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The Slow Death of Neoliberalism: Part 4A The Nature of the Person

Part 1.
Part 2.
Part 3.
Part 3A. This post at Naked Capitalism expands on Part 3, and adds a discussion of Simcha Barkai’s paper and methodology; I discuss other aspects below.

In this post, I take up the nature of the person in neoliberal theory and neoliberal society. I begin by describing the nature of the person in theory, and then apply it to elites. In a separate post I will discuss the nature of the average person in neoliberal theory and society. Then I will try to put this in a general context, based on my initial readings on Critical Theory.

The nature of the person in a neoliberal society is simple: a utility-maximizing computing machine, only interested in satisfying wants and needs in a world of scarce resources, where survival depends on the ability to grab stuff ahead of other people. Somewhat more elegantly, Philip Mirowski explains it this way

Neoliberalism thoroughly revises what it means to be a human person. Classical liberalism identified “labor” as the critical original human infusion that both created and justified private property. Foucault correctly identifies the concept of “human capital” as the signal neoliberal departure that undermines centuries of political thought that parlayed humanism into stories of natural rights. Not only does neoliberalism deconstruct any special status for human labor, but it lays waste to older distinctions between production and consumption rooted in the labor theory of value, and reduces the human being to an arbitrary bundle of “investments,” skill sets, temporary alliances (family, sex, race), and fungible body parts. “Government of the self ” becomes the taproot of all social order, even though the identity of the self evanesces under the pressure of continual prosthetic tinkering; this is one possible way to understand the concept of “biopower.” Under this regime, the individual displays no necessary continuity from one “decision” to the next. The manager of You becomes the new ghost in the machine.

Mirowski could be describing corporations: they are in fact the Platonic Ideal of this version of human nature. They have only one goal: to succeed in the market, whatever that is, by grabbing everything they can, money, power, resources, everything. We should all aspire to be like corporations.

In the neoliberal universe, the market, whatever that is, is the perfect computer. It balances all desires with money and spits out the perfect answer. The market can do no wrong. It disciplines everyone to its demands. There is no need for external government oriented regulation. Any regulation will simply make everything worse. In fact, there is no need for or room for democratic control of any kind. The market also selects our leaders, as Thorstein Veblen observed over a century ago.

We’ve been living under this intellectual regime for half a century now, and we can see its impact all around us. On the corporate side let’s look at two of the main theoretical innovations, Robert Bork’s antitrust revisions and Richard Posner’s Law and Economics movement.

As far back as 1960, Bork was fretting that socialism would be enforced on the US through antitrust law. In his seminal 1978 book, The Antitrust Paradox, he claimed that the purpose of the Sherman Act, the crucial antitrust law, was to protect consumer welfare, and that the existing law protected inefficient firms and thus drove up consumer prices. That view was adopted by the Supreme Court in 1979. Supposedly it would protect consumers better than prior law focused on the dangers of concentrated money and power.

A recent paper by Simcha Barkai shows how that worked out. Barkai is now a professor at the London School of Economics. His paper, Declining Labor and Capital Shares, is here. The first two sections and the conclusion lay out the thesis in English, not econspeak. The labor share is declining. The cost of capital is low and little additional capital has not been added to the existing depreciating stock, so the capital share is low. Profits are up in an amount sufficient to cover both drops. The profit share has risen because of increased concentration, which occurred because of the adoption of Bork’s opinion. See Part 3A, Observations.

Across specifications, the profit share (equal to the ratio of profits to gross value added) has increased by more than 12 percentage points. To offer a sense of magnitude, the value of this increase in profits amounts to over $1.1 trillion in 2014, or $14 thousand for each of the approximately 81 million employees of the non-financial corporate sector. P. 3.

Profits go to the owners of firms, who distribute the money as they see fit. Profits are not distributed to the 99%; they go to shareholders and top management. This is terrible for consumers, whose wages have stagnated while profits soar. Bork was totally wrong, and wrong in ways that hurt people and society.

The second neoliberal innovation is the Law and Economics Movement, driven by Richard Posner, recently retired from the Seventh Circuit. This is from a 1987 speech he gave at the American Economic Association, behind pay-wall but available through your local library. According to Posner, these are the basic premises of Law and Economics:

1) People act as rational maximizers of their satisfactions in making such nonmarket decisions as whether to marry or divorce, commit or refrain from committing crimes, make an arrest, litigate or settle a lawsuit, drive a car carefully or carelessly, pollute (a nonmarket activity because pollution is not traded in the market), refuse to associate with people of a different race, fix a mandatory retirement age for employees.

2) Rules of law operate to impose prices on (sometimes subsidize) these nonmarket activities, thereby altering the amount or character of the activity.

A third premise, discussed at greater length later, guides some research in the economics of nonmarket law:

3) Common law, (i.e., judge-made) rules are often best explained as efforts, whether or not conscious, to bring about either Pareto or Kaldor-Hicks efficient outcomes. P. 5

You can find my discussion of Kaldor-Hicks efficiency here, with a link to a discussion of Pareto Efficiency. Posner is quite serious about this.

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This is from [Posner’s] 1985 article in the Columbia Law Review, An Economic Theory of the Criminal Law:

My analysis can be summarized in the following propositions:
1. The major function of criminal law in a capitalist society is to prevent people from bypassing the system of voluntary, compensated exchange-the “market,” explicit or implicit-in situations where, because transaction costs are low, the market is a more efficient method of allocating resources than forced exchange. Market bypassing in such situations is inefficient — in the sense in which economists equate efficiency with wealth maximization — no matter how much utility it may confer on the offender. … (P. 1195, footnote omitted)

Posner carefully explains how this works with rape. I’m sure Weinstein, O’Reilly and all of the sexual predators heartily endorse his conclusions. It’s just sick to think in terms of the utility these predators gain balanced against the “disutility” to the people they attack. In Kaldor-Hicks terms, the predator can make everything right with a few bucks and/or a part in a movie, and Posner would be fine with that.

This analysis is explicitly inhuman: it takes no account of human dignity, or bodily autonomy and personhood of people under assault. The disutility caused by rich predators? What kind of person thinks like that?

To be precise, that is the exact mindset that neoliberalism calls out. That focus on economic efficiency defined in the most dehumanizing terms possible is at the core of the education of the elites and it perfectly explains their behavior in their institutional roles. All of them are sure they are perfection of humanity because they were selected by the perfect market. And it is therefore right and just that they should be in charge of everything. Screw democracy; as Posner put it in a 2007 opinion, the value of voting to the individual is elusive.

Notre Dame undergrad (math); JD, Indiana University at Bloomington; 1st Lieutenant, US Army.; private practice in corporate and securities law; Assistant AG in Tennessee for consumer protection and securities; Blue Sky Securities Commissioner, Tennessee; private practice, bankruptcy and corporate law.

I have had a lifelong interest in economics. For most of my career, that interest was practical, focused on the problems in front of me. Lately I have been more interested in economics as a theory, especially its impact on the lives of people like those I met in my bankruptcy practice, and on the politics of money in the US. I also enjoy reading philosophers, starting in college and steadily expanding my reading ever since. I wrote at FireDogLake for a number of years.

Generally, I think the problem facing the US is the dominance of neoliberal discourse. I think it clouds the vision, and limits the kinds of problems that can be identified and solved. For example, the existence and danger of climate change can easily be identified in a scientific discussion. However, the problem does not fit the neoliberal discourse because science insists that the pursuit of individual and corporate self-interest will lead to devastation. In neoliberal discourse, the pursuit of self-interest always leads to Eden.

The neoliberal project has two prongs. One is the police function of crushing dissent and alternative views. The police function is provided by government agencies and private and institutional actors. The counterpart is the economic system , which is operated by government and by private and institutional actors. Some of these actors operate in both spheres. I focus on the second prong.

18 replies
  1. earlofhuntingdon says:

    Even the corporation loses something under neoliberalism: its position becomes secondary to that of its investors, even though the rules governing a corporation’s existence put capital last in line. That’s a bit of Wall Street legerdemain that has wreaked economic havoc for decades.

    Under pre-neoliberal conditions, a corporation strove to become and remain a going concern. That requires that the business keep reserves of capital to fulfill its various functions: investing in new technologies, buying or renovating property, plant and equipment, retaining and improving its staff, and so on.

    Neoliberalism demands, instead, that the business stand and deliver its cash whenever investors demand it. That requires that all assets of the corporation be as liquid as possible, that they be reducible to cash in the short term so that it can make those routine payments to management and shareholders. This is usually regardless of what payments are owing to employees, suppliers, creditors, communities, the state.

    Part of that disease syndrome requires the routine repurchase of some of the business’s outstanding shares, in order to elevate the price of remaining shares. This is an admission by managers that they can think of no better business use of the cash. Stock buybacks are to be made even when there are better uses for available cash. If necessary, buybacks are funded with debt – which is a reversal of normal practice and an elevation of capital above its priority at law.

    Neoliberal priorities are cannibalistic, they benefit only the cannibals. They do great damage to the corporation, to its vested interests other than capital, to the economy and to the society in which it does business. Neoliberal priorities elevate capital to the top priority, even though by law, investors’ priority of repayment is last. I don’t think that’s what Jesus had in mind when he spoke of the last becoming first. As for the part where the first become last, that seems to have gone into the same bin the Fed uses when regulating to maintain full employment.

    • Ed Walker says:

      I don’t disagree with these observations, with the reservation that corporations are to a large extent operated  for the benefit of management. To take a simple example, the CEOs and top management of the Pharma companies have millions of stock options. They only have value if stock prices rise. To make that happen, management increases the price of existing drugs. CNBC reports “increases in the prices of drugs added $8.7 billion to 2016 net income for 28 companies analyzed, accounting for 100 percent of earnings growth last year, according to a report published this week by Credit Suisse …”.

      https://www.cnbc.com/2017/04/20/the-drug-industry-is-addicted-to-price-increases-report-shows.html

      This is justified by neoliberal fantasies of markets at work.

       

      • earlofhuntingdon says:

        Corporations wield tremendous power, much of it practically unrestrained.  Using an analogy from biology, their unrestrained excesses are pathologies harming society.  My point was that even pathologically greedy managers, running corporations as if they were personal property of the managers, are relatively constrained by mutations in capital ownership, themselves unrestrained by effective regulation.  All this is to the detriment of traditional corporate stakeholders – localities, employees, suppliers, customers and creditors.  Individuals lose the most because they have the least power.

        As you say, neoliberalism denies government a legitimate role in regulating business activity (in the aggregate, the market) and would limit government to being the enforcement arm of the “markets”.  In practice, this means the markets largest players, acting both individually and in concert.

        One of neoliberalism’s great feats has been to obscure agency, the role of individual managers and corporations, of government agencies and specific government officials, in effecting this change – and profiting by it.  Neoliberalism just is, was and will be, amen.  Unlikely, but so far, neoliberalism has denuded our  culture of legitimate  competitors to this new state religion.

  2. earlofhuntingdon says:

    Many thanks for keeping up this dialogue.

    My view on antitrust policies is largely from Arnold, ironically one of the name partners of Arnold & Porter, but originally an FDR man.  Consumers are best protected by the absence of, or enforced restraints on concentrated power.  When power is restrained, prices are set more through competitive market forces and are usually lower.  With concentrated power, prices are whatever suit power’s temporary purposes – low, to destroy competitors and gain market share, high to reap the benefits of doing that.  Low prices are sometimes, not always, an artifact of restrained power, not a substitute for that restraint.

  3. earlofhuntingdon says:

    Posner the reductionist.  Dehumanization is exactly the route Kissinger, Friedman and the Chicago Boys used to impose neoliberalism at the point of a gun – rather, several, along with a fair bit of torture and murder – in the Southern Cone in the 1970s.

  4. matt says:

    Neoliberalism is a religion (belief system) where the high priests (economists) have made the same folly as all power elites since at least the beginning of recorded human history- that folly is to project ego and rationalizations of power onto a God (the Market) for which you are absolved of all your sins, and “chosen” to be master of the world.

    What you wrote is heresy in MBA/Economics programs across the land.  It is as radical as ragamuffin Jesus walking into the Temple to preach to the Pharisees.  And, the message may be, dare I say- more important to the salvation of humanity.

    Here are some other seditious thinkers for the cause!  “UMKC Home to Mavericks of Economics”

  5. Bay State Librul says:

    Questions:

    What is a precise definition of an elite?
    If Neo Liberalism is dying, when will the final obit be written?
    When it’s remains are scattered, what will be the name of it’s successor?

    • lefty665 says:

      Answers:

      Hillary
      When the wooden stake is driven through its heart so we know it will not arise from the crypt to suck our blood again.
      NotBillnHill aka “Reformed Democrats” after its practitioners.

    • matt says:

      (Q1). In the political/economic sense, “elite” describes an individual with a power differential over other citizens.  Certain power differentials may be good, when individuals use advanced knowledge, political privilege, or accumulated wealth in ways that benefit the community/civilization as whole, vs. the ways that purely enrich the individual- the only accepted motivation in modern libertarianism.  That said, egalitarianism is the NOT the answer.  We are not all equal (in our merits), and societies that have “forced” equality of a particular norm have failed miserably.  Where’s the compromise? – Classical Liberalism acknowledged “man” as the moral decider in both the economy and society (really no difference).  As such, Classical Liberalism was preoccupied with ideas like “social contract” whereby ones freedom needed to be tempered, at least somewhat, to avoid the ugly paradox of one individual/groups “freedom” enslaving those of another- where the freedom of any “elite” group would overpower the masses and you would be back to the same problems of the Monarchy/Theocracy/Aristocracy before the Enlightenment.

      (Q2).  The final obituary for Neo(Absolute)Liberalism is already written.  The “Market” does not breath air nor concern itself with its progeny.  Therefore the ideologues that believe in this Market God and salvation through maximum profits have abnegated all morality and self-restraint that could mitigate the terminal diseases they are dying from (and killing the rest of us) like nuclear proliferation, climate change, resistant microbiota, national/religious fanaticism, job insecurity, and overpopulation.

      Neoliberalism- you promised to bring wealth to all, but concentrated it with a few.  You exploited the resources of the Earth until war, famine, and environmental catastrophe caused human civilization to expire. R.I.P.

      (Q3).  Ironically we have all the structures to succeed already in place.  There is nothing wrong with free market Capitalism, modern finance, and Democratic governance when they function as advertised and are not subverted.  Classic Liberal, Social Democratic, & Progressive dialog on the problem of “Elitism” recommends two basic things to safeguard society from tyranny:  taxation of the wealthy (and their estates) with government regulation to prevent concentration of “too much” power in the political process and the economy.  ALL political-economic literature (save the Austrians) from the time of John Locke in the 16th century to WWII made these topics a central focus.  Yet today taxing of wealth and government oversight of elites are vigorously purged from dialog, because they are the antithesis, not of Capitalism or Democracy, but of Neo(Absolute)Liberalism(Freedom).

      • Ed Walker says:

        Good answers, and more hopeful than mine. I’m afraid the dominance of neoliberal theory has poisoned too many of us, making us a totally divided nation. It makes it hard for me to see the way forward. The point of my project is to find something sensible to say about that.

    • Ed Walker says:

      Fair questions, and I’ll try to answer.

      1. An elite is someone who has substantial power in an institutional setting, power that can be used to affect the lives of people who do not have direct influence over them or ability to control their exercise of power. That includes high-level government officials, high-ranking corporate executives, and wealthy people who can wield their money to gain outcomes they want without regard to the needs or desires of anyone else. There is no technical definition, but it is fairly obvious who these people are.

      2. No idea ever disappears. Even the most obviously stupid and evil ideas survive in some form or other and have to be killed over and over again. The hope is that neoliberalism will lose its status as the dominant form of discourse about humans and their societies.

      3. Of course I don’t know. I hope it would feel like a real revival of FDR style politics where the focus is on making life better for all of us. I hope it would be something approaching a genuinely democratic arrangement where people feel like their voice matters. I hope it will restore the idea that we are all in this together and we all do better when social conditions support all of us. But I know that periods like that are rare in human history.

      We have allowed massive concentration of wealth, and the pigs that control it won’t give it or the power it brings away. That certainly opens the door to more misery. They truly believe they are chosen by the markets to run things their way. As Jay Gould is supposed to have said during the Gilded Age, I can hire half the working class to kill the other half. So, it’s quite likely that the next thing will be just as awful. Or worse.

  6. dalloway says:

    As the Romanovs and the Bourbons discovered, the non-elites eventually realize they have no more value to the elites than a hoe or a lump of coal and, with nothing to lose, rise up to claim their rights as human beings.   With corporations amassing ever more money and power, and automation even further devaluing humans and their labor, our society is fracturing in much the same way.

    • matt says:

      Yes it is.  But, how do we prevent uprisings and “revolutions” that are rooted in over-simplistic dogma-  Did Lennon and Napoleon do better for their people than the aristocracies they replaced?  How do we get people today to stop entertaining themselves and read history, philosophy, and classical economics?  America’s “nothing to loose” devalued humans are some of the most ignorant and uninformed in modern times- hence the best “populist” they could manifest was Trump.  American Democracy was created by well-read and educated individuals who understood that you cannot project your world view onto the rest of society without being a tyrant.  They understood the meaning of pluralism, whereby an individual or group was granted as much “freedoms” as could be enjoyed without infringing on the freedoms of others.

  7. GKJames says:

    “Corporation” originated with the intent to encourage useful economic activity and associated risk-taking by insulating the entrepreneur against personal liability. The principle was that businesses fail as often as they succeed; you shouldn’t be punished for trying by losing literally everything you own if things didn’t work out (provided, of course, that you followed corporate formalities). Over time, this has mutated into what, in my view, is a perversion of that intent as people talk of a corporation being a thing in itself — that is, separate and apart from the individuals who own and manage it — rather than merely a useful legal fiction with a laudable purpose. The epitome of this was the government’s prosecuting (out of existence) the firm, Arthur Andersen, rather than the executives who ran the place and perpetrated the fraud. The enduring mystery: How does a legal fiction like a corporation form the requisite intent (mens rea) for a criminal liability? It’s a long way of saying, I suppose, that corporations are only as good or bad as the flesh-and-blood individuals who own and manage it. And what clever people have done — aided and abetted by bought-and-paid-for elected representatives and the public in general — is figure out how to use the corporate form to privatize profits while socializing losses. Why, for instance, do stock options get tax treatment different from ordinary income? More broadly, why is senior management insulated, through employment agreements, from the consequences of its decisions while rank-and-file employees are employees-at-will who can be terminated for adverse consequences that resulted from decisions made by others? And yet, when one suggests that the power imbalance between organization and individual be adjusted by way of collective bargaining, the reaction is one of horror. Which, by the way, I’ll never understand; those who say they want policies in favor of the “little guy” also reject the very tools that might tangibly help. Go figure.

  8. Alan says:

    Mirowski is mostly summarizing Foucault’s argument 1978-79 lectures, The Birth of Biopolitics. See in particular the March 14, 1979 lecture (chapter 9 in the published lectures), themes that are taken up and expanded in the following lectures, particularly the discussion of Gary Becker and the neoliberal conception of crime. (Aside, Becker and Posner ran a blog together until Becker died). All this is very interesting as at an early date, before Thatcher and Reagan, Foucault had grasped that a core feature of neoliberalism was that it had an understanding of labour and a conception of homo economicus distinct from that in classical economics and that this involved a radically different conception of the self and what it is to be a person. This in turn involves an expansive, one would say from the point of view of other social sciences, imperialist and ultimately totalitarian economic project.

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