~ The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism (Princeton University Press, 2023) by Sebastián Edwards.

~ Inside Thatcher’s Monetarism Experiment: The Promise, the Failure, the Legacy (Policy Press, 2024) by Tim Lankester.

The new British prime minister, Andy Burnham, has done much to revive talk of neoliberalism. Accepting the Labour leadership on 17 July 2026, he declared that “four decades of the neoliberalism that began in the 1980s” had been unkind to the industrial, rural and coastal communities from which the Labour movement once drew its strength. Three days later, standing outside Downing Street, he translated the term into a compressed history of the country: “Political power was centralised, economic power privatised, large parts of the country de-industrialised, and they still haven’t recovered.”

British politicians have spent years discussing low investment, regional inequality, weak productivity, insecure employment, expensive housing, and failing privatised utilities. Burnham has revived the proposition that they belong to a Bond-villain scheme devised in bourgeois talking shops. His “Manchesterism” proposes to reverse these plagues of Egypt through devolution, reindustrialisation, public procurement, council housing, and stronger public control over essential services. It is a politically attractive account because it converts a collection of difficult and partly unrelated failures into the consequences of one historical error, then presents municipal direction and public ownership as their natural remedy. Thus, the decline of industrial Britain is not the complicated result of technological change, foreign competition, bad macroeconomic policy, weak investment, and political neglect, but the foreseeable consequence of decisions of a dastardly Tory cabal, hellbent on transferring ownership and power. This is a tidy and repeatable piece of political narratology, but simpler than history will permit.

Nevertheless, neoliberalism has become the bogeyman for everything that has happened since Margaret Thatcher first entered Downing Street like a Tory Francis of Assisi: privatisation, deregulation, globalisation, austerity, financialisation, deindustrialisation, and the retreat of organised labour. In a Berlinian world of hedgehogs and foxes, Burnham is the former. These developments were connected, but were certainly not identical, simultaneous, or reducible to a single deviously concocted master plan.

Sebastián Edwards’s The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism and Tim Lankester’s Inside Thatcher’s Monetarism Experiment: The Promise, the Failure, the Legacy are unusually useful books on this issue because neither author can tell a simple story of Friedmanite vindication. Edwards had supported Salvador Allende as a young man before studying economics at Chicago under Arnold Harberger, and he continued to believe that market reform contributed substantially to Chile’s later prosperity. Lankester served as Margaret Thatcher’s first private secretary for economic affairs, admired her wider political achievement, but concluded that the monetarist experiment pursued during her first government was a serious policy error. Both therefore wrote as divided witnesses. They understood why the programmes attracted intelligent supporters, yet their own evidence repeatedly showed economic programmes encountering reality only to be modified, abandoned, or rescued by the state.

Read together, the books pose an awkward problem for conventional histories of neoliberalism. Chile’s liberalised financial system ended in a spectacular banking crisis. Britain’s attempt to control inflation through monetary targeting foundered on the difficulty of deciding which quantity of money should be controlled and how government could control it. Neither country subsequently returned to the political economy that had preceded the experiment. Institutions proved more durable than the theories used to establish them.

Neither man is much of a prose stylist. Edwards writes like an economist and Lankester like the former civil servant he is. Their prose rarely crackles, but this scarcely matters, because both possess the intellectual seriousness and candour of men divided against themselves.

The Chile Project originated in 1956 through an arrangement between the Catholic University of Chile and the University of Chicago, supported by the American government. Chilean students studied price theory and monetary economics under economists including Arnold Harberger and Milton Friedman before returning to a country whose intellectual establishment remained strongly influenced by structuralist economics. The programme created something more consequential than a supply of competent technicians by producing economists who shared an explanation of Chile’s difficulties and had spent years arguing through the alternatives before circumstances gave them political authority.

By the early 1970s Chile was an economic basket case. Salvador Allende’s government faced spiralling inflation, shortages, falling production, strikes, business resistance, political polarisation, and covert American intervention. Years of argument at the Catholic University and Chicago had convinced them that protection, state direction, fiscal indiscipline, and distorted prices had not insulated Chile from crisis but helped produce it. They therefore entered the collapse with something their opponents increasingly lacked: a coherent diagnosis and a programme ready to be used.

They called this economic blueprint El Ladrillo: prices were to be freed, tariffs reduced, public enterprises sold, capital markets expanded, and much of the protective machinery built around Chilean industry dismantled. The military seizure of power in September 1973 did not immediately make the Chicago Boys masters of economic policy, but the Pinochet dictatorship eventually provided conditions under which reforms of extraordinary scope could be imposed. Trade unions were crushed and collective bargaining restricted; pensions for new entrants were converted in 1981 into compulsory individual accounts managed by private firms; schooling was reorganised through municipal control and vouchers; and ownership passed extensively from the public to the private sector.

Edwards is too careful a historian to pretend that markets simply appeared when government withdrew. His own account shows instead that the Chilean settlement required concentrated governmental power. Property rights had to be rewritten, public assets transferred, pension contributions compelled into newly created funds, labour relations regulated on different terms, and foreign competition deliberately introduced into industries previously sheltered from it. A dictatorship capable of excluding organised opposition from political life possessed formidable means for creating a market society. The state became smaller in some economic functions while becoming considerably more coercive in establishing the conditions under which the new arrangements would operate.

The experiment got caught on a sticky wicket in 1982, after financial liberalisation, loose supervision, heavy private foreign borrowing, and an exchange rate fixed at 39 pesos to the dollar produced an increasingly fragile structure. When recession and the international debt crisis struck Latin America, Chile suffered one of the deepest contractions in the region. Output fell by more than 14 per cent in 1982 and unemployment climbed above 20 per cent. By early 1983 the authorities had intervened in or liquidated eleven commercial banks and several finance companies; the affected banks accounted for roughly two-fifths of deposits and an even greater proportion of outstanding loans. The government guaranteed liabilities, absorbed bad debts, and reconstructed finance under much stronger supervision — private risk ended in public rescue.

Yet this intervention stopped short of putting the economic revolution into reverse, as pension funds remained in place, trade stayed open, collective bargaining remained greatly weakened, and privatised property was not generally returned to the state. When democracy returned in 1990, the centre-left Concertación governments therefore inherited most of the economic structure built under Pinochet, but they did not leave it untouched. Stronger banking regulation, higher social spending, new infrastructure, expanded anti-poverty programmes, and eventually greater public support for pensions altered the settlement from within. Chile’s strongest period of sustained growth and poverty reduction came under this modified order: not the pre-1973 economy, but no longer the Chicago experiment in its purest Platonic form either.

Here Edwards’s loyalties occasionally strain against his evidence. He had good grounds for rejecting the claim that Chilean growth was merely fraudulent or that the Chicago reforms constituted a single, undifferentiated failure. Trade liberalisation broadened the export economy; greater macroeconomic discipline helped break chronic inflation, while competition dismantled protections that had often preserved inefficient firms and politically favoured interests. Nor can every subsequent inequality or social failure simply be charged to market reform, as though the economy it displaced had been either equitable or conspicuously successful. The harder question is which parts of the new settlement actually account for what followed. Weak collective bargaining, inadequate social insurance, unequal educational opportunity, and pensions dependent upon regular lifetime contributions did not obviously follow from freer trade or greater competition, and Edwards sometimes moves too easily from the success of the former to the vindication of the package as a whole.

The temptation, particularly once democracy returned, is to read the continuity as a kind of we’re-all-Pinochetistas-now verdict. Successive centre-left presidents — Patricio Aylwin, Eduardo Frei Ruiz-Tagle, Ricardo Lagos, and Michelle Bachelet — governed within an economy whose basic orientation towards trade, private enterprise, and fiscal discipline they did not overturn. But they also tightened financial supervision, expanded social spending, invested heavily in infrastructure and poverty reduction, and gradually rebuilt public provision around institutions the dictatorship had left too exposed. The result is awkward for both sides. Chile’s democratic governments did not repudiate the market economy created under Pinochet, but neither did they simply preserve it. Much of the liberalisation survived because it proved useful; some of its more doctrinaire arrangements survived only after being modified.

Contrary to what the Left would have us believe, Margaret Thatcher governed through elections, Parliament, an independent press, and an opposition perfectly free to defeat her if only it could get its shit together rather than send Michael Foot to the Cenotaph looking as though he had dressed for a wet afternoon on the allotment while Tony Benn busied himself with ideological trench warfare inside the Labour Party. The Conservatives took 43.9 per cent of the vote in 1979, 42.4 per cent in 1983, and 42.2 per cent in 1987, returning Thatcher with three successive parliamentary majorities; in 1983 they won 397 seats, the party’s best Commons result since 1945.

Monetarism arrived in Britain with considerable intellectual plausibility. The inflation of the 1970s had discredited repeated attempts at incomes policy, while the Labour government itself had adopted monetary targets after the 1976 IMF crisis. Thatcher and her allies went further. If inflation followed excessive monetary expansion, controlling the money supply offered a means of imposing discipline without another round of bargaining among government, employers, and unions. The Medium-Term Financial Strategy announced in 1980 promised declining monetary growth accompanied by fiscal restraint. Government would establish the limit; economic actors would have to adjust.

Lankester’s insider account is strongest when this apparent simplicity begins to hit the skids. The government concentrated heavily on sterling M3, covering currency and a broad range of sterling bank deposits. But finance was changing while ministers attempted to measure it. Exchange controls disappeared in 1979, banking competition increased, credit practices changed, and financial innovation altered relationships among deposits, lending, interest rates, and spending. Sterling M3 repeatedly behaved in ways the model had not predicted. Officials and ministers consequently turned towards additional measures including M1 and PSL2. Facts, as John Adams observed, are stubborn things. Money, as Thatcher’s ministers discovered, was considerably trickier: the supposedly clear rule descended into a bunfight over which measure of it actually mattered.

The instruments used to enforce restraint were less ambiguous in their effects, as high interest rates, fiscal tightening, weak domestic demand, and a sharply appreciating pound bore heavily upon industry. Manufacturing employment fell from about 6.7 million in 1979 to roughly 5.2 million by 1983, while unemployment rose from around 5 per cent to more than 11 per cent. The contraction could not all be laid at monetarism’s door, as British industry entered the period with serious weaknesses, North Sea oil contributed to sterling’s appreciation, a global recession reduced demand, and manufacturing employment had already been declining. Lankester nevertheless shows that ministers intensified the recession because monetary indicators which they believed they could control continued to overshoot.

British industry could not simply be mothballed like Michael Foot’s donkey jacket and brought back out when demand recovered. Factory closures broke supplier networks, dispersed skilled workforces, ended apprenticeship systems, reduced local tax bases, and weakened unions embedded in particular industries. By the end of the decade trade-union membership had fallen from its 1979 peak of more than thirteen million to around ten million. Some of that represented longer technological and industrial changes, but the recession accelerated the process with a violence that neither Thatcher nor many of her advisers initially anticipated.

Lankester’s account makes clear that Thatcher did not initially expect destruction on this scale, as monetarism had promised a comparatively orderly disinflation in which a credible rule would alter expectations and reduce the employment cost. There was nothing malicious in this; ministers simply misunderstood the mechanism and underestimated the consequences. Like Stephen Fry’s Lord Melchett, ministers believed that a total pig-headed unwillingness to look facts in the face would see them through.

His criticism is damaging precisely because he rejects the retrospective claim that all of this amounted to a deliberately administered purge of inefficient industry. Monetarism had promised something more sophisticated: credible monetary restraint was supposed to change inflationary expectations and make disinflation less dependent upon enormous losses of output and employment. What ministers discovered instead was that they possessed much greater power over interest rates and demand than over the monetary aggregate they had chosen to control. As that became harder to ignore, hard monetary targeting gradually receded, policy grew more eclectic, and increasing weight was placed upon the exchange rate. Inflation did fall, but by then the mechanism bore little resemblance to the clean monetary experiment advertised at the beginning.

Lankester nevertheless wants to rescue Thatcherism from monetarism, just as Edwards seeks to separate valuable Chilean market reforms from the failures around them. In each case the separation is only partly convincing. Thatcher’s governments undeniably confronted genuine problems that previous governments had failed to resolve: persistent inflation, poor productivity, industrial conflict, heavily subsidised firms, and an increasingly exhausted system of corporatist bargaining.

Britain stumbled into the 1980s as the sick man of Europe. The men (and they were mostly men) who had given their finest hour on the beaches, landing grounds, fields, and streets, and then built the post-war settlement, now appeared on television bleary-eyed, jowly, hairy-eyebrowed, dandruff-shouldered, and owl-like behind horn-rimmed spectacles, presiding over an economy of strikes, inflation, failing industries, and assumptions about government as threadbare as their ill-fitting suits. Ted Heath’s technocratic modernism foundered on the shoals of inflation, statutory wage restraint, the miners’ strikes, and the three-day week; Wilson’s pipe-smoking corporatism choked on 26 per cent inflation, a faltering Social Contract, and mounting pressure on sterling; and Callaghan’s pre-monetarist reformism froze solid in the Winter of Discontent amid pay restraint, piled rubbish, and undug graves — an absolute dog’s dinner that no number of meetings in smoke-filled rooms over beer and sandwiches between politicians, business leaders, and union representatives could hope to resolve.

When Callaghan told Labour conference in 1976, “in all candour”, that governments could no longer spend their way out of recession, the Keynesian consensus had already dug and filled in its last hole. Keynes had warned that in the long run we were all dead; his post-war settlement proved no exception — Thatcher and Reagan tangoed over its grave. The Employment Acts of 1980 and 1982 restricted secondary action and exposed unions to liabilities from which they had previously been protected; the 1984 Trade Union Act imposed secret-ballot requirements, while the defeat of the miners in 1985 broke the power of the movement that had helped bring down Heath. Union membership, above thirteen million in 1979, fell to around ten million by the end of the decade. British Telecom went in 1984, British Gas in 1986, and British Steel in 1988. By then the fate of sterling M3 mattered rather less. Monetarism had failed as a modus operandi, but Thatcherism proved Leninist where it counted: the poll tax aside, doctrine could be sacrificed to preserve the revolution.

When Labour finally returned to power in 1997, it did so playing by the rules of Thatcher’s game. Tony Blair had rewritten Clause IV two years earlier, accepted most of the privatisations, and within days of taking office gave the Bank of England operational independence to pursue an inflation target. New Labour increased public spending, introduced tax credits, and redistributed income through the tax-and-benefit system, but it did not restore the old union settlement, renationalise the commanding heights, or return full employment and industrial protection to their former place in economic policy.

Read together, Edwards and Lankester make neoliberalism look less like the grand exercise in ideological engineering imagined by much of the Left than a succession of experiments, improvisations, and retreats whose institutional consequences proved more durable than the doctrines behind them. None of this represented a Norquistian strangling of the state in a bathtub, as both governments created markets, altered bargaining power, transferred risks and property, and then intervened again when some of the resulting systems malfunctioned.

The irony running through both books is that policy failure sometimes strengthened this settlement rather than destroying it. Chile’s financial crash produced better-regulated capitalism, not a return to the developmental state. Britain’s monetary failure produced more pragmatic macroeconomic management without restoring the political economy of full employment and organised labour. The theories could be discarded because much of their historical work had already been done. Institutions, once constructed, acquired interests and expectations of their own; industries and organisations destroyed during adjustment could not simply be summoned back into existence like White Walkers by the Night King.

Neither Edwards nor Lankester quite follows his evidence all the way. Edwards sees post-1990 Chile as vindicating the market turn once its worst errors were corrected; Lankester treats monetarism as an avoidable blunder within the greater achievements of Thatcherism. In both cases, there is something to that. Chile’s current prosperity rests in part on trade openness, fiscal discipline, and competition, just as Britain’s (now-faltering) economy is built upon much of the liberal settlement Thatcher left behind: lower inflation, private ownership, open markets, and greater competitive discipline. The failure of these experiments does not invalidate every reform implicated in them. Some measures were abandoned, others revised, while enough of the neoliberal turn survived because it answered real problems the ancien régime had failed to solve — whether short-sighted socialist doctors in Santiago or world-weary war heroes in Westminster.

Burnham is therefore right to locate a rupture in the 1980s, but that does not make him right about its remedy. The history is more unsettling than that of a successful doctrine now reaching exhaustion, and less convenient than the Left’s story of markets simply replacing government. Neoliberalism survived because economic failure and political success were not opposites.

Any government now proposing to build an alternative to neoliberalism will encounter the same difficulty from the opposite direction. The world economy cannot be put back behind national borders, nor can deindustrialisation, technological change, mobile capital, global supply chains, and international finance be corralled without some combination of industrial policy, capital regulation, trade strategy, and international coordination. A new political economy would have to be built through them, against them, and sometimes with them. Reindustrialisation, stronger unions, public ownership, capital controls, and a larger social state will all require political power to be used deliberately against interests and incentives created over the previous forty years.

Burnham, or any other leader of the Left, may be right that Friedmanite neoliberalism has exhausted itself; but, as Thatcher and the Chicago Boys discovered, economies rarely behave according to an ideological blueprint, and their successors are unlikely to enjoy any special exemption.