The Slow Death of Neoliberalism: Part 4B

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 in Part 4A.
Part 4A.

In Part 4A, I laid out the neoliberal theory of the person, and the beginning of an appraisal of the effect of that theory on elites. In this post I add to that appraisal, and take up the impact of this theory on the rest of us. In the next post I will offer a possible explanatory context, but not a solution.

The neoliberal theory of the person is the basis of the economics most of the elites learn as undergrads, and in business schools. Lawyers are taught neoliberal principles in anti-trust classes and in the jurisprudential aspects of other courses, through the impact of the law and economics movement. When elites get jobs in business or law or government, they are surrounded by others who are deeply enmeshed in neoliberalism, even if they can’t name it. They believe that the market, whatever that is, is a wonderful, if occasionally erratic, judge of worth. They earn what they make because the market rewards the productive, and everyone finds their level in that system of rewards, based on their personal merit and their productivity. As they rise in pay and prestige, that opinion is cemented. It’s like Calvinism, with the market substituted for the Almighty. And if the market rewards the productive and dumps on the “non-productive”, then that is right and just.

The farther elites get from the productive work of businesses, the more they come to regard employees as cogs in a machine, not fully human, merely factors of production. The ease with which they fire people is the result of their belief that elites are productive and the rest tools. Lawyers and politicians may see their employees as humans, if weak versions, but the rest of the working world vanishes, except when needed. In brief, the elites operationalize Karl Polanyi’s concept of labor as a fictitious commodity.

And how does this work out for the lesser people? They are forced to live and work in the neoliberal world. They learn to repeat its tropes. For a beautiful piece of research on this, see Coming Up Short: Working-Class Adulthood in an Age of Uncertainty, 2015, by Jennifer M. Silva, The people Silva interviewed describe themselves in the terms in the Mirowski quote in Part 4A, as bundles of skill sets, who must take risks and invest in themselves to get ahead; when it doesn’t work, they think it’s their fault, they blame themselves, and they struggle to find some other way forward.

I saw this many times in my 25 years of bankruptcy practice. People who file Chapter 7 always blamed themselves, and never could understand how their failures resulted from the cruel form of capitalism we enjoy in the US. Here’s a composite case. A young couple with two low-level jobs in a county near Nashville decide that the husband will go back to school so he can get a better job. The wife gets pregnant, suffers a bad miscarriage and can’t go on working. They don’t have insurance, and the bills pile up. He drops out to get a job to support them and tries to pay down the debt. She gets well enough to work, and then he loses his job. They can’t pay the medical and student debt. They get money from family, but it doesn’t work. They file Chapter 7, but they can’t discharge the student debt and they feel obligated to pay back their families. And when we talk to them, they blame themselves in words and phrases exactly like those Silva reports in her book.

In Part 4A, I describe two of the prevalent ideas that neoliberalism has given us, Bork’s antitrust revisionism and Posner’s Law and Economics. For the elites, the first was a boon. It was easy to explain how the markets would protect consumers after a merger. Corporations became larger and larger. Regulators allowed almost every merger, and the elites became more and more powerful, with more and more assets under their control. Combine the new wealth and power with their belief that they are superior, as shown by the rewards heaped on them by the all-knowing market, and suddenly elites are exerting even greater control over the government and using it to enrich themselves as managers and shareholders. According to Mirowski, this is a desired outcome of neoliberalism. See, e.g. point 10.

The Law and Economics movement supports this view. Courts following Posner look at economic efficiency above any other interest, and interpret the laws narrowly so as not to interfere with the sacred market. The consistent rulings in their favor support elites in thinking they are wonderful.

After the Great Crash, brought on by elites at gigantic banks, hedge funds, big law firms and other cheats and liars, not a single member of the elites went to jail, and they all got paid, and they all got to keep their ill-gotten gains. Many of the political elites defended their Wall Street friends. Pundits and academics and think-tankers sprang to the defense of Wall Street. Both of these groups pretended that it was everybody’s fault, or the fault of those evil subprime borrowers or nobody’s fault because it was all perfectly legal and the deals were between equally sophisticated and brilliant people, but it surely wasn’t the fault of the well-known people who organized and sold RMBSs and other deals. The prosecutors said they couldn’t indict any individual because responsibility was spread out among lots of people, or it was too hard to get a conviction, or because something something. When elites are not held accountable, it reinforces their sense of how wonderful they are.

But the effect of these two two neoliberal theories on the rest of us is bad. As I note in Part 4A, based on this paper by Simcha Barkai, increasing concentration is perhaps the most important cause of the wage-productivity gap. Wage stagnation as profits increased has left workers struggling to get ahead, to the point that less than half of US households can pay an unexpected $500 bill without borrowing or selling something.

In the same way, the law and economics movement has hurt workers. For example, Banks and other large corporations put arbitration clauses in all their contracts, and clauses that bar class actions, and courts routinely uphold these clauses, because it’s so efficient. That means that when you get cheated in one of Wells Fargo’s schemes, you have to arbitrate, and class actions are barred.

So far, the legacy political parties and the elites have been able to deflect the anger that is slowly building up in our society as frustration turns into pain. It’s dawning on all of us that the way we treat our people is disgusting, whether it’s cops killing unarmed Black people, sexual predators attacking women, unfair pay for people of color, massive corruption, lawsuits with utterly unjust results; the list is endless.

My prediction of the slow death of neoliberalism is based on my profound hope that people are realizing that neoliberalism is a nightmarish theory, the spell will be broken, and people will demand to be treated like human beings with natural rights that must be the central focus of social organization.

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.

12 replies
  1. matt says:

    Ed, thoughtful post. Economic thought was leaning toward “Social Democracy” after WWII, but somehow (or by design) “social” got equated with “communist/socialist.” You just can’t talk about public education, health care, social security, unions, corporate regulation, and progressive taxation, like Bernie Sanders, without being called a “socialist.” We don’t have dialog, because in our age of modern technical wonder, nobody is reading, much less thinking about how “nightmarish” our political economy really is (except for you, of course). Sorry to be a pessimist.

    • matt says:

      … I might add, in the last 20 years, I may have had one or two people out of hundreds who understand “neoliberalism.” And that includes bankers, MBA’s, and economists…

    • Kathleen says:

      Spent a great deal of time with Bernie supporters both young and older (I am 65),  Younger supporters appeared and sounded completely in support of Bernie’s focus on “social democracy.”  Completely in support.

      Took my 89 year old die hard Dem mom to see Bernie twice during the primary,  Knew she had to see him since every time my mother (who had a stroke but has been coming back as much as you can come back at 89) would see and hear Bernie and Elizabeth Warren on the news she was sit upright and say the same thing “they sound like Franklin and Eleanor Roosevelt,  They sound like the Dem’s from 60, 70 years ago”  She would almost jump out of her seat.  She grew up working in factories and being a Union member all her life,

      When I went to a Trump rally just north of Dayton Ohio last summer as a Sanders supporter just to talk with Trump supporters directly.  Over and over I heard Trump supporters say “we like what Bernie is saying , but he is a socialist”   Then I would ask them how they defined “socialism.”  Next would come the conversations about public schools, medicare, roads, libraries etc being a result of social democracy.  Similar conversation with about 30 or so folks,   Quite a few former GM, Delphi workers,  A few now working at Wal Mart,

      I think there is less fear and a deeper understanding of ‘social democracy” possibly in response to the economic extremes that have developed over the last 40 years

  2. Alan says:

    The people Silva interviewed describe themselves in the terms in the Mirowski quote in Part 4A, as bundles of skill sets, who must take risks and invest in themselves to get ahead

    All this is in Foucault’s 1978-1979 lectures, Mirowski’s acknowledged source. Practically all the most effective attacks on neoliberalism start from Foucault’s analysis of American neoliberalism.

  3. Alan says:

    My prediction of the slow death of neoliberalism is based on my profound hope that people are realizing that neoliberalism is a nightmarish theory, the spell will be broken, and people will demand to be treated like human beings with natural rights that must be the central focus of social organization.

    Yes, but if you take Foucault’s analysis seriously, there is no essence, core, origin or what have you to return to, to recover, etc. One can break the spell only by casting a new one. And the new one will have its own oppressions.

    • Matt says:

      “Decentralism” was a populist precursor to Libertarianism…  The movement was a reaction to industries failure to create a humane standard of living in the cities, and the governments call to arms for global wars.  It is based strongly on rural self sufficiency and voluntary cooperation between members of small local economies.  At least in self sufficient local communities, oppression can be mitigated, as power differentials are small.

      Unfortunately, decentralists were anti-FDR because they did not feel the need for social security (or any other government program) was strong enough to mandate military service and taxation.  These writers of the 30’s 40’s espoused a lifestyle similar to the Amish and would be aghast that their philosophy of individual freedom from ANY centralized control was usurped by wealthy elites to dodge social responsibility (taxation, environmental concern, workplace conditions) and to equate the individual with a business corporation.

      Nonetheless, true decentralism and local self-sufficiency will be the only hope of the masses to enjoy an alternative to the ever failing system of global libertarianism.  I live in a “poor” rural county in WI, where there is tremendous “real” wealth, and peoples needs are met because they can fix their own cars, build their houses, grow their food, and even take care of (most) basic health care better than than industrialized medicine.  That said, we are still vulnerable to the draft if large scale war would break out; we are vulnerable to the impositions/power of the police state; and we are vulnerable to health care crises (major disease, injury) without access to hospital care.

      Here is fun read from 1947: “Decentralize for Liberty” by Thomas Hewes.

      • Ed Walker says:

        Matt, you might like this in the New Yorker if you have some time; it’s about life in a thriving Iowa farm that sounds like the life you are talking about, and how the town sruvivedd when so many didn’t.

        town: https://www.newyorker.com/magazine/2017/11/13/where-the-small-town-american-dream-lives-on

         

    • Ed Walker says:

      Alan, this raises crucial questions that I’m not ready to write about just yet. I’m not sure I agree with Foucault. I’m pretty sure when people wake up, they don’t want another dream, they wan action and now. The new dream comes later.

      I don’t think Americans have ever awakened from many of their dreams, starting with the dream of whiteness, as Ta-Nehesi Coates put it; or the dreamy history that misses our sins while overrating our virtues, among others. Maybe we should try opening our eyes and growing up. We’ve been at this for centuries and it’s about time.

      • Alan says:

        I’m not sure he’s saying it’s another dream/nightmare. There’s always a structure of power. As an anthropologist I might say there is always culture. There’s no pure society to which one can return. There are always rules, practices, etc. which might be otherwise. Some work better for more people than others. Foucault’s ethics focus on stopping the structure of power, whatever it might be, from freezing: i.e. stopping those that have some advantage under the current rules from freezing the game so they can increasingly exploit their advantage to dominate everyone else (see Bess interview). He’s not going to play the prophetic role and tell you there’s some Utopia, Promised Land, a pure society that can be achieved if we only do x, y and z.

  4. lefty665 says:

    “So far, the legacy political parties and the elites have been able to deflect the anger that is slowly building up in our society as frustration turns into pain”

    The anger, frustration and pain gave us Trump last year. That was profound. It is predictable that when he fails to deliver better for workers the swing next time will be even wilder. The elites and neolibs have a short window for change. They in large are not seizing the opportunity but instead are engaging in anti Trump and anti Russian hysteria. It seems unlikely the elites and neolibs will figure out that Trump and his ilk are symptoms of the disease they have spread throughout the country.

    The fix is to cure the disease by driving a stake through neoliberalism’s heart. Raging at the Trumpian symptoms may be emotionally satisfying, but is worse than useless as it prevents even understanding there is a problem. Recognizing that there is a problem is the first step toward fixing it.

    Thank you Ed for a wonderful series. Hope some of the folks around here read and pay attention to what you have presented. If they do then they will at least have the opportunity to come to their senses.

  5. earlofhuntingdon says:

    Trump, Bannon, the Mercers and Kochs, their university and think tank machines and the Republican Party (and no small part of the Democrat establishment) have found a way to direct that “slowly” building up anger and resentment into traditional, if extraordinarily destructive, channels.  In a word, it’s the blame game:  Blame immigrants.  Blame people of color (who want something for nothing, unlike Trump and his peers).  Blame the “system” (which they control).  Blame the furriner.  And blame the people committed to pointing these things out and who are attempting to change in order to make better most people’s lives.

    Democrats need to be more forceful, in criticizing fake news and partisan propaganda, in pointing out what’s wrong and who is making it so, in raising to leadership people who make Warren and Brown look conservative.  If one billionaire makes commercials urging us to impeach Trump – for eminently good reasons – ten billionaires should want to put something better in place in his place, and not just to install a better steward of the meritocracy, who will preserve neoliberalism’s gains for the wealthy.

    At best, that would be seed money.  Democrats therefore need to revive the community organizing and fund raising that Obama buried once he achieve the presidency, and that Clinton worked hard never to need.  Buffett is right: this is a class war and his side already won.  But we can convert that to won the battle and not the war.  The future of society is at stake.  Given the right’s blindness about global warming, the future of the planet is at stake, too.

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