in the private sphere, (2) a majority of workers operating as wage laborers, and (3) a majority of production decision- making that is market determined (i.e., not centrally planned). In essence, the competition on the global stage is no longer between alternate systems of economic organization, but between alternate variants of capitalism.