The Federal Reserve's bailout (arranged liquidation to some) of Bear Stearns over the weekend seriously calls into question the headlong march toward neoliberalism that has been ascendant for the past few decades. Roughly speaking, neoliberalism called for a retrenchment of the state in favor of deregulated markets. As an ideological force neoliberalism held great sway in trade policy, the overall management of the economy and even at the local level where most planners operate. Municipal level functions like park maintenance and social service provision were often privatized. Affordable housing shifted from being built and owned by government in the form of public housing to one where subsidized affordable housing is now largely owned by the private sector albeit still subsidized by government. Rather than planning cities planners reacted to the whims of real estate developers.
For planners, neoliberalism posed a significant challenge to the discipline's legitimacy. One could argue that the raison d'être for planning is that some type of centralized authority is needed to build livable cities. Neoliberalism would seem to suggest that authority be as small and weak as possible. Planning as a discipline was put on the defensive, more of a necessary evil than a place for grand visions of our future.
Deregulation as occurred in the financial industry was held forth as the answer to our problems. But with the financial markets teetering on the brink of collapse and threatening to take the rest of the economy down with it, the Fed had to step in, whatever the ideological inclinations of the fed chairman or the current administration. Once a government lifeline is thrown to Wall Street the whole philosophical underpinnings of neoliberalism would have to be called into question, even among the most faithful adherents of neoliberalism. The question of government intervention becomes a matter of degree rather than kind. That is, a strong central authority is needed to guide the economy. Left to its own devices the "free market" can run off the rails. Critics of neoliberalism have pointed this out for years. But as long as most of the pain was confined to the more disadvantaged members of the world proponents of neoliberalism could wave the misfortunes off as the forces of creative destruction, etc. With the whole system under strain, that is no longer the case. The notion that reducing government and deregulation is the answer to all our problems seems laughable now.
The recent distress in the financial sector while unfortunate should put the discipline of planning of firmer ground. Planners should not have to be apologetic about the need for intervention in guiding our economy or building better places to live. This may be the one silver lining to the current debacle.
Lance Freeman is an associate professor of Urban Planning at Columbia University.