Neo-Liberal Institutions Following the Crisis: Change and Continuity of Macroeconomic Policies and Governance

The 2008 financial meltdown and the Great Recession that followed it reflect one of the most severe global economic crises in contemporary history. Some claim that despite this fact, and in contrast with previous major global crises, no far-reaching institutional change has so far followed and that neoliberal institutions have remained intact. I challenge this perspective and claim that the recent crisis had actually produced important changes in the institutional structure of the macroeconomic domain. This claim is based on historical and discursive institutional analysis of institutional changes, as well as on the distinction between two aspects of neoliberal institutionalization: the governance aspect (or intra-state interface) and the market aspect (or state-market interface). The institutionalization of the neoliberal project was composed of dramatic changes regarding both state-market interface (primarily the adoption of "free markets" ideology) and intra-state interface (primarily depoliticization of economic decision-making). Both dimensions of neoliberal change were also present in the macroeconomic domain: setting price stability as the main goal and monetary policy as the main policy instrument have redefined macroeconomic policies, while positioning central banks as "autonomous" decision-makers and limiting elected politicians influence on fiscal policy have redefined macroeconomic decision-making structure. The recent crisis had had dramatic but distinctive influence on each of these two aspects of neoliberal institutionalization. It produced a radical change in the state-market interface, by substantially weakening the influence of "free markets" ideology and re-institutionalizing deep governmental macroeconomic intervention in the markets. Concurrently, in terms of intra-state interface, the crisis contributed to the strengthening and escalation of neoliberal depoliticization of macroeconomic governance. Evidence from Israel nicely illustrate this argument.