The Slow Death of Neoliberalism: Part 4C Conclusion

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.
Part 4B.

It’s fairly easy to criticize neoliberalism from the inside, just based on its incoherence and its failure to deliver good outcomes to most of us. The Barkai Paper discussed in parts 3A and 3A, and the Paradise Papers and the Panama Papers make it obvious that the benefits of neoliberalism flow to the wealthy at the expense of the rest of us, whose wages are largely stagnant and have been for decades, and whose share of overall wealth has fallen.

Neoliberalism can also be criticized from the outside as a form of capitalism, and that seems to me to be more revealing. The constricted logic of capitalism leads directly to domination by the few in business and society generally. The logic that pushes towards dominance is the result of the nature of reason as it has evolved since the Enlightenment. I’ve discussed similar descriptions of the drive to domination in Polanyi, Arendt and to a lesser extent Veblen; click name above to visit my author page. My recent discussions of these points based on my first readings in Critical Theory can be found here, here, and here.

The members of the Frankfurt School were trained in classical German thought, including Hegel, Kant, and Marx. Initially they accepted Marx’ theory of an inherent contradiction in capitalism: that the rich would accumulate all the money and impoverish the workers, who would rise up and lead the revolution. That didn’t happen. Instead, the drive to domination was restrained by legislation. The majority’s insistence on restraints was so strong that the Supreme Court, that playground of the elites, was forced to allow the legislation to stand. But the scholars of the Frankfurt School knew that the drive to domination didn’t disappear. Today it’s just as strong as it was in the late 19th Century.

The natural logic of capitalism is gigantism. Marx said that in unrestrained capital, smaller businesses will be swallowed up by larger businesses, and he was right, as we see today. Organizations with massive capital wield enormous power, and can easily take over control of a society. We see the beginnings of all this today. There is a long tradition in the US of distrust of large piles of money and the people who control them, a sentiment that drove the progressive movement of the late 19th Century. That doesn’t disappear accidentally. It requires an external force to change it. I wouldn’t say it has disappeared today, but far too many of us have lost that natural distrust.

Somehow many people think billionaires as just like the rest of us. They aren’t, and the vulgar braggart in the White House is a perfect exemplar. But far too many of us are willing to accept rule by the rich. One of the central influences that led to this sorry situation is the Law and Economics movement, with its single-minded focus on economic efficiency. Economic efficiency: who could object that? Of course we should be efficient.

Once courts decided that the most important part of justice is insuring economic efficiency, they began to eat away at the laws and theories that enabled the majority to control the rich and powerful. Ideals like the importance of fairness, or social equality, or recognizing and correcting power imbalances through legislation, withered and vanished. Gradually we lost the ability to govern by majority rule. Our Supreme Court feels no compunction in overruling the will of the majority on health care, on voting rights, even on actual elections.

That is the result of the same kind of logic that drives capitalism, the logic of economic efficiency applied to every area of life. A somewhat simple idea that might be useful in limited settings becomes the overall mindset, the formula for decision-making that jumps from the tiny number of cases in which it might be a useful to the absurd idea that it works in every area of law.

It would be interesting to see a history of the erosion of the Securities Laws beginning under Reagan and his hit-man SEC Chair John Shad, followed by mildly limiting legislation, which the courts expanded to cut way back on the ability of the regulator to regulate, and the investor to sue. The Supreme Court bought into Posner’s principle, and then expanded it beyond recognition.

Friedrich Pollock, a member of the Frankfurt School, said that the profit motive has always been a form of the power motive. It just gets dressed up in fancy reductive logic by the likes of Posner and Bork for public consumption. Regardless of their motives, they are no different from Frank Luntz, who uses the tools of rhetoric to hide the ugly transformations sought by the rich.

All these changes start small, and require something that seems like a justification, but eventually, it’s just the whim of the elites. That’s how Trump acts, and that’s how the more effective members of his cabinet and his other appointees act. Rex Tillerson is destroying our capacity to engage in diplomacy. Scott Pruitt is destroying our ability to protect ourselves from climate change and pollution. Jeff Sessions is wrecking the Justice Department. All this was foreshadowed by the destruction of the SEC under Shad.

When government is dismantled, how does a society work? The rich take over and run things according to their fancies.

That’s the logic of capitalism. Control the capitalists or they controls you.

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.

13 replies
  1. earlofhuntingdon says:

    A contemporary example of government by the rich is Texas, where the legislature meets every other year, the governor has little to do but throw baseballs out to start Rangers or Astros games and refuse to pardon prisoners on death row – often in the face of facts that scream for review – and to do the bidding of Texas’ richest families (and those running their family business offices).

    Older examples would include South Africa during the time of Cecil Rhodes; the US during the heyday of Gould, Vanderbilt, Rockefeller, Carnegie and California’s Big Four railway barons; or the United Kingdom for much of its existence, except, for example, several decades after WW2.

    If senators are already saying Wall Street banks “own” Congress, if we have over 30,000 lobbyists legally spreading bribe money throughout the Beltway, if we have the Mercers, Waltons, Kochs and Adelsons with their man in the White House, and if we have congresscritters afraid of losing their jobs as public employees unless they can immunize their patrons from estate tax and the AMT, I’d say we’ve returned to government by the rich.  I suspect that most residents of Puerto Rico would agree.

     

    • bmaz says:

      From Bush to Perry to Abbott, it is crystal clear that a potted plant can acceptably function as the Governor of Texas. The old trope that it is one of the weakest Governor jobs in the country is actually quite true.

  2. earlofhuntingdon says:

    Yeoman’s work, by the way, Ed.  Thanks very much.  Hope there are other projects in the works.  We would all benefit from them.

  3. lefty665 says:

    Ed, Thank you, thank you, thank you. This series has been amazing and wonderful. I have seen for decades things that are profoundly wrong in America, have had a simple syntax to describe them and have raged as I watched the country transform before my eyes. You have put an academic and intellectual framework around the evils of neoliberalism that is both elegant and compelling.

    There has been little hope for the Repubs since the right wing take over and the death of the moderate “Rockefeller” wing of the party. The Dems changed a little later with their “reforms” after the ’72 debacle. The easy changes to see were things like handing control to super delegates. What came along with that was the embrace of neoliberalism under the guise of meritocracy (we all like merit) that abandoned the New Deal bedrock that workers deserve to share in the fruits of their labor. Under the new Dem regime if you did not get your piece of the pie you were by definition not meritorious, you were unskilled, lazy, in the wrong place or obsolete.

    With the “New Democrat”, DLC ascendancy in ’92 we had a union of Repubs and Dems in a political spectrum that was greatly narrowed. The Clinton administration paved the way for much that has followed with the dismantling of New Deal protections and restrictions on capitalists like the repeal of Glass-Steagall and the deregulation of commodities and derivatives (aka the Enron Act).  Duhbya played his part in bringing down the house of cards, and Obama bailed out the elite capitalists and neoliberals with trillions in no or low cost loans while homeowners and workers rotted. Wages today for 80+% of American workers are no greater than they were in the ’70s. That is coming up on three generations (grandparents, parents, children) of no gain for most American workers, and no prospects for better. Dems in the New Deal mold would call that deplorable, neoliberal elite Dems call it deplorables. Unlike the Repubs there is the possibility of hope for the Dems in the Sanders wing of the party.

    There is an old concept in the US, mixed capitalism. It is the idea that the public sector, our elected representatives, restrains the excesses of capitalism to keep it from destroying itself and the rest of us, while channeling its energy for the good of the people of the country.  You have described in this installment how first the courts and then the legislature and executive have abandoned their duty to protect us all. The Trump administration’s failures are indeed particularly egregious, but they simply have a higher profile than Dem actions with similar impact. The Clinton dismantling of regulatory structure set the stage for the collapse of the world’s financial system. The Obama administration’s failure to regulate the capitalist neoliberals in the financial sector set the stage for the next collapse and are every bit as destructive as what Trump is attempting. With Hillary we would have had further destruction of jobs and the middle class via the TPP, and policy by Goldman-Sachs much like what we have under Trump.

    Your message is stark, “Control the capitalists or they controls you.” I would only add that in America today that is a bipartisan imperative. Thank you again for an amazing series of posts.

  4. Bay State Librul says:

    Good essay.

    Nothing drives me crazy as the term Neo-Liberalism. Can you change the wording to Neo Economic Liberalism?

    What we are talking about is economics.

    To be brief, in my opinion, with all my prejudices, the one way, we can fix the inequality is

    through taxation. Remember when the tax rate was as high as 90%?

    Tax the shit out of the wealthy and distribute to the poor — I would like that ju ju but it ain’t going to happen.

    Outlaw lobbying — ain’t going to happen soon

    Outlaw campaign contributions — ain’t going to happen soon

    Repeal “Corporations are People”, the biggest lie since Lefty’s assertion that Clinton caused the 2008 meltdown and Obama sleeps with Goldman Sachs.

    What we need is a mini revolution.

    Look, I feel a little guilty cause I came of age in the 60’s, and was able to go to college where my parents didn’t, was able to provide for my wife and two kids with a pretty good income. I will always vote Democratic since it is the best possibility for the poor and middle class.

    I love Franken and his new book is a dilly. Call me Al is the type of politician we should have.

    Finally, what do you think of Robert Reich’s new book?

     

     

  5. sapaterson says:

    Thank-you Ed Walker on your lucid evaluation of neoliberalism. Liberalism which is supposed to correct for the social shortcomings of capitalism couples so well with Neo because we are but batteries living in the Matrix of capitalism. The concentration of wealth is certain and Thomas Piketty does an irrefutable and  thorough historical analysis of this in Capital in the Twenty-first Century. Our economy and the concentration of wealth in the pockets of so few has historical precedent:  just before the Belle Epoch (Napoleon’s time), WWI and WWII. When the power is in the hands of so few and so many are discontent, it seems that wars are started, in part to distract and cull the masses, but mostly because capital finds a higher profit in war than anywhere else.

    Liberalism, Neoliberalism, Meritocracy, Zionism, Conservatism all choose winners and losers in the  economy they are practiced in. Exclusion is how capitalism works. Since there’s not enough for everybody to live like the Trumps or the Clintons there needs to be a ratiocination that justifies scarcity for the many for the sake of opulence for the few.

    It’s not the clarion call to burn down institutions, however. Judges, policemen, soldiers, and meter-maids are just working stiffs trying to feed their families and pay their mortgage. We can recognize the evil in the concentration of wealth without hating the benefactors. Think of this: if the system is rigged by the Gates and the Zuckerburgs, of the world well then they are liable for all the calamity that befalls us. If they cannot prevent the corruption of confidence of computer voting machines or the suppression of minority voters then they are complicit.  If they do not want to be held liable they need to remove money from the political landscape by endorsing public financing of all elections. Further no media company should be profiting off election campaigns – how is that patriotic?

    The Matrix needs rebooting. Once my pipe dream prerequisites occur the masses can vote to tax all intangible holdings, estates inherited, foundations, etcetera of all citizens (with the term to include anyone who does business in the country to prevent that pesky capital flight) by, let’s say 10%. That would be enough to give every resident $50,000 / per year and fund free healthcare and college educations to boot.

    How do we prevent the concentration from happening after that? Worker owned coops – self governed business models where there is a twenty to one ratio rule firmly in place, meaning the disparity of wage between the lowest worker and the executive is moderated. Richard Wolff has a lot to say regarding worker coops. And eventually a requirement that the ratio to be part of our trading partner’s economy. This way the capitalists would at first be saddled with their fiscal responsibility to society and then be ridden into the sunset of their natural conclusion. The nightmare of neoliberalism would be over and not a drop of blood shed.

     

  6. orionATL says:

    ed walker –

    this is an outstanding intellectual and scholarly effort. it took lots of time, energy, and persistence. i learned some things i didn’t know and was forced to relearn some things i had known but decades earlier.

    thanks for the exercise.

    orion

Comments are closed.