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“Neoliberalism” has been called a political swear word, and it gets blamed for pretty much every socioeconomic ill we have, from bank failures and income inequality to the gig economy and demagogic populism. Yet for forty years neoliberalism was the principal economic doctrine of the American government. Is that what has landed us in the mess we’re in?

What’s “neo” about neoliberalism is really what’s retro about it. It’s confusing, because in the nineteen-thirties the term “liberal” was appropriated by politicians such as Franklin D. Roosevelt and came to stand for policy packages like the New Deal and, later on, the Great Society. Liberals were people who believed in using government to regulate business and to provide public goods—education, housing, dams and highways, retirement pensions, medical care, welfare, and so on. And they thought collective bargaining would insure that workers could afford the goods the economy was producing.

Those mid-century liberals were not opposed to capitalism and private enterprise. On the contrary, they thought that government programs and strong labor unions made capitalist economies more productive and more equitable. They wanted to save capitalism from its own failures and excesses. Today, we call these people progressives. (Those on the right call them Communists.)

Neoliberalism, in the American context, can be understood as a reaction against mid-century liberalism. Neoliberals think that the state should play a smaller role in managing the economy and meeting public needs, and they oppose obstacles to the free exchange of goods and labor. Their liberalism is, sometimes self-consciously, a throwback to the “classical liberalism” that they associate with Adam Smith and John Stuart Mill: laissez-faire capitalism and individual liberties. Hence, retro-liberalism.

The label “neoliberal” has been attached to a range of political species, from libertarians, who tend to be programmatically anti-government, to New Democrats like Bill Clinton, who embrace the policy goals of the New Deal and the Great Society but think that there are better means of achieving them. But most types of neoliberalism reduce to the term “markets.” Get the planners and the policymakers out of the way and let the markets find solutions.

The scholarly literature on neoliberalism tends to focus either on the intellectual genealogy of neoliberal thought (which starts, more or less, in Europe in the nineteen-thirties) or on the political history of neoliberal policies (which start in the nineteen-seventies). Naomi Oreskes and Erik M. Conway’s “The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market” (Bloomsbury) adds a third dimension to the story. In their account, neoliberalism—they prefer the term “market fundamentalism,” which they credit to George Soros—represents the triumph of decades of pro-business lobbying. They also tell the intellectual story and the political story of neoliberalism, so their book is, in effect, three histories piled on top of one another. This makes for a very thick volume.

The lobbying story is good to know. Most voters are highly sensitive to the suggestion that someone might take away their personal freedom, and this is what pro-business propaganda has been warning them about for the past hundred years. The propaganda took many forms, from college textbooks funded by business groups to popular entertainments like Laura Ingalls Wilder’s “Little House on the Prairie” books, which preach the lesson of self-sufficiency. (The books were promoted as autobiographical, but Oreskes and Conway say that Wilder, with the help of her daughter, completely misrepresented the facts of her family story.)

The endlessly iterated message of this lobbying, Oreskes and Conway say, is that economic and political freedoms are indivisible. Any restriction on the first is a threat to the second. This is the “big myth” of their title, and they show us, in somewhat fire-hose detail, how a lot of people spent a lot of time and money putting that idea into the mind of the American public. The book is an immense scholarly feat, but the authors insist that it is not just an “academic intervention.” They have a political purpose. They think that one role of government has been to correct for market failures, and, if government is discredited, how is it going to correct for what may be the biggest market failure of all: climate change?

Oreskes and Conway suggest that we can get an idea of what we’re up against from the pandemic. Millions of Americans seemed either to disbelieve what government officials were telling them about COVID or to regard public-health measures like vaccines and mask mandates as encroachments on their liberty. (There was also some anti-vaxxer hysteria.) Fantastically well-compensated professional athletes, on whose liberties very little encroaches, were among the worst role models.

Comparing the American response to that of other countries, Oreskes and Conway suggest that forty per cent of this country’s COVID deaths could have been prevented if Americans trusted science, government, and one another. They think that years of science-bashing (the subject of their previous book, “Merchants of Doubt”) and anti-government messaging have taught Americans not to. Now when public officials propose policies for addressing climate change, people will be told, “They want to take your televisions away,” and many will believe it.

The notion of hitching economic freedom to political freedom, or corporate freedom to personal freedom, was not dreamed up by lobbyists. It is the core tenet of the scriptural texts of market fundamentalism, Friedrich A. Hayek’s “The Road to Serfdom” and Milton Friedman’s “Capitalism and Freedom.” Hayek and Friedman were academic economists; they both were awarded the Nobel Prize, in 1974 and 1976, respectively. But their famous books are not academic. They’re polemical, high on assertion and low on evidence. Still, the two books have remained in print. They pushed some buttons.

Hayek wrote “The Road to Serfdom” during the Second World War. He was living in England, after emigrating from Austria to take a position at the London School of Economics, and his book came out there in 1944. If you were looking back at recent world history in 1944, what would you see? A stock-market crash, a worldwide depression, and the rise of two powerful totalitarian states that, if Hitler had not made the mistake of invading the Soviet Union, might have divided Europe between them for generations. You might reasonably have concluded that, even if Germany was finally defeated and the Soviet Union was put back in its box, free-market capitalism and liberal democracy had had their day.

Hayek felt this was what people in England were concluding—that a state-managed economy, of some sort, was necessary to prevent another meltdown. They might not think that this would mean giving up their liberty, but Hayek warned them that that was a fatal mistake. He dedicated the book to “The Socialists of All Parties.” He believed that central planning, even when carried out by an elected government, was a kind of dictatorship. People shouldn’t be told what to do with their property, he said, and “what our generation has forgotten is that the system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not.”

Hayek acknowledged that there are things governments can do that private actors cannot. Presumably, you need laws and courts to protect property rights and to enforce contracts; you need an army, and some form of money. There are also public needs that private enterprise cannot profitably or efficiently address. Oreskes and Conway tell us that Hayek “was not as hostile to social welfare programs as he is often reputed to be.”

But Hayek was making a classic slippery-slope argument. Planning is top-down and requires centralized authority, and, whatever that authority’s motives, this inevitably devolves into totalitarianism. “From the saintly and single-minded idealist to the fanatic is often but a step,” as he put it. He believed that socialism destroys what he saw as a basic principle of Western civilization: individualism. The welfare state might keep people housed and fed, but the cost is existential. It’s not just that people will lose their freedom—it’s that they will not even care.

“The Road to Serfdom” was written in a time of geopolitical uncertainty. The possibility of a totalitarian future, the “Could it happen here?” question, obsessed many intellectuals—including Karl Popper, Hannah Arendt, Isaiah Berlin, and George Orwell, who reviewed Hayek’s book. Hayek is “probably right in saying that in this country the intellectuals are more totalitarian-minded than the common people,” Orwell wrote. “But he does not see, or will not admit, that a return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than the State.” The New York Times called “The Road to Serfdom” “one of the most important books of our generation.” It spoke to its moment.

Friedman’s book, on the other hand, would seem to have been almost comically mistimed. He published it in 1962, in the middle of what the economist Robert Lekachman, in a widely read book published in 1966, called “the Age of Keynes.” Government programs were understood to be essential to stimulating growth and maintaining “aggregate demand.” If people stop consuming, companies stop producing, workers get laid off, and so on. That was taken to be the lesson of the Great Depression and the New Deal: more government intervention, not less.

In the U.K., the postwar Labour government, as Hayek had feared, nationalized key industries and created the National Health Service—“socialized medicine,” as opponents called it. In the United States, government programs like Social Security and the G.I. Bill were enormously popular, and huge spending acts were passed. The National and Interstate Defense Highways Act of 1956 authorized the construction of the interstate highway system, easing interstate commerce and lowering transportation costs. The National Defense Education Act of 1958 pumped federal money into education. In 1964, Congress would outlaw racial and gender discrimination in employment. A year later, it would create Medicare and Medicaid. Government spending more than doubled between 1950 and 1962. Meanwhile, the top marginal tax rate in the United States and the United Kingdom was close to ninety per cent.

It was a neoliberal’s nightmare—and yet between 1950 and 1973 the world G.D.P. grew at the fastest rate in history. The United States and Western Europe experienced remarkably high rates of growth and low levels of wealth inequality—in fact, the lowest anywhere at any time. In 1959, the poverty rate in the United States was twenty-two per cent; in 1973, it was eleven per cent. It was also a period of “liberation.” People felt free, acted out their freedom, and wanted more of it. They weren’t supposed to feel that way. They were supposed to be passive and dependent. It would not have seemed a propitious time to write a full-out assault on government.

And yet Friedman wrote one, and he did not pull punches. “Capitalism and Freedom” begins with a contemptuous response to John F. Kennedy’s Inaugural Address. “The paternalistic ‘what your country can do for you,’” Friedman wrote, “implies that government is the patron, the citizen the ward, a view that is at odds with the free man’s belief in his own responsibility for his own destiny.” (Of course, Kennedy had said that Americans should not ask what their country could do for them. But never mind. It’s that kind of book.)

Friedman provided a list of things he was opposed to: rent control, minimum-wage laws, bank regulation, the Federal Communications Commission, the Social Security program, occupational licensure requirements, “so-called” public housing, the military draft, publicly operated toll roads, and national parks. Later on in the book, he came out against anti-discrimination laws (which he compared to the Nazis’ Nuremberg laws: if the government can tell you whom you must not discriminate against, it can tell you whom you must discriminate against), labor unions (anti-competitive monopolies), public schools (where taxpayers are compelled to fund courses on “basket weaving”), and the graduated income tax. He argued that an inheritance tax is no more just than a talent tax would be. Inheritance and talent are both accidents of birth. Why is it fair to tax the first and not the second?

Much in Friedman’s book echoes Hayek. (From 1950 to 1972, they both taught at the University of Chicago, Friedman in the economics department and Hayek in the Committee on Social Thought.) “A society which is socialist cannot be democratic, in the sense of guaranteeing individual freedom,” Friedman says. And: “Economic freedom is...an indispensable means toward the achievement of political freedom.”

Like Hayek, Friedman conjured up the loss of individualism. Yes, he conceded, government programs and regulations might improve the quality of life and raise the level of performance of social services locally, but, in the process, they would “replace progress by stagnation” and “substitute uniform mediocrity for the variety essential for that experimentation which can bring tomorrow’s laggards above today’s mean.”

Essentially, “Capitalism and Freedom” is an argument for privatization. The free market is a price system: it aligns supply and demand and assigns goods and services their appropriate price. If the state wants to get into the business of, say, retirement benefits, it should have to compete on a level playing field with rival providers. There should be a market in retirement plans. People should be free to choose one, and equally free to choose none.

Friedman had some ingenious ideas about ways to use the market approach—for example, allowing investors to pay university tuition in exchange for a percentage of a student’s future earnings. He thought that school segregation could be fixed by a voucher system that permitted parents to choose which school to send their children to.

“How did this radical and incredible—which is to say not credible—book sell so well?” Oreskes and Conway ask. And it did: half a million copies, with translations into eighteen languages. One reason was Friedman’s promotional energy. He made himself into one of the most prominent public intellectuals of the day. He wrote a column for Newsweek, and between 1966 and 1984 he published more than four hundred op-eds. In 1980, with his wife, Rose, he produced a ten-part television program called “Free to Choose,” broadcast on PBS.

One episode has him explaining how a pencil comes into being. The materials—wood, graphite, rubber, metal—are produced independently in countries all over the world. How do they come together to make a pencil? “There was no commissar sending out orders from some central office,” Friedman says, waving a pencil. “It was the magic of the price system.” His viewers may not have been sure exactly what “the price system” was, but it was a cool show-and-tell. And they knew what a commissar was. Nobody likes a commissar.

Another reason Friedman’s book survived the age of Keynes is that the Chicago economics department became well established in the academic world. A number of its faculty during Friedman’s time there would also win Nobel Prizes, including George Stigler and Gary Becker, whose views were closely allied with Friedman’s. There emerged something called the Chicago School, identified as the intellectual force behind a microeconomic approach to social science, which explains much behavior in terms of “price” (one of Becker’s books is called “The Economic Approach to Human Behavior”), and the law and economics movement in jurisprudence. This work was not propaganda, but, as Oreskes and Conway say, it gave pro-business propaganda intellectual credibility.

The Chicago School had its Founding Father: Adam Smith. Friedman had an Adam Smith necktie; Stigler wore an Adam Smith T-shirt. As Glory M. Liu explains in her history of Smith’s reception in the United States, “Adam Smith’s America” (Princeton), the Chicagoans “reimagined Smith as the original author of the price mechanism.” This involved carving away the parts of Smith’s thought that didn’t fit the thesis. “ ‘Self-interest’ and the ‘invisible hand,’ ” Liu says, came to signify “an entire way of thinking about society as being organized through the natural, automatic, and self-generating actions of individual economic actors.”

Oreskes and Conway agree. They point out that when Stigler produced an abridged “Wealth of Nations,” in the nineteen-fifties, he omitted most of the passages in which Smith advocates the regulation of industries where the unchecked pursuit of self-interest can cause social harm. Banking was one of them. What Oreskes and Conway call the “Americanization” of Adam Smith reduced him to the trope of the invisible hand.

In fact, the phrase “invisible hand” appears only once in the thousand pages of “The Wealth of Nations.” Smith uses the metaphor to characterize the means by which an act of self-interested profit-seeking can serve a social good. (That idea had already been put forward in Bernard Mandeville’s “The Fable of the Bees,” published in 1714.) Smith’s book, published in 1776, meant to oppose a prevalent economic strategy in eighteenth-century Britain—the nationalist and protectionist system of mercantilism—by explaining how free trade and the division of labor create more national wealth. He was writing before the Industrial Revolution had really begun or the modern concept of capitalism had taken hold. It is an anachronism to read him as though he were countering Keynes.

Stigler called “The Wealth of Nations” a “stupendous palace erected upon the granite of self-interest.” But Smith did not think that markets are always self-regulating, and he did not think that people are always self-interested. The very first sentence of his other major work, “The Theory of Moral Sentiments,” reads, “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.” (Becker might have called this a “shadow price.” There are certain things that make people feel better or worse about themselves, and those feelings get priced into the good or service they are buying. For a free-market economist, the price is always right.)

The real reason market fundamentalism prevailed was not that it won the war of ideas. It was that the postwar boom came to an end. The economy started to go south in the early seventies, with the oil embargo and the recession of 1973-74, during which the Dow lost forty-five per cent of its value. It became prohibitively expensive to borrow money. By 1980, the prime rate, the interest rate that banks charge their most creditworthy customers, had gone past twenty per cent (it was 2.25 per cent in 1950), and inflation was around fourteen per cent. The unemployment rate rose from 3.5 per cent in 1969 to 10.8 per cent in 1982. The American economy was stuck in “stagflation”: high inflation and low growth.

Nixon, Ford, Carter—it seemed that no Administration knew how to stop the bleeding. Government spending and high marginal tax rates, which had seemed to work fine in the nineteen-sixties, now looked like impediments to recovery. The Chicago School approach gained traction. Still, as the historian Daniel T. Rodgers points out in “Age of Fracture,” his intellectual history of the period, “the puzzle of the age is not that economic concepts moved into the center of social debate; the riddle is that so abstract and idealized an idea of efficient market action should have arisen amid so much real-world market imperfection.”

It helped that, in 1980, a true believer was elected President. Ronald Reagan had been converted to free-market theology during the years he spent as a spokesman for General Electric, from 1954 to 1962, not only hosting “General Electric Theatre,” broadcast every Sunday in prime time on CBS, but preaching the free-enterprise gospel and the magic of markets to workers in G.E. plants around the country. “Government is not the solution to our problem,” he said in his Inaugural Address. “Government is the problem.” Those were sentences that the authors of “The Road to Serfdom” and “Capitalism and Freedom” had lived to hear. The United Kingdom, under Margaret Thatcher, undertook a parallel revision of welfare-state economics (rougher there, since there was more for Thatcher to undo).

One of the first things Reagan did as President was to break the air-traffic controllers’ union, whose members, federal employees, had gone on strike. He fired the strikers, and the union was decertified. Still, although Reagan’s pro-market spirit was willing, his political flesh was weak. He passed the largest peacetime tax increase in American history, failed to eliminate any major government agency, and added nearly two trillion dollars to the national debt. But he implanted in the mind of the electorate the idea that business freedom is personal freedom. In 1988, he awarded the Presidential Medal of Freedom to Milton Friedman.

As Oreskes and Conway point out, deregulation really began under Jimmy Carter, Reagan’s predecessor. Carter, sometimes with the support of the arch-liberal Edward M. Kennedy, deregulated the airline industry, railroads, and trucking. Deregulation continued after Clinton was elected, in 1992. “The era of big government is over,” he famously announced. “Self-reliance and teamwork are not opposing virtues—we must have both.” In the United Kingdom, Tony Blair’s government took the same approach. Together, Blair and Clinton promoted a neoliberal approach to international trade, the beginnings of what we now call globalization.

In 1993, Congress ratified the North American Free Trade Agreement (NAFTA). In 1996, it passed the Telecommunications Act, opening up the communications business. And in 1999 it repealed part of the Glass-Steagall Act, a Depression-era statute that prohibited commercial banks from joining together with securities firms (“investment banks”).

These policies were undertaken in the belief that freeing markets increases productivity and competition, lowering prices, and that markets regulate themselves more efficiently than administrators can. But some of their unintended effects can still be felt today. NAFTA had a net-positive impact on the economies of the signatories—Canada, Mexico, and the United States—but it also made it easier for American manufacturers to relocate plants to Mexico, where labor is cheaper, inflicting severe social and economic damage on certain areas of the U.S. It is probable that many Trump voters were people, or the children of people, whose lives and communities were disrupted by NAFTA.

The Telecommunications Act included a clause, Section 230, immunizing Web operators from liability for third-party content posted on their sites. The consequences are well known. And the weakening of Glass-Steagall, along with the Federal Reserve chairman Alan Greenspan’s relaxation of bank oversight, has been blamed for the financial crisis of 2008 and the Great Recession that followed, a crisis that Oreskes and Conway estimate cost the public twenty-three trillion dollars.

Yet the neoliberal era was hardly a triumph for Friedman’s approach. Pro-market policies were generally mixed with state funding and government direction. Clinton may have subscribed to many neoliberal principles, but one of the first initiatives his Administration attempted was a reform of the health-care system where the government was to give every citizen a “health-care security card”—which sounds a lot like socialized medicine.

Both NAFTA and the Telecommunications Act contain plenty of regulatory requirements. The government is overseeing how business is done, not simply stepping aside. As with the freedom of speech and the freedom of religion, it’s the state that creates the social space in which economic freedom can be exercised. Without government, we are in a state of nature, where coercion, not freedom, is the norm.

There is a strange blind spot in “The Big Myth.” The authors are exhaustive in debunking the fundamentalist view of the “magic of the marketplace” (although fundamentalisms aren’t hard to debunk, and a lot of their criticisms are familiar). But what especially exercises them is the equation pro-business propagandists made between free markets and political liberties—“the claim that America was founded on three basic, interdependent principles: representative democracy, political freedom, and free enterprise.” Oreskes and Conway call this “a fabricated claim.” Is it?

As they point out, there’s no mention of free enterprise in the Constitution. But there are mentions of property, and almost every challenge to government interference in the economy rests on the concept of a right to property. The Framers were highly sensitive to this issue. They not only made the concept of private property compatible with the concept of political rights; they made property itself a political right. And vice versa: rights were personal property. “As a man is said to have a right to his property,” James Madison wrote, “he may be equally said to have a property in his rights.”

Thus the Fifth Amendment provides that “no person shall be . . . deprived of life, liberty, or property, without due process of law.” Like the rest of the Bill of Rights, this was originally understood to apply only to the federal government, but the Fourteenth Amendment, ratified in 1868, applied it to the states as well, and courts have invoked that amendment’s “due process” clause to protect all sorts of fundamental rights that are unspecified in the Bill of Rights—such as the right to privacy, which is the constitutional basis for the decision in Roe v. Wade. This is the judicial doctrine known as “substantive due process.”

Pro-business lobbyists were therefore completely correct to define free enterprise, by which they meant the freedom to do as they liked with their property, as a political liberty. In the early decades of the twentieth century, the Supreme Court used substantive due process to strike down government acts and programs that impinged on the right to property and on what the Court called “the liberty of contract”—including minimum-wage laws, worker-safety regulations, and a number of New Deal programs. The treatment of private ownership as a political right was not something dreamed up by Friedrich Hayek or the National Association of Manufacturers. It is, for better or worse, part of the fabric of American society.

But this political liberty is not absolute. The Framers were adept at balancing one grant of authority with a countervailing one. When the Supreme Court—under pressure from Franklin Roosevelt, who threatened to pack the Court—did an about-face on the New Deal, in 1937, it had another legal mechanism at its disposal. Article I of the Constitution gives Congress the power “to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” This is the “commerce clause,” which has, since the time of John Marshall, been broadly interpreted to give Congress the power to regulate virtually everything related to interstate commerce. Through the commerce clause, courts began giving Congress new powers, opening the way to the programs and policies of mid-century liberalism. The constitutional authority for the anti-discrimination provisions of the 1964 Civil Rights Act is the commerce clause. You can’t tell the story of business’s war on government without taking this legal context into account. Due process and the commerce clause were the weapons the antagonists fought with, and, as it generally does, the Supreme Court had the last word.

What hath neoliberalism wrought? On the plus side of the ledger: in 1980, about forty-three per cent of the world lived in extreme poverty (by the World Bank’s definition), and today the number is about eight per cent. Globalization has lifted a billion humans out of poverty in just forty years. And you own many household items, like batteries and T-shirts, that were manufactured in Communist countries—China and Vietnam—and that were very inexpensive. New parts of the world, notably East and South Asia, are now economic players. Technological knowledge is no longer a monopoly of the First World powers.

Among the debits: deregulation, which was supposed to spur competition, has not slowed the trend toward monopoly. Despite the Telecommunications Act, just three companies—Verizon, T-Mobile, and A.T. & T.—provide ninety-nine per cent of wireless service. Six companies dominate the media in the United States: Comcast, Disney, Warner Bros. Discovery, Paramount Global, the Fox Corporation, and Sony. Book publishing in the United States is dominated by the so-called Big Five: Hachette, HarperCollins, Macmillan, Penguin Random House, and Simon & Schuster. The music industry is dominated by just three corporate players: the Universal, Sony, and Warner music divisions.

The big fish, with their piles of capital, keep swallowing up the little fish. The Big Five would now be the Big Four if Penguin Random House’s deal to acquire Simon & Schuster had not been ruled a violation of antitrust law last fall. Of the twelve most valuable companies in the world, eight of which are tech businesses, all are monopolies or near-monopolies.

And, as Martin Wolf emphasizes in his highly informed and intelligent critique of the global economy, “The Crisis of Democratic Capitalism” (Penguin Press), inequality is everywhere. At the level of the firm: in 1980, C.E.O.s were paid about forty-two times as much as the average employee; in 2016, they were paid three hundred and forty-seven times as much. At the level of the whole society: the three million people who make up the wealthiest one per cent of Americans are collectively worth more than the two hundred and ninety-one million who make up the bottom ninety per cent.

It is the rise in inequality abetted by the neoliberal system that poses the most immediate threat to civil society. Wolf doubts whether the United States will still be a functioning democracy at the end of the decade. Either way, the sun has set on neoliberalism. Both parties have drifted closer to something like mercantilism; the language of the market has lost its magic. “Bidenomics” entails immense government spending; meanwhile, a new cadre—protectionists, crony capitalists, ethno-nationalists, and social and cultural provincials—has been rewriting party platforms. Republicans eagerly lambaste Big Tech and clash with “woke” corporations, more intent on fighting a culture war than on championing commerce. People used to pray for the end of neoliberalism. Unfortunately, this is what it looks like.