Daniela Gabor: 'Nobody is defending free markets any more'

New Statesman​

07-08-2025

Photographed by Zula Rabikowwska for the New Statesman
The past century of economic history is often told as a series of dates presented as seismic turning points: 1929, 1945, 1979… The financial crisis of 2008 will no doubt be added to the list of watersheds in which the old world died and a new one was born. But if that year definitively signalled the death of the globalised, neoliberal paradigm, it's less clear what has emerged to replace it.
'I went to a two-day workshop at Princeton University discussing central planning,' the Romanian economist Daniela Gabor told me. 'That already tells you how the political winds are blowing, when central planning is being discussed in Princeton.'
The first time we spoke, Gabor was working in New Jersey at the storied Institute for Advanced Study (IAS). 'Have you seen Oppenheimer?' she asked. 'Remember there's a little pond where Einstein and Oppenheimer speak about the end of the world?' That's the IAS.
Gabor grew up in Transylvania during the dying days of Nicolae Ceauşescu's regime, which was soon followed by a chaotic transition to capitalism. The experience was enough to give anyone an appreciation for the importance of economics. She is a dynamic speaker, talking at full-speed, almost without taking a breath. She's part of an informal wave of progressive, female economists challenging free-market conceptions that includes Isabella Weber, Mariana Mazzucato and Stephanie Kelton. Today, as a professor of economics at Soas, University of London, her politics are firmly on the left. But this hasn't always been the case.
'When I was a kid, I was a monarchist,' she said. When Romania's royal family were turfed out by the invading Soviets after the Second World War, some, including Gabor, pined for a regal restoration that never came. 'Then I discovered Marxism. Most people grow out of their Marxism. I grew out of my monarchism.'
She is a prophet, as well as a strident critic, of a new political economy developing across advanced economies: a more statist, more interventionist, less globalised system that began to take shape under Joe Biden, and has survived his ousting.
'There is a resurgence of thinking that says: 'We should care about goods, about where they're produced, and who produces them,'' Gabor told me over Zoom last year, when the US was still in its Biden-Harris era. Hundreds of billions had been lavished on enticing manufacturing jobs back to Rust Belt states through the Inflation Reduction Act.
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The EU responded in kind, relaxing state aid restrictions and establishing the Green Deal Industrial Plan. More recently, Germany eschewed its attachment to austerity to invest billions in infrastructure, energy and rearmament. Under Boris Johnson, Britain edged towards a 'red Tory' interventionism, with the nationalisation of the Sheffield Forgemasters steelworks, investment in the renewable grid and promises to leverage public procurement to support domestic manufacturing with post-Brexit 'buy British' pledges.
The statist turn is cross-party. Under Labour, the Chancellor, Rachel Reeves, has talked up a putative policy of 'securonomics', declaring 'globalisation is over'. The new National Wealth Fund, state-owned GB Energy, nationalised steel and railways and increased levels of public capital investment are the hallmarks of this fledgling agenda.
But Gabor is unconvinced of its potential as an alternative to the model that failed in 2008: 'Larry Fink, the CEO of BlackRock' – a US investment company that manages $11trn in assets, or around three times the UK's GDP – 'he sat down with Keir Starmer in a meeting about 'rebuilding Britain'. The whole agenda confirmed what I say about a Global North version of the Wall Street consensus. If you are a state or government that wants to transform the economy, and you think you don't have the money because you've chosen an institutional set-up where you can't produce public money, or where you're afraid of fiscal spending, or afraid to tax, then private finance will come along and say they'll do it all for you.'
Gabor is critical of this approach. Labour's willingness to use private financing vehicles could lead to a repeat of the disastrous private finance initiatives of the New Labour era, which saddled the public sector with decades of interest repayments that would have been lower if capital investments had remained on the state's ledger. Rather than producing endless carrots to persuade the private sector to align with political priorities such as job creation, regional investment or the green transition, Gabor says that governments should be unafraid of using sticks to discipline capital as part of a new, green dirigisme.
She claims 'governments in Europe have capitulated' to a statist policy model that intervenes on behalf of capital – not to alter or transform it, much less to create the 'big green state' she recommends, but rather to entrench the current balance of power.
And yet, despite its apparent deficiencies, the shift in economic policymaking has no doubt been pronounced. Industrial policy is back in vogue. Globalisation-scepticism has set in. There's a new reaffirmation of national industry and national production. There's a rejigging of programmes in the think tanks that once denied there was a problem with import dependency, and that promoted a service-orientated workforce geared towards a digitised knowledge economy (with factory jobs lost to cheaper, globalised supply chains). Resilience is now being prioritised over efficiency; 'reshoring' is the new buzzword for producers in uncertain geopolitical times. 'There's an understanding,' Gabor said, 'at least among the elite in Europe and in the US, that the great success story of the last two decades is China, and that they manufactured the shit out of everything, including clean tech. And if you want to play the geopolitical game, you basically do the same.'
In order to counter China, the West is beginning to adopt the communist state's strategies: targeted protectionism, supply-side interventions, public investment and industrial subsidies. The Western consensus around free and open markets, limited government intervention and the private sector's ultimate preferability when it comes to the allocation of capital is over.
The 2008 crisis precipitated the downfall of a growth model; 'Nobody is defending free markets any more,' Gabor said. Since then, the structures of the global economic system have only survived on life support: emergency bank nationalisations; monetary and fiscal stimulus; and the pumping of vast amounts of liquidity into the financial sector through central banks' quantitative easing programmes. The very system that once bemoaned big government was rescued by it. The old, limping model was further knocked by Covid and the imperatives of reaching net zero.
What some have heralded as a 'post-neoliberal era' has come about because of 'a combination of these three or four' factors, said Gabor: the financial crisis, Covid-19, China and climate change. The Biden project was, she says, 'a domestic political game of 'let's make the Democratic Party electable again'.' It was 'about presenting a programme of job creation' to the US working class.
We spoke for the second time in 2025, and it was by then clear that Bidenism as a progressive response to Trumpian national-populism had failed. Gabor had told me in our earlier conversation that Bidenism's job-creation prospects were limited, and she was right: the green spending splurge didn't create widespread prosperity. And yet, minus Bidenism's positioning of net zero as a catalyst for industrial revival, Trump's return is less a rupture and more a haphazard development of previous trends.
'There are important lines of continuity,' Gabor told me, this time from her offices at Soas. 'Both Republican and Democrat administrations are attempting to try to deal with this significant hegemonic threat from Beijing. There's a chaotic view of what Trump is doing that says: 'This guy is crazy, he just puts up tariffs, then he changes his mind, and the bond market disciplines him until he caves.' But to me, there is another reading, which is of structural continuities and a geopolitical logic of the necessity of transformation. And when Republican ideology meets with Maga, what we get is the idea that we can transform the productive and consumption structures of the US economy by means of massive changes in price signals – transformative tariffs.'
Where Bidenism, Gabor said, engaged in 'de-risking' – 'basically bribing or subsidising structural transformation and trying to bring back manufacturing and industrial capacity in a partnership with private capital' – Trump is instead attempting a similar industrial revival via tariff policy. In both cases, a half-century of bien pensant market dogma is over.
But is this 'post-neoliberalism'? What should we call a broad-based, renewed market-scepticism, this scattered reconfiguration of the state as a prime economic actor? The moniker 'modern supply-side' – the phrase used by Biden's top team – was always going to be limited by its wonkish undertones. That specific Democratic project died at the ballot box, to be replaced by something much harsher, much darker.
Some have suggeted we should call this new age one of 'productivism' – the phrase of the Turkish economist Dani Rodrik, who has advocated for an economy 'rooted in production, work and localism, instead of finance, consumerism and globalism'. But if Western governments are trying to mimic China's economic success, they are delivering only a poor, diluted imitation. Our cumbersome, diffuse state apparatus and pluralist societies obviate urgent, top-down, executive actions. Western governments are constrained, limited and stiff. By contrast, the Chinese Communist Party has authoritarian powers that allow it to act decisively, with speed and agility, without being impeded by property rights, judicial reviews, a free press, party-political opposition, lengthy consultations or pesky, Nimbyish campaign groups.
'I like talking about discipline,' Gabor said. 'The biggest problem we have now is around how to discipline private capital. The politics behind the revival of the state is based around short-term electoral-cycle politics. And it's difficult to imagine a radical reorganisation of macrofinancial conditions or significant nationalisations in four years… Discipline to me is important because without it, the state is not going to get the kind of outcomes that it wants.'
This kind of 'disciplinarian' approach seems at odds with Gabor's liberal-progressivism; she even plays in what she calls an 'anarchist football club in Bristol'. 'I love them. They're great friends. But they always make fun of me because the ethics and moral principles for the club are that it's about participation, not winning. And in the Romanian system we had a very significant emphasis on meritocracy and competition. It was violently competitive for kids like me… Command economies aren't necessarily lacking in competitiveness or incentives for innovation and hard work… [Under socialism] the Romanian state did some really impressive planning in the sense that it went from an agrarian society that was completely ripped apart by the Second World War into a country that had a very complex and advanced chemicals industry, building refineries, and having really significant technological capabilities.'
We were in the foothills of a conversation about the benefits of socialist dictatorship, which Gabor doesn't advocate. Yet she believes managing a green transition within the confines of democratic politics to be 'very, very difficult'. Central is the restoration of the state as a transformative, democratic agent rather than a technocratic-managerial one. 'I think the state is back,' she said.
Something fundamental has shifted when every politician, of every persuasion, is promising radical change. 'People say we live in the age of post-neoliberalism, and everybody has transformation as the ultimate horizon of political ambition, including Labour. And yet instead we are seeing a status quo of trying to deliver transformation through mobilising institutional capital… It's giant private funds like BlackRock investing in public assets and infrastructure.'
What is the alternative? How can a cash-strapped Treasury pay for a transformative agenda without private capital, particularly when jittery bond markets can bring down spendthrift governments even more quickly than restive electorates? 'After 2008, and during Covid, we had central banks that weren't intimidated by bond vigilantes,' replied Gabor. 'We had central banks that acted as buyers of last resort on sovereign debt. Where did this disappear?'
It is unlikely that Keir Starmer will take heed. Reform has come closest to calling for the Bank of England to be brought back under political control – not to buy bonds to fund public investment, but to reduce the interest paid to commercial depositors and free up government spending, with fiscal and monetary policy working in tandem. This is yet another harbinger of the confluence of left and right towards production-focused interventionism – exemplified by Trumpism.
'Trump has an ambitious vision,' Daniela Gabor told me, 'albeit an authoritarian vision, but nonetheless… He knows the kinds of transformations that are necessary and knows you need political guts to go through with it. Starmer is the opposite. He has no vision, no ambition. He goes whichever way the wind blows.'
It's a damning indictment. But vision or no vision, the inflection point is here. Broad, structural changes are in motion, and Western governments will be compelled to respond.
[See also: The politics of murder]
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