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There is so much general confusion, if not outright dread, about the state of the global economy. The war in Ukraine, gyrating gas prices, skyrocketing mortgage rates, the continued fallout of the Covid-19 pandemic and the looming prospect of a recession — all of these factors seem to be coalescing into chaos.

The fear is real. But the chaos is transitory, as it is largely driven by the tumult that attends any transition from an old economic order to a new one. Every economy goes through cycles of expansion and contraction, but the most important indicator within these cycles has less to do with market prices or unemployment rates and more to do with underlying political philosophy.

For roughly half a century, our political economy has been based on the governing concept of neoliberalism — the idea that capital, goods and people should be able to cross borders in search of the most productive and profitable returns. Many people associate it with the trickle-down economics practiced by Ronald Reagan and Margaret Thatcher or even the business-friendly economic ideas espoused by Bill Clinton and Barack Obama around financial markets and trade. But the roots of the philosophy go back further.

The term “neoliberalism” was coined in 1938, at a Paris gathering of economists, sociologists, journalists and businessmen who were alarmed by what they viewed as the excessive state control of markets after the Great Depression. For them, the interests of the nation-state and of democracy could pose problems for economic and political stability. The voting public could not be trusted, and thus national interests (or, more particularly, nationalism) should be constrained by international laws and institutions so that markets and society could function properly.

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