The Long Road to 1989: Neoclassical Economics, Alternative Socialisms, and the Advent of Neoliberalism

This article examines three events that have reinforced misunderstandings about neoclassical economics, socialism, and neoliberalism: the socialist calculation debate, economic reforms in socialist Eastern Europe, and 1989. In contrast to assumptions that neoclassical economics is capitalist, this article reveals that, since the nineteenth century, neoclassical economists have used an abstract socialist state to develop their professional knowledge. Since a centralized socialist state and a competitive market lie at the core of neoclassical economics, neoclassical economists find a range of socialisms — not merely centrally planned socialism — directly relevant to their professional work. Since the late nineteenth century, socialist economists have also used neoclassical economics not only as a way to describe the economy or make predictions but also as a blueprint for a future socialist society. Economists critical of authoritarianism created alternative democratic and market socialist models based on neoclassical economics. With these histories, this article provides a new explanation of the economic debates around 1989, demonstrating that these debates were not about planning versus markets but rather about authoritarianism versus economic and political democracy.