Neoliberalism -- the ideological doctrine that market exchange is an ethic in itself, capable
of acting as a guide for all human action -- has become dominant in both political thought and
practice throughout much of the world since 1970 or so. It helped to crush communism in the USSR and
largely displaced Marxism.
The shift toward neoliberalism occurred in the 1970s because businesses and the super-rich began a process
of political self-organization in the early 1970s that enabled them to pool their wealth and influence
to achieve dominant political power and to capture administration. As David Swan noted in his
review (E.
David Swan's review of A Brief History of Neoliberalism)
From its founding America's wealthy have feared democracy recognizing that the majority, being
poor and middle class, could vote to redistribute wealth and reduce the control held by the elites.
After World War II, the middle class in the United States grew dramatically somewhat flattening
the countries power base. As a reaction to this dispersal of power the early 1970's saw the formation
of groups like The Business Roundtable, an organization of CEO's who were `committed to an aggressive
pursuit of political power for the corporation'. As the author writes, `neoliberalization was
from the very beginning a project to achieve the restoration of class power'. T
he neoliberal plan was to dissolve all forms of social solidarity in favor of individualism,
private property, personal responsibility and family values. It fell on well funded think tanks
like The Heritage Foundation to sell neoliberalism to the general public using political-philosophical
arguments.
Money pouring into lobbying firms, political campaigns, and ideological think tanks created the organizational
muscle which mimics the Bolsheviks organizational muscle. And Repugs got a bunch of Trotskyite turncoats
such as James Burnham, who knew the political technology of bolshevism from the first hands, were probably
helpful in polishing this edifice. All that gave the Republicans a formidable institutional advantage
since 1980s.
Carter and Clinton sold Democratic Party to the same forces.
This rise of special interests politics has been at the expense of the middle class. In this sense
already in 1994 the USA became very unhealthy society although the crisis of 200 was still six years
ahead. Collapse of the USSR and subsequent looting of the territory by Clinton administration slowed
down this process, but now it's by-and-large over (with the USA failing to prevent reelection of Putin)
and "latin-americanization" of the USA is again in full force.
There are no sizable countervailing forces on the horizon, although the level of public debt might
be an implicit limiting factor for neoliberalism. It will be interesting to see how and by what political
forces neoliberal regime in the USA ends. Some people suggest that the USA might eventually disintegrate
along the lines of Civil War alliances. I think much depends how "peak oil" crisis unfolds. And will
the wars with terrorism continue to give the USA elite the required level of the national unity and
meaning. Rise of separatist movements in Texas, Alaska and other states is pretty indicative here.
The tendency of the rate of profit to fall in capitalistic economies does not work uniformly.
In different periods, because politics and social class alliances can change, so can the profitability.
The current crisis was only partially caused by falling rates of profits.
It is more result of self-organizing of the top 1%. According to Dumenil and Levy the basic
story goes like this: following the Great Depression of 1930 a strong social
political alliance emerged between the management class and "popular classes" (this popular
class includes blue and white collar workers, including quasi-management, clerical, and professional,
which cannot be reduced to the traditional "working-class"). In the 1970s there was a severe profitability
crisis, the legislative and institutional response to this crisis caused a fracture between management
and popular classes, and a re-alliance between management and capitalist
classes (which includes ownership and financial classes).
David Harvey in his A Brief History of Neoliberalism
gives slightly different perspective. Here are some insightful Amazon reviews:
R. Albin (Ann Arbor, Michigan United States), February 4, 2012
A good way to discuss this concise and clearly written book is to compare it with some recent
discussions of politics and economics in the USA, notably the analysis published by the political
scientists Paul Pierson and Jacob Hacker in their book Winner Take All Politics. Pierson and
Hacker point to the increasing concentration of wealth and political power in the USA, the decline
in social mobility, the impressive ability of the very wealthy to influence Congress and elections,
and how these phenomena have arisen over the past generation. Readers interested in a concise
discussion of their conclusions can easily find a nice review article by Hacker and Pierson using
Google Scholar or similar search services. Other recent relevant issues include the decline in
American manufacturing, the increasing role of the financial services sector, and the dangerous
economic fluctuations introduced by a global and relatively unregulated financial system. Harvey,
however, identified and discussed all these themes insightfully several years ago.
Beyond his prescience, Harvey's particular contributions are three-fold.
First, he is particularly interested in the relationship between these phenomena and
the ideology of neoliberalism.Harvey defines that latter as the idea that markets
and private property rights are both essential to human freedom and the best method of public
policy. As he points out, the neoliberal era is defined not only by withdrawal of state
intervention in markets but also by state creation of markets in areas where they did not previously
exist. Once the state creates such markets, the state maintains a hands off posture. Harvey
contrasts neoliberalism with what he called "embedded liberalism," the mixed economies of post-WWII
European social democracy (whose policies often implemented by right of center parties) and
New Deal Liberalism and its successors in the USA. The economic and political corollary
of neoliberalism is increasing concentration of economic and political power; essentially the
justification of an upper class assertion of power with the consequences of enriching and empowering
the most wealthy and impoverishing others by the reduction of social services that benefit
the poor and middle class. In true and insightful Marxian fashion, neoliberalism is the ideological
superstructure and figleaf of class conflict.
Harvey's second interesting contribution, at least for American readers, is his attention
to international aspects of neoliberalism. This discussion has two dimensions.
The first is a discussion of neoliberal implementation in other advanced capitalist
countries, notably Harvey's native Britain, where events parallel much that has been observed
in the USA. Harvey also has good discussion of often destructive neoliberal policies in
the global financial system and economy carried out by institutions such as the World Bank,
the IMF, the WTO, and major banks. Its fair to say that Harvey's critique is matched by
that of individuals who are definitely not Marxists in orientation such as Joseph Stiglitz.
Harvey also has an interesting discussion of neoliberalism in relationship to China.
Harvey points out that neoliberal international policies considerably facilitated the
ability of the state led (which some astute commentators term Market Leninism) growth of
the Chinese economy to become a major economic power. Harvey points out that this somewhat
ironic phenomenon is accompanied by the development within China of a powerful capitalist
class deeply embedded in Communist Party that has many of the features of a neoliberal elite.
Harvey is also quite interesting on the relationship between neoliberalism and other ideologies.
The emphasis on possessive individualism and what some call economism (eg, Margaret Thatcher's
famous statement that there is no such thing as society) tends to promote worrisome social
conflict. The result is upper class promotion of somewhat authoritarian ideologies to maintain
social peace. Harvey argues that various strains of neoconservatism are a manifestation of
this phenomenon. Neoliberalism and libertarianism, whose adherents claim promote human
freedom, ironically tends to promote authoritarianism.
Harvey also points to many of the other contradictions of neoliberalism. It is often a
license for the wealthy to exploit political systems in ways that undercut its central claims.
Claims that it would produce an era of enormous economic growth with a rising tide raising all
boats proved groundless. Regimes purportedly espousing neoliberalism, such as the Bush II
era USA, indulged in disguised and incompetently applied Keynesianism. Despite scientistic claims
to be based on basic features of economics, neoliberalism often ignores basic findings of economic
research.
Defects of Harvey's analysis
Defects of Harvey's analysis include a bit of overemphasis on what might be called the conspiratorial
aspects of his class based analysis. Harvey also omits an important criticism of neoliberalism
-- its failure to recognize the sources of long term economic growth. The latter depends on
technological innovation and implementation of new and improved technologies.
Two and a half centuries after the start of the Industrial Revolution, the low hanging fruit
has long been harvested and further technological change depends on substantial state investment
in research, including considerable investment in development and industrial policies, and a large
and well educated work force.
These preconditions for sustained growth aren't and probably will never be generated by neoliberal
regimes.
The term neoliberalism is usually heard in the pejorative sense, often coming from Latin American
leaders such as Hugo Chavez and Evo Morales. The term refers to an international economic policy
that has been predominant in policy-making circles and university economics departments since
the 1970's. The four faces on the cover of this book (Reagan, Deng, Pinochet, and Thatcher) are
considered by David Harvey the primemovers of this economic philosophy. Reagnomics, Thatcherism,
Deng's capitalism with Chinese characteristics, and Pinochet's free market policies marked the
beginning of new era of global capitalism.
Neoliberalism as a philosophy holds that free markets, free trade, and the free flow of capital
is the most efficient way to produce the greatest social, political, and economic good. It argues
for reduced taxation, reduced regulation, and minimal government involvement in the economy. This
includes the privatization of health and retirement benefits, the dismantling of trade unions,
and the general opening up of the economy to foreign competition. Supporters of neoliberalism
present this as an ideal system. Detractors, such as Harvey, see it as a power grab by economic
elites and a race to the bottom for the rest.
In this short, but very well researched book, Harvey charts the capital flows of the last thiry
years. In the 1970's, there was the breakdown of the Bretton Woods system, with its fixed exchange
rates, tariff barriers, and capital controls. It gave way to floating currencies and high trading
volumes. Capital started searching the globe for comparative advantage. Proponents claimed that
this routed out corruption and inefficiencies, while opponents saw instability and exploitation.
Indeed, Harvey produces ample statistics showing how the rich got richer and the poor stagnated.
More surprisingly, he points out that the aggregate economic growth during the years of Keynesian
management (the decades between World War II and the 1970's) was greater than during the neoliberal
era (the 1970's to the present). The neoliberal era benefitted mainly the wealthy. In the US,
the richest 1% now control 15% of the wealth as opposed to 8% at the end of World War II.
When Reagan and Thatcher came to power in the late 1970's and early 1980's they used their
control of the IMF and World Bank to impose neoliberal policies on the developing world - especially
Latin American countries. In the case of Chile, Pinochet - after violently ousting the Allende
government - instituted free market policies as prescribed by the Chicago school, and was relatively
successful. Other Latin American countries were not so successful, and it created a backlash of
populist nationalisms in the form of Hugo Chavez in Venezuela and Evo Morales in Bolivia.
The section on China is one of the best in the book: "Neoliberalism with Chinese Characteristics".
Harvey points out that China is not a pure neoliberal state. There is still heavy state intervention
in the economy and management of the currency. And as a further criticism of neoliberalism, he
reminds us that China has produced some of the highest growth rates - 9 to 10 percent annually.
On the downside, the gap between the rich and poor is growing, and because their currency is held
artificially low they are building dangerous overcapacity.
Neither does the US, for that matter, operate according to neoliberal principles. Even
as it is urging other countries to maintain minimal government and balanced budgets, it is running
huge deficits and issuing ever more t-bills to cover its excess spending.
With China and the US - two linchpins in the world economy - not playing according to the rules
of the game a crisis is bound to happen. One country is totally geared toward producing and exporting,
while the other is content with importing, consuming, and creating more debt. Harvey believes
that the global economic readjustment that is going to take place will be painful and possibly
violent.
Harvey's excellent little book illustrates, once again, that the perfect market, presupposed
by neoliberalism and classical liberalism, does not exist. Unfortunately, he does not offer any
remedies to rectify the current situation, nor does he offer an alternative system. Nevertheless,
this book is very insightful.
Read more ›
On the first anniversary of 9/11 President Bush made a speech saying, `Freedom is the Almighty's
gift to every man and woman in this world... as the greatest power on earth we have an obligation
to help the spread of freedom.' Spreading freedom is the primary function of neoliberalization
but as George Lakoff stated in `Whose Freedom?' freedom can be a very subjective term. The freedom
of neoliberalism is the glory of unfettered, free market economics and the rights of corporations
and financial institutions over individuals and governments. It's the freedom to fully exploit
resources and workers.
From its founding America's wealthy have feared democracy recognizing that the majority, being
poor and middle class, could vote to redistribute wealth and reduce the control held by the elites.
After World War II, the middle class in the United States grew dramatically somewhat flattening
the countries power base. As a reaction to this dispersal of power the early 1970's saw the formation
of groups like The Business Roundtable, an organization of CEO's who were `committed to an aggressive
pursuit of political power for the corporation'. As the author writes, `neoliberalization was
from the very beginning a project to achieve the restoration of class power'. The neoliberal plan
was to dissolve all forms of social solidarity in favor of individualism, private property, personal
responsibility and family values. It fell on well funded think tanks like The Heritage Foundation
to sell neoliberalism to the general public using political-philosophical arguments.
At the same time a group of economists were working on economic theories that developed into
the `Washington Consensus'. These followers of Hayek and Friedman just happened to create
economic blueprints for growth that matched up exactly with the goals of the wealthy business
elites. The plans were based on the superiority of the marketplace in making wise decisions
but also assumed perfect information and a level playing field for competition. As the author
writes, `...eminent economic theorists [...] argue that all would be well with the world if only
everyone behaved according to the precepts of their textbooks' The neoliberal economists have
become so focused on growth that they seem to take a decidedly amoral approach to human suffering.
Above all countries needed to focus on privatization and low taxes and definitely avoid deficit
spending. What has happened is a widening of the gap between the wealthy and poor. The author
suggests that rather than an unfortunate byproduct of neoliberalism or a temporary situation this
is the intended result.
The great irony is that the U.S., the world's number one proponent of neoliberalism, generally
finds itself breaking the rules. With high deficit spending and massive subsidizing particularly
in consumerism and defense spending the United States has generally taken a `do as I say, not
as I do' stance. With the amount of political appointee/lobbyists shuttling back and forth
between business and government Adam Smith's `Invisible Hand' looks more and more like a crushing
fist.
This was not the book I expected. This is a devastating critique of neoliberalism. I didn't
agree with everything the author wrote and there are most definitely many positives that have
come from globalization but the corporatization of the world has the potential to by an enormous
threat. Global Warming has to be the poster child for neoliberal extremism with short term economic
growth trumping the welfare of the entire world. David Harvey has a decidedly liberal stance but
he backs up his views with sobering facts. Despite being a book on economics I found it extremely
readable and recommend it wholeheartedly.
David Harvey A Brief History of Neoliberalism
can probably be considered to be a classic book in this field. But it treats this phenomenon too narrow
and does not address the reasons of tremendous staying power of neoliberalism that it demonstrated after
2008, the crash which destroyed its theoretical attractiveness and had shoed really false premises behind
this ideology.
The Strange Non-death of Neo-liberalism Colin Crouch in this sense is a better read.
Undoing the Demos argues that ‘neoliberalism is profoundly destructive to
the fiber and future of democracy in any form’ (p. 9). More precisely, it is concerned with mapping
the myriad ways in which neo-liberalism, conceived as a productive mode of reason that today saturates
ever more spheres of life, articulates crucial elements of democratic language, practice and subjectivity
‘according to a specific image of the economic’ (p. 10). In so doing neo-liberalism directly assaults
the democratic imaginary that animated so much of modernity, hollowing out liberal democratic practices
and institutions while at the same time cauterising radical democratic expressions.
Undoing the Demos is divided into two parts: the first, ‘Neoliberal Reason
and Political Life’, puts forward the book’s main argument and is moreover concerned with Michel
Foucault’s account of neo-liberalism, developed in his 1978–1979 lectures at the Collège de France,
and discusses its merits and its shortcomings in detail; the second, ‘Disseminating Neoliberal Reason’,
is concerned with how neo-liberal rationality is extended to spheres heretofore untouched by economic
parameters, including ‘statecraft and the workplace, … jurisprudence, education, culture, and a vast
range of quotidian activity’ (p. 17). The central argument of the book is that ‘neoliberalism assaults
the principles, practices, cultures, subjects, and institutions of democracy understood as rule by
the people’ (p. 9). Brown sets out to understand how it does so and develops a theoretical framework,
deeply reliant upon, but not uncritical of, Foucault’s seminal account.
In the first chapter Brown does the theoretical legwork upon which the entire argument
rests. While democracy is understood simply (and, in my view, problematically – an issue I will return
to below) as ‘rule by the people’ (p. 19; cf. pp. 9, 20, 178, 202, 209), neo-liberalism is understood,
with Foucault, as ‘a distinctive mode of reason, of the production of subjects, a “conduct of conduct”,
and a scheme of valuation’ (p. 21). Neo-liberalism, then, is not the name given to capitalism’s latest
guise, nor is it an ideology that masks the resurgence of class politics. Instead, it is conceptualised
as a mode of reason, a ‘political rationality’ (pp. 20–21; cf. Chapter 4), that today invades all
spheres of life and recasts in an economic register their constituent concepts, practices, institutions,
subjects and truths. Accordingly, the book is not concerned with studying neo-liberal techniques
of government, but with the rationality, the regime of truth, that underlies them.
Chapters 2 and 3 offer a systematic reading of Foucault’s lectures on neo-liberalism
(later published as The Birth of Biopolitics) and lead to a number of significant insights
that expand the Foucauldian approach beyond his own groundwork. Importantly, Brown signals no less
than 12 features of the contemporary neo-liberal landscape that Foucault could not account for because
they either did not yet exist or were still only nascent (pp. 70–72). These include the rise of finance
capital, permanent financial and social crises and crisis-fuelled austerity politics, the rise of
governance, and, for Brown perhaps most profound, a number of changes within the neo-liberal subject,
who is now tethered to competitive markets in such a way that she has lost all remnants of protection
against brutal and impersonal market forces. This last feature is related to what Brown takes to
be the biggest flaw in Foucault’s analysis: it is not attentive towards homo politicus and
its subsequent extinction by neo-liberal reason. Homo politicus, referred to as the ‘demotic
subject’ (p. 87), theorised first by Aristotle, whose morphology changes continuously throughout
her odyssey through occidental thought – via, inter alia, Locke, Smith, Bentham, Marx and
Freud (see pp. 87–99) – is finally usurped by homo oeconomicus. When the economic subject
reigns, what is vanquished is the form of subjectivity that animates democracy – a member of a demos,
a democratic citizen, an autonomous, sovereign, Kantian subject.
Chapters 4, 5 and 6 – which make up the second part of the book – map the different
ways in which neo-liberal rationality is disseminated through legal reason (Chapter 5) and through
higher education (Chapter 6). This dissemination is made easier by contemporary governance practices
(discussed in Chapter 4), which are ‘not identical with or exclusive to neoliberalism’ (p. 122).
In other words: governance is not born of neo-liberal rationality, but once articulated to it, gives
rise to novel ways of managing and disciplining subjects, states and firms. Governance practices
thus provide the tools through which neo-liberal reason flows smoothly from sphere to sphere, including
devolution, responsibilisation, ‘benchmarking’ and ‘best practices’ (see pp. 131–142). Through meticulous
analysis of legal jargon, Brown shows, in Chapter 5, how the US Supreme Court opinions have in recent
years been saturated with neo-liberal reason, thus assisting in discursively reconstructing democracy
both at home and abroad. She further maps, in Chapter 6, how neo-liberalised higher education undercuts
the formation of a critical, educated citizenry, without which democracy cannot survive.
Because its main aim is to study neo-liberal rationality, which has not been studied
so rigorously before, Undoing the Demos is a timely and innovative book. At the same time,
however, its scope invites some issues that have, on different levels and in different ways, a negative
bearing on the strength of the argument. One such problem is that because Brown sets out primarily
to understand neo-liberal rationality and how it is disseminated she pays little or no attention
to elements that, although they fall outside of this scope, are arguably intimately related to the
problem of rationality. For instance, the book does not engage in much depth with the problem of
resistance to neo-liberalism (see pp. 220–222); with other de-democratising rationalities and their
relationship to neo-liberal rationality; or with those theorists who were crucial in shaping the
discursive framework from which neo-liberal rationality now draws (Röpke, Eucken, Hayek, Friedman,
Becker and so on). The point is not so much that Brown should have investigated all of these separate
issues, but that she provides few to no conceptual tools for investigating them or their relationship
to neo-liberal rationality either.
A related concern is that Undoing the Demos is all-too-narrowly focused on
a specific and contemporary (Anglo-)American form of neo-liberalism. While Brown acknowledges at
the outset that she is aware of neo-liberalism’s internal complexity and heterogeneity (see pp. 20–21)
the rest of the book falls short of developing a convincing account of how neo-liberal rationality
functions when it enters into different contexts. This is a book about present-day North American
neo-liberalism, and little work is done to move outside of that context, even to Europe, let alone
the rest of the world. Accordingly, Brown’s ahistorical and geographically limited approach cannot
explain how the neo-liberalisation of, for instance, British universities has insidiously merged
with the already deeply entrenched class-based education system. Likewise, the reader is left guessing
whether legal reason has been neo-liberalised in, for instance, Northern Europe in the same way as
it has in the United States. Here again the point is not that Undoing the Demos should have
been a book about contextually specific neo-liberalisms, but that it remains silent on the question
of how neo-liberal rationality takes shape when it is inserted into the messy and complex landscape
of micro-politics, where it will inevitably have to negotiate with pre-existing discourses or with
stubborn remnants of previously hegemonic rationalities.
A final objection revolves around the notion of democracy and how Brown defines it.
In defining democracy as ‘rule by the people’ Brown deliberately sticks to an ‘open and contestable’
(p. 20) understanding of democracy in order to show not just how a specific model of democracy
(liberal, social, deliberative, elitist and so on), but also how ‘the bare promise of bare democracy’
(p. 203) tout court is undone. There are several problems with such a strategy. First, the
Greek δημοκρατία does not straightforwardly translate into ‘rule by the people’, as Brown
says it does (see pp. 19, 202), grounding the argument in a problematic claim from the start. Second,
Brown wants to show that neo-liberalism is destructive of ‘democracy in any form’, meaning that it
undermines the ‘bare promise of bare democracy’. However, it could be argued that this promise is
not at all shared by all forms of democracy: Does Schumpeterian elitist democracy really promise
that ‘all might be regarded as ends, rather than means’ or that ‘all may have a political voice’
(p. 203)? Notwithstanding Brown’s insistence on the openness of her definition, we appear to still
be talking about quite a specific conception of democracy. Third, because of her definition, Brown’s
primary focus is on the people that ought to rule – that is, on demotic subjectivity
and the exercise of sovereignty. Yet this focus cannot capture how neo-liberal rationality rearticulates
notions outside of that definition, such as, to name but one element, the legitimacy of the legislature
(which surely is different both from the legitimacy of the state and from popular sovereignty, which
Brown does discuss because they do fit inside the scope of her definition). Brown’s open and contestable
definition, in brief, in fact limits her scope and thus the force of her argument.
While I think Undoing the Demos would have been all the better for pre-empting
these issues, the book’s merits outweigh these shortcomings. Besides providing a theoretical framework
that allows for a deep understanding of neo-liberal rationality, it does so accessibly. More than
merely speaking to Brown’s comrades-in-arms on the Left, the book appears to be written for a broader
audience and Brown’s familiar style – lucid and rhythmic yet rigorous – makes even intricate Foucauldian
claims easily digestible.
Undoing the Demos conveys a sober and mournful message: democracy is under
attack and it might not survive. The book will leave anyone looking for strategies of resistance
disappointed. But whoever wants to understand the rationality that informs and governs so much of
our lives today would do well to read it.
The basic idea of this book isn't necessarily
new, but it's worth repeating: that neoliberalism isn't just bringing economics into a more prominent
role in public policy, it's destroying the very institutions of democracy and changing how we
talk about politics. What might be novel about it is that the author's (WB's) argument is targeted
to a very particular audience: Americans who are steeped in critical theory.
Even though I'm outside the target audience and had encountered the basic idea elsewhere on a
number of occasions (and agree with it), my copy now has a few stars in the margins, too. What
I especially liked was WB's emphasis in several places on language: how the neoliberal vocabulary
of governance -- based ostensibly on compromise and optimization -- is replacing that of politics,
which is based on conflict; and that by doing so, neoliberalism is robbing us of ways to think
about politics. In this regard, WB makes the striking observation that through "the vanquishing
of homo politicus" and its replacement with "homo oeconomicus," neoliberalism eliminates the "open
question of how to craft the self or what paths to travel in life" (@41). WB's concepts of the
political draw heavily from Aristotle's Politics and Machiavelli's Discourses, two of my own favorite
source-texts. There's also a very heartfelt and jargon-free chapter near the end of the book (Chap.
VI) about the impact of neoliberal policies on public education, which I found all the more interesting
since I myself recently started teaching undergraduates.
It is not clear that authors of the books listed above as well as several non-listed book authors
(for example Chalmers Johnson, Webster Griffin Tarpley and Paul Waldman) are not just over-educated
nay sayers. We know that we're in real trouble, we just don't know what to do about it.
An award-winning journalist investigates Amazon's impact on the wealth and poverty of
towns and cities across the United States.
In 1937, the famed writer and activist Upton Sinclair published a novel bearing the subtitle
A Story of Ford-America . He blasted the callousness of a company worth "a billion
dollars" that underpaid its workers while forcing them to engage in repetitive and sometimes
dangerous assembly line labor. Eighty-three years later, the market capitalization of
Amazon.com has exceeded one trillion dollars, while the value of the Ford Motor Company
hovers around thirty billion. We have, it seems, entered the age of one-click America―and
as the coronavirus makes Americans more dependent on online shopping, its sway will only
intensify.
Alec MacGillis's Fulfillment is not another inside account or exposé of our
most conspicuously dominant company. Rather, it is a literary investigation of the America that
falls within that company's growing shadow. As MacGillis shows, Amazon's sprawling network of
delivery hubs, data centers, and corporate campuses epitomizes a land where winner and loser
cities and regions are drifting steadily apart, the civic fabric is unraveling, and work has
become increasingly rudimentary and isolated.
Ranging across the country, MacGillis tells the stories of those who've thrived and
struggled to thrive in this rapidly changing environment. In Seattle, high-paid workers in new
office towers displace a historic black neighborhood. In suburban Virginia, homeowners try to
protect their neighborhood from the environmental impact of a new data center. Meanwhile, in El
Paso, small office supply firms seek to weather Amazon's takeover of government procurement,
and in Baltimore a warehouse supplants a fabled steel plant. Fulfillment also shows how
Amazon has become a force in Washington, D.C., ushering readers through a revolving door for
lobbyists and government contractors and into CEO Jeff Bezos's lavish Kalorama mansion.
With empathy and breadth, MacGillis demonstrates the hidden human costs of the other
inequality―not the growing gap between rich and poor, but the gap between the country's
winning and losing regions. The result is an intimate account of contemporary capitalism: its
drive to innovate, its dark, pitiless magic, its remaking of America with every click.
" Fulfillment vividly details the devastating costs of Amazon's dominance and brutal
business practices, showcasing an economy that has concentrated in private hands staggering
wealth and power while impoverishing workers, crushing independent business, and supplanting
public governance with private might. A critical read." ―Lina Khan, associate
professor at Columbia Law School and author of Amazon's Antitrust Paradox
"Anyone who orders from Amazon needs to read these moving and enraging stories of how one
person's life savings, one life's work, one multigenerational tradition, one small business,
one town after another, are demolished by one company's seemingly unstoppable machine. They are
all the more enraging because Alec MacGillis shows so clearly how things could have been
different." ―Larissa MacFarquhar, staff writer at The New Yorker and author of
Strangers Drowning: Grappling with Impossible Idealism, Drastic Choices, and the
Overpowering Urge to Help
"Alec MacGillis practices journalism with ambition, tenacity, and empathy that will command
your awe. Like one of the great nineteenth-century novels, Fulfillment studies a social
ill with compelling intimacy and panoramic thoroughness. In the process, Jeff Bezos's dominance
and its costs are made real―and it becomes impossible to one-click again the same."
―Franklin Foer, staff writer at The Atlantic and author of World Without
Mind
"For a generation, inequality has been rising relentlessly in the United States―not
just inequality of income and wealth, but also inequality of power and geography. In
Fulfillment , Alec MacGillis brings this crisis vividly alive by creating a broad
tableau of the way one giant company, Amazon, affects the lives of people and places across the
country. This book should be read as a call to action against the new economy's continuing
assault on working people, small businesses, and left-behind places." ―Nicholas
Lemann, author of Transaction Man
" Fulfillment addresses the human impact of current technologies and economic
inequality with rare power. People in tech don't often think about the ramifications of their
work; Alec MacGillis reminds us that it has consequences, and that even if there are no clear
solutions, we have a moral imperative to consider its effects." ―Craig Newmark,
founder of craigslist
Alec MacGillis is a senior reporter for ProPublica and the recipient of the
George Polk Award, the Robin Toner prize, and other honors. He worked previously at The
Washington Post , Baltimore Sun , and The New Republic , and his journalism
has appeared in The New York Times Magazine , The New Yorker , The
Atlantic , and other publications. His ProPublica reporting on Dayton, Ohio was the
basis of a PBS Frontline documentary about the city. He is the author of The Cynic , a
2014 biography of Mitch McConnell. He lives in Baltimore.
All of these "advancements" are around removing face-to-face interaction with other people.
Whether work-from-home, automated rental & purchase, retail goods delivered, etc. Curious
what long term impact this seemingly exponential shift toward human interaction as personal
irritant is doing to our social cohesion.
Is standing in a line always a burden or is it sometimes a benefit? Sure, sometimes I just
want to do my business and go but have also met fascinating people while in lines. I'm assuming
many of the people working at that ski resort are "ski bums" who used the job as a way to
fulfill their skiing lifestyle. They are a part of the skiing culture that has been removed
from the experience now. So many local jobs are being removed and replaced by tech jobs. We
barely have local community left and it's being replaced with, what? Social media? I'm a big
fan of our online communities here at NC so it's not all bad of course.
Yes, change is inevitable and much of this is convenient but just curious what it's doing to
us as a society. Maybe it's allowing us more time to focus on closer social bonds we've already
developed? Less time in lines or stores means more time with friends and family?
Our prior ways weren't exactly healthy so honestly I don't know if this will lead to better
ways or push us further apart. Any insights or ideas are appreciated. Just been pondering it
and curious what other think.
"In a system that generates masses, individualism is the only way out. But then what happens
to community -- to society?" – Jeanette Winterson
Maybe it's allowing us more time to focus on closer social bonds we've already developed?
Less time in lines or stores means more time with friends and family?
The social bond with your doctor is pretty important I would say. As it is with your local
bookseller or grocery store. They are all people too, and being face to face with them you
build more trust and compassion. This helps us both in times of hardship
I'll take the most dire view here (someone has to!):
Every step this society takes away from face-to-face interaction, and therefore community
and fellowship, is going to proportionally increase the death rate when the rolling disasters
of our era arrive properly at our shore.
I wish I could reach out and shake everyone who is like "I interact with people too much
already, this enforced isolation is GREAT!" don't they realize this philosophy might
kill them? In the upcoming chaos, if they're an unknown unknown to the people around
them, don't they realize they'll be all too easy to leave behind or even sacrifice??
This seems to be the path our society is absolutely determined to take – so be it.
Even NC is posting articles that are more or less cheering it. But as for me, I will rage, rage
against the dying of the light.
Found myself in a rather long line (no complaints) last Sat. for 2nd Covid vaccine. Realized
later that between the long line waiting and the after waiting to leave it was probably the
most people interaction I've had for over a year! We are social creatures. Our system preaches
"individualism" because that is the only way the "instant profit" system can operate. There are
other ways; our ruling classes opt out of those and the general population becomes muddled
instead.
"Modernity" and "AI" technology is great but if u have no human interaction eventually those
traits leave and you have what???? A dead society.
And with every step forward there is a step backward. Going digital across the board is not
always good as it takes away privacy and I have an example here. There is a linked article in
Links today called "Are punitive rules forcing doctors to hide their mental health problems?"
In it, a young doctor is under enormous mental stress and turns to older doctors for advice.
They 'advised her to drive out of town, pay cash and use a pseudonym if she needed to talk
to someone.' If most transaction were done digitally, how would this doctor and others like
her go for help without endangering their jobs? What options would they have?
In cases like this, the only 'options' allowed will be "official" options. As my
misguided attempt at "therapy" years ago taught me, often times, the analyst can be toxic.
Also, in a mental health setting, I encountered the "official" preference for medication
over 'therapy.' Both are situations that put the 'authority's' preferences above the
patients. One big way I eventually 'twigged' to the dystopian dynamic was in observing the
attitudes and body language of the "health care professionals" I was dealing with.
Electronica and devices have no agency, and no "body language." The entire process is
removing useful tools for the patient to navigate the shoals and reefs where the sharks
hang out in any bureaucracy.
The other, knock on effect of telemedicine we encountered was that the charges for
electronic "office visits" have not dropped. This is analogous to when a grocery store
keeps the cost of an individual item stable and reduces the package size.
Others have said it better than I, but it bears repeating; 'modern' methods are reducing
people to the status of 'things.' Just as in the process of reducing a person or group of
people to the status of "other," the next step is 'removal.'
Cash is agency. The spying may be efficient, but its main purpose is to take away
agency. Just like "software as a service" or "in the cloud", when you could just as easily
have the same functionality on your device which you own. The vendors don't want that. They
want to control you.
The only alternative is to support and keep alive businesses that accept customers with
cash and agency. And boycott the rest. Even if it is inconvenient!
Yay, less human interaction, more isolation, fewer seasonal jobs for high school or college
students. More magical technological solutions that the on-site staff has no idea how to fix
when they stop working. You're too busy and important to stand in line! That's socialism! Let's
tell everyone that they're risking imminent death by being around other people and then sell
them ways to avoid it!
The U.S. exported its production of goods and became a "service" economy or a "knowledge"
economy. Thanks to Corona much of the service employment has become virtual. Knowledge workers
can now work from home. How many knowledge workers possess knowledge unique to the U.S. and how
many could be replaced by remote workers from somewhere else?
This post describes changes, some of which may prove temporary and others may prove
permanent. I believe most of the changes and their longer term implications require time to
fully unfold. I am not fond of virtual service. I order online from the independent vendors
still around as Amazon, E-Bay, Etsy, and other platforms grind them down, but how long will
they remain independent? The U.S. Postal Service is under attack and when it falls to
privatization what kind of e-commerce will come after that? Cashless means exposed to me --
exposed to tracking and monitoring and exposed to theft from the shadows.
I don't understand the rush to eliminating cash. Cash is the last way to opt out of
commercial control. People seem to positively embrace it, and I don't get it.
(Exception: I understand why legal cash-business owners like the idea.)
I hear crime prevention and money laundering prevention as reasons. The first is code
for "control of poor people", the second is true as far as it goes, but that's not very
far. You're targeting mainly drug money while completely ignoring corporate and
high-net-worth individuals.
My question (to no one) is how was the automation financed? Did the ski company issue
new shares in equity with first refusal to the employees? Or did the company instead mosey
on down to a local branch of the government-privileged private credit cartel to have
themselves a heaping helping of the PUBLIC'S (including the employees') CREDIT but for the
company owners' PRIVATE GAIN?
As a partridge that hatches eggs which it has not laid,
So is a person who makes a fortune, but unjustly;
In the middle of his days it will abandon him,
And in the end he will be a fool. Jeremiah 17:11
The human population didn't grow to 8 billion through physical distancing, touchless
interaction, and living in isolation. ecommerce is a thing now, but it may not have a long
shelf life. There is an inherent need for human interaction if the specie is to prosper. The
pandemic is transitory and will eventually pass; human needs, wants, and desires will endure. I
look forward to the day when I can speak with a store clerk, browse shelves and racks, and pay
for things with currency. I don't believe that there is no going back. In fact, we must go
back. At least most of the way back.
This is a good, short book laying out many of the ways that the market has crept up on us and made our lives smaller.
Konczal provides necessary pushback to the neoliberal project, showing just everything that we have lost as the forces of capital
decided that the Great Society, the New Deal, and the Progressive Era were bridges too far against the corporate form. 8 people
found this helpful
Konczal's book is a compact history of how Americans have tried to remove the constraints imposed on them by the market. Konczal
questions the conventional idea that the market is solely a mechanism that expands choices and opportunity. As he shows, markets
can, and have, achieved precisely the opposite outcomes -- restricting choices and preventing people from having options. In many
instances, Americans successfully reclaimed the liberty they had lost to the market by organizing or taking state action. He thus
makes a more general case for ensuring that societal outcomes are more consistent with Berlin's notion of positive liberty. Libertarians
will not appreciate the book's conclusions.
The book starts with the Homestead Act and ends with the decision to terminate virtually free higher education in the 1960s
and 1970s. In between, he covers a lot of historical ground -- the effort to reduce working hours in the 19th century, the Wagner
Act and Social Security during the New Deal, and the introduction of Medicare and Medicaid, among other things. Despite the book's
ambitious scope, you can read it in a sitting, which is quite a feat. Either Konczal is a naturally efficient writer, or he has
a good editor.
There is one topic I would've liked to see treated in more detail -- finance. Konczal gives the best concise summary of the
economic ideas behind the ideological shift toward neoliberalism I have read. Still, the liberalization of finance during the
past 50 years and its farreaching implications receive a cursory discussion. In an interview, Konczal said he wanted to include
more discussion of this topic and something on the gold standard but didn't see how to incorporate it. In my view, it would have
fit quite naturally into the chapter "Free Economy."
But this is a quibble. Overall, the book is both well researched and well written. It sheds light on an important and timely
question -- to what extent should Americans permit themselves to be subject to market-driven outcomes? The book shows that, historically,
Americans have tried to implement changes that enabled them to live freer lives by organizing and taking political action. Not
all those changes were successful but many were.
For a deeper dive into these and related questions, read this book along with Polanyi's "The Great Transformation," Robin's
"The Reactionary Mind," and Slobodian's "The Globalists." 4 people found this helpful
Freedom from the Market remakes our understanding of American politics. By drawing intelligently on forgotten aspects of American
history, Konczal makes it easier for Americans to understand that things they might not believe are possible in America must be,
because they have been. He rescues moments such as the WWII government run daycare centers, or the use of the power of the federal
state to bring through the integration of Southern hospitals, from the enormous condescension of posterity. And notably, although
he doesn't dwell on this point, many of these changes began at moments that seem shittier and more despairing than our own.
So what Konczal is doing is neither to provide a standard linear history, nor yet a policy textbook. Instead, he is claiming
an alternative American tradition, that has not looked to the market as its apotheosis, but instead has sought to free Americans
from its random vagaries. His history explains how Americans have responded collectively to the real and expressed needs of publics,
who have organized to fight for them. And it does so in the plain language that he mentions in passing was necessary to allow
ordinary people to organize and understand who was trying to stop them.
Konczal's fundamental claim is that people who link freedom to markets miss out on much of the story. Equally important is
a notion of freedom <em>from</em> markets, "rooted in public programs that genuinely serve people and checking market dependency."
This notion goes back much further in time than the New Deal. The nineteenth century is sometimes depicted as a reign of laissez-faire,
both by those who admired it and deplored it. Konczal argues instead that there was an emerging sense of public needs - and how
the government might provide for them. For example, this helps us understand the provision of public land through the Homestead
Act and the land grant universities.
The nineteenth century notion of the public was clearly horribly flawed and contradictory - it did not include slaves or Native
Americans. Some, like Horace Greeley ended up fleeing these contradictions into the welcoming arms of free market absolutism.
But within these contradictions lay possibilities that opened up in the twentieth century. Konczal builds, for example on Eric
Schickler's work to argue that as the New Deal began to provide concrete benefits to African Americans, it created a new conduit
between them and the Democratic Party, breaking up the old coalition that had held Jim Crow together.
Konczal explains how change happens - through social movements and the state:
While the Supreme Court can be effective at holding back change and enforcing already existing power structures, it is actually
very weak at creating new reform itself. It controls no funding and is dependent on elite power structures to carry out its
decisions. What really creates change is popular mobilization and legislative changes.
He also draws on historians like Quinn Slobodian, to describe how modern Hayekians have sought to "encase" the market order
in institutions and practices that are hard to overturn. Property rights aren't the foundation of liberty, as both nineteenth
century jurists and twentieth century economists would have it. They are a product of the choices of the state, and as such intensely
political.
This allows Konczal to turn pragmatism against the Hayekians. Hayek's notion of spontaneous order is supposed to be evolutionary.
But if there is a need to to provide collective goods for people that cannot be fulfilled through voluntarism, the Hayekian logic
becomes a brutal constraint on adaptation.
The efforts of Hayekians to enforce binding legal constraints, to cripple the gathering of the collective knowledge that can
guide collective action, to wink at legal doctrines intended to subvert social protections against the market; all these prevent
the kinds of evolutionary change that are necessary to respond to changing circumstances. Konczal makes it clear that Oliver Wendell
Holmes was no left-winger - but his criticisms of the rigid and doctrinaire laissez-faire precepts of his colleagues rings true.
Their "willingness to use a very specific understanding of economics to override law writes a preferential understanding of economics
into the constitution itself." Although Konczal wrote this book before the current crisis, he describes Holmes as mentioning compulsory
vaccination laws as one of the ways in which government interference in private decisions can have general social benefits. The
wretched contortions of libertarians over the last several months, and their consequences for human welfare in states such as
North Dakota illustrate the point, quite brutally.
What Konczal presses for is a very different notion of freedom. This doesn't deny the benefits of markets, but it qualifies
them. In Konczal's words, "markets are great at distributing things based on people's willingness to pay. But there are some goods
that should be distributed by need." Accepting this point entails the necessity of keeping some important areas of life outside
the determining scope of markets. Furthermore, people's needs change over time, as societies and markets change. Konczal's framework
suggests the need for collective choice to figure out the best responses to these changes, and a vibrant democratic politics,
in which the state responds to the expressed needs of mobilized publics as the best way to carry out these choices.
All this makes the book sound more like an exercise in political theory than it is. You need to read the book itself, if you
really to get the good stuff - the stories, the examples, and the overall narrative that Konczal weaves together. <em>Freedom
from the Market</em> has the potential to be a very important book, focusing attention on the contested, messy but crucially important
intersection between social movements and the state. It provides a set of ideas that people on both sides of that divide can learn
from, and a lively alternative foundation to the deracinated technocratic notions of politics, in which good policy would somehow,
magically, be politically self supporting, that has prevailed up until quite recently. Recommended.
"As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the
citizen is struggling far in the rear or is trampled to death beneath an iron heel." ~Grover Cleveland
(about that other gilded
age)
"There is fraud at the heart of Wall Street -- deliberate intellectual, business, and political deception. Charles Ferguson is in
hot pursuit.
Inside
Job
shook
up the cozy world of academic finance.
Predator
Nation
should
stir prosecutors into action. And if we fail to reform our political system, you can say goodbye to American democracy." --
Simon
Johnson
,
coauthor of
White
House Burning
and
professor at MIT Sloan School of Management
"Over the last thirty years, the United States has been taken over by an amoral financial oligarchy, and the American dream of
opportunity, education, and upward mobility is now largely confined to the top few percent of the population.
Federal policy is increasingly dictated by the wealthy, by the financial sector, and by powerful (though sometimes badly mismanaged)
industries. These policies are implemented and praised by these groups' willing servants, namely the increasingly
bought-and-paid-for leadership of America's political parties, academia, and lobbying industry.
If allowed to continue, this process will turn the United States into a declining, unfair society with an impoverished, angry,
uneducated population under the control of a small, ultrawealthy elite. Such a society would be not only immoral but also
eventually unstable, dangerously ripe for religious and political extremism."
4.0 out of 5 stars
Scary
read. Frightening true! HIGHLY recommend!!
Reviewed in the United States on February 11, 2017
Verified Purchase
Just finished this page turner. Wow! Talk about an enlightening read.
Scary too and worse, yet it's so spot on. I always knew that most businesses, especially those dealing with
money are crooked, selfish and good for nothing greedy souls. This book proves my point and more. Personally, I
never heard of this book or the author until my brother recommended it to me in passing. It scared the hell out
of him. Naturally, I had to see what book could do that. After reading it, I understand why.
Not only are the financial industries greedy and crooked but so is our governments and both Democrats and
Republicans. The housing crash of 2008 wasn't the beginning of our problems but the culmination of years of
greed, shady deals and lack of accountability for the financial industry. President George W. Bush was
complicit in protecting the finance industry not the people of America. Worse yet was President Barack Obama.
It's all in there: every dirty little detail. If you think your broker, banker or financial advisor has your
best interest at heart, this couldn't show how very wrong you are. Is the book perfect? No. Is the U.S.
Government or any other world government perfect? Hell no. should we be very afraid of how our bankers are?
Yes.
This is a book I enjoyed reading because I already knew about most of it already just by observing and never
trusting anyone anyway. I highly recommend it. I loved the fact that the author wasn't afraid to speak the
truth. That is always refreshing. I look forward to reading more by Charles Ferguson.
Overall, an informative and compelling read. Everyone whether interested in finances or note needs to read this
book. Seriously!
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OMG!
You owe it to yourself to read what is really going on!
5.0 out of 5 stars
OMG!
You owe it to yourself to read what is really going on!
Reviewed in the United States on November 4, 2014
Verified Purchase
Definitely an eye opener. If I was cynical before, this one pushed me
over the edge. Banks and large corporations in collusion with the government and zero accountability. Our
newspapers, again, did a disservice to the public. It is one thing to talk about the mortgage industry going
under, it is quite another to understand what the banks did to facilitate a world-wide recession with NO
prosecutions. I was particularly appalled that the corporations paid the politicians who voted to remove any
restraints on the banks. Then the banks created derivative markets they knew would fail. Moreover, the bank
made millions of dollars by betting the derivative market would fail. Yet, when the bubble burst, these same
people were standing at the government door (that they paid for) with their hand out for a taxpayer bail-out.
The CEOs were rewarded for their bad behavior with millions of dollars in bonuses and no repercussions for
bilking millions of victims or for causing a world wide downward money spiral.
7 people found this helpful
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4.0 out of 5 stars
Long
on diagnosis, short on solution
Reviewed in the United States on June 9, 2012
Verified Purchase
As a fan of "Inside Job" I was eager to read Predator Nation, which
minces no words in designating the financial industry as "criminal" abetted by the political establishment,
whether Republican or Democrat. The other reviews here lay out what this book accomplishes, to which I would
only underscore the powerful and no-holds-barred approach of Ferguson to establishing responsibility and
labeling it "criminal" as well as "predatory."
Beyond critique of Wall Street and the political "duopoly," the book widely supports the thesis that something
is terribly wrong in America, a cultural malaise rooted in economic thievery and imbalance empowering the
wealthy, and rendering today's America into the equivalent of what we used to call "a banana republic." Charles
Ferguson pulls no punches in laying out his case here.
But, as another review has pointed out, the ending is disappointing. Charles has laid into Obama as part of the
"duopoly" governing America, meaning diverging only on fractious social issues but essentially united in
matters of finance and government, including war. At one point he labels Obama's weak commentary on controlling
Wall Street "horse [manure]" and then at another point says "he [Obama] screwed us." In his concluding five
page chapter which has an "oh, well" feel to it he tells us "hold your nose and vote for him [Obama], as I
will."
With this and various commentaries we seem to be very long on laying out damages and ascribing responsibility,
but have almost nothing to say on what to do other than repair to the lounge on the Titanic and have another
whiskey, hoping somebody will come along with a bright idea or two at some point. If more energy were put into
finding answers, as with ascribing blame, maybe we could be more hopeful.
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9 people found this helpful
The rich understand that capitalism is a game of musical chairs. It's systemic class warfare
conducted on a grand scale to discourage solidarity across lines that might otherwise threaten
the system, and with each market re-set arranged by the Federal Reserve, more of the country's
resources fall into wealthy hands.
Examining what happens when a society favors old money over new and breaks all the rules to
make the world safe for finance, author Jeanne Haskin predicts increasing volatility and
violence in the United States if we do not significantly change course.
For a preview of what lies ahead for the U.S., the author takes us for a quick exemplary
trip through Central America.
A society that is reared on competition will face unsettling
challenges to authority if it doesn't set certain functions outside the arena of battle, via
systematic enrichment of the affluent minority that has always had the power to topple and ruin
the system.
Today's preoccupation with America's revolutionary history is not just a piece of theater.
At the heart of America's outrage is an inability to lash out and demand redemption from the
source of its distress because the pain is inflicted, not by hatred, but by the fundamental
lack of stability built into our way of life.
Now that a fifth of the population is suffering job loss, foreclosures, or exclusion from
employment due to prejudice, poor credit, a lack of skills or education, a glut of competition
and insufficient opportunity, the failure to provide for the helpless majority means the system
is at an impasse. Because the system can't or won't perform, the Tea Party's rise was
preemptive with all its implied violence and 'real' American theater as the means to channel
our anger into voting out Obama so reform can proceed unimpeded...with all its inherent
dangers.
After reviewing some foreign examples that erupted in the environments of colonialism and
post-colonialism, neoliberalism, militarism and oligarchies, the author filters through the
head-spinning social and political noise that stands in for responsible debate in America
today. Ms. Haskin's richly documented essay sees a bonfire prepared as social tensions are
increased and inter-group pressures are encouraged to mount. So much for "One nation..."
Title Pagev
Table of Contentsxi
Introduction1
Chapter One- Unearthing the Bones7
Chapter Two- Instilling the Illusion of Choice19
Chapter Three- Political Strategizing23
Chapter Four- Behavioral Economics27
Chapter Five- Favoring Old Money over New33
Chapter Six- Making the World Safe for Finance39
Chapter Seven- The Colonial History of Belize51
Chapter Eight- Belize -- Party Politics and Debt65
Chapter Nine- Belize -- Recommendations of the IMF83
Chapter Ten- Nicaragua 1522–193991
Chapter Eleven- Nicaragua -- The Somoza Dynasty107
Chapter Twelve- Nicaragua -- Opposition to the Sandinistas119
Chapter Thirteen- Nicaragua -- Implementing Neoliberalism133
Chapter Fourteen- El Salvador -- The Military and the Oligarchy151
Chapter Fifteen- El Salvador -- The War and Its Aftermath165
Chapter Sixteen- Honduras -- Land of Instability179
Chapter Seventeen- Honduras -- The Impact of the Contras191
Chapter Eighteen- Fast-Forward to a Volatile USA205
Bibliography227
Index25
This author is brilliant. He gave a comprehensive yet very compact overview of neoliberalism
the first part of the book. An overview which IMHO is very difficult to match. Here are the key
ideas and periods that he outlined:
== quote ==
This is not an ordinary political moment. Everywhere around us, the old order is collapsing.
The golden age of postwar economic growth is over, replaced by a new Gilded Age of inequality
and stagnation... People once united by common culture and information are now fractured into
social media echo chambers.
The [neo]liberal international order is cracking as nationalism grows in strength and global
institutions decay. The United States' role as a global superpower is challenged by the rising
strength of China and a new era of Russian assertiveness.
Optimists hope that generational and demographic change will restore inexorable progress.
Pessimists interpret the current moment as the decline and fall of democracy.
.. we are currently in the midst of one of these epochal transitions. We live on the edge of
a new era in politics -- the third since the Great Depression and World War II. The first era
is probably best described as liberal.... from the 1940s through the 1970s, a version of
political liberalism provided the paradigm for politics. Charting a path between the state
control of communists and fascists and the laissez-faire market that dominated before the Great
Depression, liberals adopted a form of regulated capitalism. Government set the rules of the
road for the economy, regulated finance, invested to create jobs and spark consumer demand,
policed the bad behavior of businesses, and provided a social safety net for Americans. Big
institutions -- big government, big corporations, big labor -- cooperated to balance the needs
of stakeholders in society. In the United States, it was called New Deal Liberalism. In Europe,
social democracy. There were differences across countries, of course, but the general approach
was similar. ...even the conservatives of the time were liberal. Republican president Dwight
Eisenhower championed the national highway system and warned of the military-industrial
complex. President Richard Nixon said, "I am now a Keynesian in economics." His administration
created the EPA and expanded Social Security by indexing benefits to inflation.
...since the 1980s, we have lived in a second era -- that of neoliberalism. In economic and
social policy, neoliberalism's tenets are simple: deregulation, privatization, liberalization,
and austerity. Under neoliberalism, individuals are on their own and should be responsible for
themselves. Instead of governments, corporations, and unions balancing the interests of all
stakeholders, the primary regulator of social interests should be the marketplace. Neoliberals
opposed unions and unionization, they wanted to pursue vouchers instead of public provision of
services, and they sought to shrink the size and functioning of government, even if it meant a
less effective government. Markets worked like magic, and market logic would be applied to all
aspects of life. Around the world, the neoliberal era came with an aggressive emphasis on
expanding democracy and human rights, even by military force. Expanding trade and commerce came
with little regard for who the winners and losers were -- or what the political fallout might
be. ...It was President Bill Clinton who said that the "era of big government is over" and who
celebrated the legislation deregulating Wall Street.
...With the election of Donald Trump, the neoliberal era has reached its end. While in
control of the House, Senate, and presidency, Republicans neither repealed the Affordable Care
Act nor privatized Social Security and Medicare. Their party is increasingly fractured between
Trumpist conservatives, who are far more nationalist, and the never-Trump old-line
conservatives like Bill Kristol or Jeb Bush. An increasing number of people recognize that
neoliberalism's solutions are unsuited to the challenges of our time.
== end ==
The most valuable part of the book IMHO are two chapters devoted to the collapse of
neoliberalism
The author also proposes a very interesting approach to evaluation of the identity politics
as a political strategy:
== quote ==
To be sure, race, gender, culture, and other aspects of social life have always been important
to politics. But neoliberalism's radical individualism has increasingly raised two interlocking
problems. First, when taken to an extreme, social fracturing into identity groups can be used
to divide people and prevent the creation of a shared civic identity. Self-government requires
uniting through our commonalities and aspiring to achieve a shared future.
When individuals fall back onto clans, tribes, and us-versus-them identities, the political
community gets fragmented. It becomes harder for people to see each other as part of that same
shared future.
Demagogues [more correctly neoliberals] rely on this fracturing to inflame racial,
nationalist, and religious antagonism, which only further fuels the divisions within society.
Neoliberalism's war on "society," by pushing toward the privatization and marketization of
everything, thus indirectly facilitates a retreat into tribalism that further undermines the
preconditions for a free and democratic society.
The second problem is that neoliberals on right and left sometimes use identity as a shield
to protect neoliberal policies. As one commentator has argued, "Without the bedrock of class
politics, identity politics has become an agenda of inclusionary neoliberalism in which
individuals can be accommodated but addressing structural inequalities cannot." What this means
is that some neoliberals hold high the banner of inclusiveness on gender and race and thus
claim to be progressive reformers, but they then turn a blind eye to systemic changes in
politics and the economy.
Critics argue that this is "neoliberal identity politics," and it gives its proponents the
space to perpetuate the policies of deregulation, privatization, liberalization, and
austerity.
Of course, the result is to leave in place political and economic structures that harm the
very groups that inclusionary neoliberals claim to support. The foreign policy adventures of
the neoconservatives and liberal internationalists haven't fared much better than economic
policy or cultural politics. The U.S. and its coalition partners have been bogged down in the
war in Afghanistan for 18 years and counting. Neither Afghanistan nor Iraq is a liberal
democracy, nor did the attempt to establish democracy in Iraq lead to a domino effect that
swept the Middle East and reformed its governments for the better. Instead, power in Iraq has
shifted from American occupiers to sectarian militias, to the Iraqi government, to Islamic
State terrorists, and back to the Iraqi government -- and more than 100,000 Iraqis are
dead.
Or take the liberal internationalist 2011 intervention in Libya. The result was not a
peaceful transition to stable democracy but instead civil war and instability, with thousands
dead as the country splintered and portions were overrun by terrorist groups. On the grounds of
democracy promotion, it is hard to say these interventions were a success. And for those
motivated to expand human rights around the world, it is hard to justify these wars as
humanitarian victories -- on the civilian death count alone.
Indeed, the central anchoring assumptions of the American foreign policy establishment have
been proven wrong. Foreign policymakers largely assumed that all good things would go together
-- democracy, markets, and human rights -- and so they thought opening China to trade would
inexorably lead to it becoming a liberal democracy. They were wrong. They thought Russia would
become liberal through swift democratization and privatization. They were wrong.
They thought globalization was inevitable and that ever-expanding trade liberalization was
desirable even if the political system never corrected for trade's winners and losers. They
were wrong. These aren't minor mistakes. And to be clear, Donald Trump had nothing to do with
them. All of these failures were evident prior to the 2016 election.
== end ==
In other words identity politics is, first and foremost, a dirty and shrewd political
strategy developed by the Clinton wing of the Democratic Party (aka "soft neoliberals".)
Along with Neo-McCarthyism it represents a mechanism to compensate for the loss by Clinton
Democrats of their primary voting block: trade union members, who in 2016 "en mass" defected to
Trump.
Initially Clinton calculation was that trade union voters has nowhere to go anyways, and it
was correct for first decade or so of his betrayal. But gradually trade union members and lower
middle class started to leave Dems in droves (Demexit; compare with Brexit) and that where
identity politics was invented to compensate for this loss.
We also can identity politics as a double edge sword, which the second edge being the
political strategy of the "soft neoliberals " directed at discrediting and the suppression of
the rising nationalism.
The author correctly argues that the resurgence of nationalism is the inevitable byproduct
of the dominance of neoliberalism, resurgence which I think is capable to bury neoliberalism as
it lost the popular support (which now is limited to financial oligarchy and high income
professional groups, such as we can find in corporate and military brass, (shrinking) IT
sector, upper strata of academy, upper strata of medical professionals, etc.)
In other words, if you are interested in this topic (as well as the most probable outcome of
2020 elections which would be the second referendum on neoliberalism held in the USA) , please
buy the book; you will never regret this decision ;-)
That means that the structure of the current system isn't just flawed which imply that most
problems are relatively minor and can be fixed by making some tweaks. It is unfixable, because
the "Identity wars" reflect a deep moral contradictions within neoliberal ideology. And they
can't be solved within this framework.
Publisher: Harvard University Press (March 16, 2018)
Language: English
ISBN-10: 9780674979529
Chosen by Pankaj Mishra as one of the Best Books of the Summer
Neoliberals hate the state. Or do they? In the first intellectual history of neoliberal
globalism, Quinn Slobodian follows a group of thinkers from the ashes of the Habsburg Empire to
the creation of the World Trade Organization to show that neoliberalism emerged less to shrink
government and abolish regulations than to redeploy them at a global level.
Slobodian begins in Austria in the 1920s. Empires were dissolving and nationalism,
socialism, and democratic self-determination threatened the stability of the global capitalist
system. In response, Austrian intellectuals called for a new way of organizing the world. But
they and their successors in academia and government, from such famous economists as Friedrich
Hayek and Ludwig von Mises to influential but lesser-known figures such as Wilhelm Röpke
and Michael Heilperin, did not propose a regime of laissez-faire. Rather they used states and
global institutions―the League of Nations, the European Court of Justice, the World Trade
Organization, and international investment law―to insulate the markets against sovereign
states, political change, and turbulent democratic demands for greater equality and social
justice.
Far from discarding the regulatory state, neoliberals wanted to harness it to their grand
project of protecting capitalism on a global scale. It was a project, Slobodian shows, that
changed the world, but that was also undermined time and again by the inequality, relentless
change, and social injustice that accompanied it.
This is a rather
interesting look at the political and economic ideas of a circle of important economists,
including Hayek and von Mises, over the course of the last century. He shows rather
convincingly that conventional narratives concerning their idea are wrong. That they didn't
believe in a weak state, didn't believe in the laissez-faire capitalism or believe in the power
of the market. That they saw mass democracy as a threat to vested economic interests.
The core beliefs of these people was in a world where money, labor and products could flow
across borders without any limit. Their vision was to remove these subjects (tariffs,
immigration and controls on the movement of money) from the control of the democracy-based
nation-state and instead vesting them in international organizations. International
organizations which were by their nature undemocratic and beyond the influence of democracy.
That rather than rejecting government power, what they rejected was national government power.
They wanted weak national governments but at the same time strong undemocratic international
organizations which would gain the powers taken from the state.
The other thing that characterized many of these people was a rather general rejection of
economics. While some of them are (at least in theory) economists, they rejected the basic
ideas of economic analysis and economic policy. The economy, to them, was a mystical thing
beyond any human understanding or ability to influence in a positive way. Their only real
belief was in "bigness". The larger the market for labor and goods, the more economically
prosperous everyone would become. A unregulated "global" market with specialization across
borders and free migration of labor being the ultimate system.
The author shows how, over a period extending from the 1920s to the 1990s, these ideas
evolved from marginal academic ideas to being dominant ideas internationally. Ideas that are
reflected today in the structure of the European Union, the WTO (World Trade Organization) and
the policies of most national governments. These ideas, which the author calls "neoliberalism",
have today become almost assumptions beyond challenge. And even more strangely, the dominating
ideas of the political left in most of the west.
The author makes the point, though in a weak way, that the "fathers" of neoliberalism saw
themselves as "restoring" a lost golden age. That golden age being (roughly) the age of the
original industrial revolution (the second half of the 1800s). And to the extent that they have
been successful they have done that. But at the same time, they have brought back all the
political and economic questions of that era as well.
In reading it, I started to wonder about the differences between modern neoliberalism and
the liberal political movement during the industrial revolution. I really began to wonder about
the actual motives of "reform" liberals in that era. Were they genuinely interested in reforms
during that era or were all the reforms just cynical politics designed to enhance business
power at the expense of other vested interests. Was, in particular, the liberal interest in
political reform and franchise expansion a genuine move toward political democracy or simply a
temporary ploy to increase their political power. If one assumes that the true principles of
classic liberalism were always free trade, free migration of labor and removing the power to
governments to impact business, perhaps its collapse around the time of the first world war is
easier to understand.
He also makes a good point about the EEC and the organizations that came before the EU.
Those organizations were as much about protecting trade between Europe and former European
colonial possessions as they were anything to do with trade within Europe.
To me at least, the analysis of the author was rather original. In particular, he did an
excellent job of showing how the ideas of Hayek and von Mises have been distorted and
misunderstood in the mainstream. He was able to show what their ideas were and how they relate
to contemporary problems of government and democracy.
But there are some strong negatives in the book. The author offers up a complete virtue
signaling chapter to prove how the neoliberals are racists. He brings up things, like the John
Birch Society, that have nothing to do with the book. He unleashes a whole lot of venom
directed at American conservatives and republicans mostly set against a 1960s backdrop. He does
all this in a bad purpose: to claim that the Kennedy Administration was somehow a continuation
of the new deal rather than a step toward neoliberalism. His blindness and modern political
partisanship extended backward into history does substantial damage to his argument in the
book. He also spends an inordinate amount of time on the political issues of South Africa which
also adds nothing to the argument of the book. His whole chapter on racism is an elaborate
strawman all held together by Ropke. He also spends a large amount of time grinding some sort
of Ax with regard to the National Review and William F. Buckley.
He keeps resorting to the simple formula of finding something racist said or written by
Ropke....and then inferring that anyone who quoted or had anything to do with Ropke shared his
ideas and was also a racist. The whole point of the exercise seems to be to avoid any analysis
of how the democratic party (and the political left) drifted over the decades from the politics
of the New Deal to neoliberal Clintonism.
Then after that, he diverts further off the path by spending many pages on the greatness of
the "global south", the G77 and the New International Economic Order (NIEO) promoted by the UN
in the 1970s. And whatever many faults of neoliberalism, Quinn Slobodian ends up standing for a
worse set of ideas: International Price controls, economic "reparations", nationalization,
international trade subsidies and a five-year plan for the world (socialist style economic
planning at a global level). In attaching himself to these particular ideas, he kills his own
book. The premise of the book and his argument was very strong at first. But by around p. 220,
its become a throwback political tract in favor of the garbage economic and political ideas of
the so-called third world circa 1974 complete with 70's style extensive quotations from
"Senegalese jurists"
Once the political agenda comes out, he just can't help himself. He opens the conclusion to
the book taking another cheap shot for no clear reason at William F. Buckley. He spends alot of
time on the Seattle anti-WTO protests from the 1990s. But he has NOTHING to say about BIll
Clinton or Tony Blair or EU expansion or Obama or even the 2008 economic crisis for that
matter. Inexplicably for a book written in 2018, the content of the book seems to end in the
year 2000.
I'm giving it three stars for the first 150 pages which was decent work. The second half
rates zero stars.
Though it could have been far better if he had written his history of
neoliberalism in the context of the counter-narrative of Keynesian economics and its decline.
It would have been better yet if the author had the courage to talk about the transformation of
the parties of the left and their complicity in the rise of neoliberalism. The author also
tends to waste lots of pages repeating himself or worse telling you what he is going to say
next. One would have expected a better standard of editing by the Harvard Press.
By both its supporters and detractors, neoliberalism is usually considered an economic
policy agenda. Neoliberalism's Demons argues that it is much more than that: a complete
worldview, neoliberalism presents the competitive marketplace as the model for true human
flourishing. And it has enjoyed great success: from the struggle for "global competitiveness"
on the world stage down to our individual practices of self-branding and social networking,
neoliberalism has transformed every aspect of our shared social life. The book explores the
sources of neoliberalism's remarkable success and the roots of its current decline.
Neoliberalism's appeal is its promise of freedom in the form of unfettered free choice. But
that freedom is a trap: we have just enough freedom to be accountable for our failings, but not
enough to create genuine change. If we choose rightly, we ratify our own exploitation. And if
we choose wrongly, we are consigned to the outer darkness -- and then demonized as the cause of
social ills. By tracing the political and theological roots of the neoliberal concept of
freedom, Adam Kotsko offers a fresh perspective, one that emphasizes the dynamics of race,
gender, and sexuality. More than that, he accounts for the rise of right-wing populism, arguing
that, far from breaking with the neoliberal model, it actually doubles down on neoliberalism's
most destructive features.
skeptic
This book tried to integrate the results of previous research of neoliberalism by such
scholars as David Harvey, Philip Mirowski, and Wendy Brown into a more coherent framework. He
has some brilliant insights about neoliberalism as secular religion scattered within the
book. For example "I have claimed that the political-theological root of neoliberalism is
freedom and have characterized its vision of freedom as hollow." His theological notion of
"neoliberalism demons" ( the dark forces unleashed by neoliberalism) also represents a very
valuable insight as neoliberalism explicitly violates Christian morality postulates ("greed
is good").
"Liberal democracy under neoliberalism represents a forced choice between two fundamentally
similar options, betraying its promise to provide a mechanism for rational and
self-reflective human agency. The market similarly mobilizes free choice only to subdue and
subvert it, "responsibilizing" every individual for the outcomes of the system while
radically foreclosing any form of collective responsibility for the shape of society. And
any attempt to exercise human judgment and free choice over social institutions and
outcomes is rejected as a step down the slippery' slope to totalitarianism. To choose in
any strong sense is always necessarily to choose wrongly, to fall into sin."
In the introduction, he correctly states that the academic workforce is now
deeply affected by neoliberalization.
Every academic critique of neoliberalism is an unacknowledged memoir. We academics occupy a
crucial node in the neoliberal system. Our institutions are foundational to neoliberalism's
claim to be a meritocracy, insofar as we are tasked with discerning and certifying the
merit that leads to the most powerful and desirable jobs. Yet at the same time, colleges
and universities have suffered the fate of all public goods under the neoliberal order. We
must, therefore "do more with less," cutting costs while meeting ever-greater demands. The
academic workforce faces increasing precarity and shrinking wages even as it is called on
to teach and assess more students than ever before in human history -- and to demonstrate
that we are doing so better than ever, via newly devised regimes of outcome-based
assessment. In short, we academics live out the contradictions of neoliberalism every day.
The author explains his use of the term "theology" instead of "ideology in such a way: "
theology' has always been about much more than God. Even the simplest theological systems
have a lot to say about the world we live in, how it came to be the way it is, and how it
should be. Those ideals are neither true nor false in an empirical sense, nor is it fair to
say that believers accept them blindly. "
He justifies the use of this term in the following way:
Here the term theology is likely to present the primary difficulty, as it seems to
presuppose some reference to God. Familiarity with political theology as it has
conventionally been practiced would reinforce that association. Schmitt's Political
Theology and Kantorowicz's The King's Two Bodies both focused on the parallels between God
and the earthly ruler,3 and much subsequent work in the field has concentrated on the
theological roots of political concepts of state sovereignty'. Hence the reader may justly
ask whether I am claiming that neoliberalism presupposes a concept of God.
The short answer is no. I am not arguing, for example, that neoliberalism "worships" the
invisible hand, the market, money, wealthy entrepreneurs, or any other supposed "false
idol," nor indeed that it is somehow secretly "religious" in the sense of being fanatical
and unreasoning. Such claims presuppose a strong distinction between the religious and the
secular, a distinction that proved foundational for the self-legitimation of the modern
secular order but that has now devolved into a stale cliché. As I will discuss in
the chapters that follow, one of the things that most appeals to me about political
theology as a discipline is the way that it rejects the religious/secular binary.
The author correctly point s out that "Neoliberalism likes to hide", Like Philip Mirowski
he views neoliberalism as a reaction on the USSR socialism which in my view integrates much
of Trotskyism. Replacing the slogan "Proletarians of all countries, unite!", with the slogan
"financial elites of all countries unite."
While most authors consider that neoliberalism became the dominant political force with
the election of Reagan, the author argues that it happened under Nixon: " Nixon's decision in
1971 to go off the gold standard, which broke with the Bretton Woods settlement that had
governed international finance throughout the postwar era and inadvertently cleared the space
for the fluctuating exchange rates that proved so central to the rise of contemporary finance
capitalism. "
He contrasts approaches of Harvey, Mirowski and Brown pointing out that real origin of
neoliberalism and Trotskyism style "thought collective" – intellectual vanguard that
drives everybody else, often using deception to final victory of neoliberalism.
It is this group that Mirowski highlights with his notion of the Neoliberal Thought
Collective. One could walk away from Harvey's account viewing the major figures of
neoliberalism as dispensable figureheads for impersonal political and economic forces. By
contrast, the most compact possible summary of Mirowski s book would be: "It's people!
Neoliberalism is made out of people!" In this reading, there was nothing inevitable about
neoliberalism's rise, which depended on the vision and organization of particular nameable
individuals.
Brown portrays neoliberalism as an attempt to extinguish the political -- here
represented by the liberal democratic tradition of popular sovereignty and self-rule -- and
consign humanity to a purely economic existence. In the end Brown calls us to take up a
strange kind of metapolitical struggle against the economic enemy, in defense of politics
as such. Meanwhile, Jodi Dean, who agrees that neoliberalism has a depoliticizing tendency,
argues that this depoliticization actually depends on the notion of democracy and that
appeals to democracy against neoliberalism arc therefore doomed in advance.9
He also points out neoliberalism tendency to create markets using the power of the
state:
"Obamacare effectively created a market in individual health insurance plans, an area where
the market was previously so dysfunctional as to be essentially nonexistent. The example of
Obamacare also highlights the peculiar nature of neoliberal freedom. One of its most
controversial provisions was a mandate that all Americans must have health insurance
coverage. From a purely libertarian perspective, this is an impermissible infringement on
economic freedom -- surely if i am free to make my own economic decisions, I am also free
to choose not to purchase health insurance. Yet the mandate fits perfectly with the overall
ethos of neoliberalism.
Overall, then, in neoliberalism an account of human nature where economic competition is
the highest value leads to a political theory where the prime duty of the state is to
enable, and indeed mandate, such competition, and the result is a world wherein
individuals, firms, and states are all continually constrained to express themselves via
economic competition. This means that neoliberalism tends to create a world in which
neoliberalism is "true." A more coherent and self-reinforcing political theology can
scarcely be imagined -- but that, I will argue, is precisely what any attempt to create an
alternative to neoliberalism must do.
He points out on weaknesses of Marxist analysts and by Harvey's own "recognition
of the fact that classes have been profoundly changed during the process of
neo-liberalization" -- meaning that the beneficiaries cannot have planned the neoliberal push
in any straightforward way. More than that, an economic-reductionist account ignores the
decisive role of the state in the development of the neoliberal order: "To believe that
'financial markets' one fine day eluded the grasp of politics is nothing but a fairy tale. It
was states, and global economic organizations, in close collusion with private actors, that
fashioned rules conducive to the expansion of market finance."'' In other words,
neoliberalism is an example where, contrary to Marxism, political forces directly transform
economic structures.
He also points out that Polanyi views on the subject supports this thesis:
Polanyi famously characterized the interplay between market forces and society as a "double
movement": when market relations threaten to undermine the basic foundations of social
reproduction, society (most often represented by state institutions) intervenes to prevent
or at least delay the trend set in motion by the market. Compared with Aristotle's
distribution of categories between the political and economic realms, Polanyi's account is
itself a "great transformation" on the conceptual level. Where Aristotle distinguished
state and household and placed both legitimate economic management and unrestrained
accumulation in the latter, Polanyi's "society" combines the household and the state,
leaving only out-of-control acquisition in the purely economic realm. And in this schema,
the society represents the spontaneous and natural, while the economic force of the market
is what is constructed and deliberate.
The legacy of Polanyi should already be familiar to us in the many analyses of
neoliberalism that see the state, nationalism, and other similar forces as extrinsic
"leftovers" that precede or exceed neoliberal logic. Normally such interpretations first
point out the supposed irony or hypocrisy that neoliberalism comes to require these
exogenous elements for its functioning while claiming that those same "leftover"
institutions can be sites of resistance. Hence, for instance, one often hears that the left
needs to restore confidence in state power over against the market, that socialism can only
be viable if a given country isolates itself from the forces of the global market, or in
Wendy Brown's more abstract terms, that the left must reclaim the political to combat the
hegemony of the economic.
He makes an important point that "neoliberalism does not simply destroy some
preexisting entity known as "the family," but creates its own version of the family, one that
fits its political-economic agenda, just as Fordism created the white suburban nuclear family
that underwrote its political-economic goals."
Following Wendy Brown he views victimization of poor as an immanent feature of
neoliberalism:
"The psychic life of neoliberalism, as so memorably characterized by Mark Fisher in
Capitalist Realism, is shot through with anxiety and shame. We have to be in a constant
state of high alert, always "hustling" for opportunities and connections, always planning
for every contingency (including the inherently unpredictable vagaries of health and
longevity). This dynamic of "responsibilization," as Wendy Brown calls it, requires us to
fritter away our life with worry and paperwork and supplication, "pitching"ourselves over
and over again, building our "personal brand" -- all for ever-lowering wages or a
smattering of piece-work, which barely covers increasingly exorbitant rent, much less
student loan payments."
He also points out that under neoliberalism "Under normative neoliberalism "neoclassical
economics becomes a soft constitution for government or 'governance' in its devolved forms"
the point that Philip Mirowski completely misses.
While correctly pointing out that neoliberalism is in decline and its ideology collapsed
after 2008 (" Neoliberalism has lost its aura of inevitability"), it is unclear which forces
will dismantle neoliberalism. And when it will be sent to the dustbin of the history. The
chapter of the book devoted to "After Neoliberalism" theme is much weaker than the chapters
devoted to its analysis.
For example, the author thinks that Trump election signifies a new stage of neoliberalism
which he calls "punitive neoliberalism." I would call Trumpism instead "national
neoliberalism" with all associated historical allusions.
"... In this book, I provide a somewhat cumbersome definition of neoliberalism and a pithier one, both of which inform the argument running throughout this book. The cumbersome one is as follows: 'the elevation of marked-based principles and techniques of evaluation to the level of state-endorsed norms'. ..."
In this book, I provide a somewhat cumbersome definition of neoliberalism and a pithier
one, both of which inform the argument running throughout this book. The cumbersome one is as
follows: 'the elevation of marked-based principles and techniques of evaluation to the level of
state-endorsed norms'.
What this intends to capture is that, while neoliberal states have extended and liberated
markets in certain areas (for instance, via privatisation and anti-union legislation), the
neoliberal era has been marked just as much by the reform of non-market institutions, so as to
render them market-like or business-like. Consider how competition is deliberately injected
into socialised healthcare systems or universities. Alternatively, how protection of the
environment is pursued by calculating a proxy price for natural public goods, in the
expectation that businesses will then value them appropriately (Fourcade, 2011). It is economic
calculation that spreads into all walks of life under neoliberalism, and not markets as such.
This in turn provides the pithier version: neoliberalism is 'the disenchantment of politics by
economics'.
The crisis of neoliberalism has reversed this ordering. 2008 was an implosion of technical
capabilities on the part of banks and financial regulators, which was largely unaccompanied by
any major political or civic eruption, at least until the consequences were felt in terms of
public sector cuts that accelerated after 2010, especially in Southern Europe. The economic
crisis was spookily isolated from any accompanying political crisis, at least in the beginning.
The eruptions of 2016 therefore represented the long-awaited politicization and publicisation
of a crisis that, until then, had been largely dealt with by the same cadre of experts whose
errors had caused it in the first place.
Faced with these largely unexpected events and the threat of more, politicians and media
pundits have declared that we now need to listen to those people 'left behind by
globalization'. Following the Brexit referendum, in her first speech as Prime Minister, Theresa
May made a vow to the less prosperous members of society, 'we will do everything we can to give
you more control over your lives. When we take the big calls, we'll think not of the powerful,
but you.' This awakening to the demands and voices of marginalized demographics may represent a
new recognition that economic policy cannot be wholly geared around the pursuit of 'national
competitiveness' in the 'global race', a pursuit that in practice meant seeking to prioritise
the interests of financial services and mobile capital. It signals mainstream political
acceptance that inequality cannot keep rising forever. But it is still rooted in a somewhat
economistic vision of politics, as if those people 'left behind by globalisation' simply want
more material wealth and opportunity', plus fewer immigrants competing for jobs. What this
doesn't do is engage with the distinctive political and cultural sociology of events such as
Brexit and Trump, which are fuelled by a spirit of rage, punishment and self-punishment, and
not simply by a desire to get a slightly larger slice of the pie.
This is where, 1 think, we need to pay close attention to a key dimension of neoliberalism,
which 1 focus on at length in this book, namely competition. One of my central arguments here
is that neoliberalism is not simply reducible to 'market fundamentalism', even if there are
areas (such as financial markets) where markets have manifestly attained greater reach and
power since the mid1970s. Instead, the neoliberal state takes the principle of competition and
the ethos of competitiveness (which historically have been found in and around markets), and
seeks to reorganise society around them. Quite how competition and competitiveness are defined
and politically instituted is a matter for historical and theoretical exploration, which is
partly what The Limits of Neoliberalism seeks to do. But at the bare minimum, organising social
relations in terms of 'competition' means that individuals, organisations, cities, regions and
nations are to be tested in terms of their capacity to out-do each other. Not only that, but
the tests must be considered fair in some way, if the resulting inequalities are to be
recognised as legitimate. When applied to individuals, this ideology is often known as
'meritocracy''.
The appeal of this as a political template for society is that, according to its advocates,
it involves the discovery of brilliant ideas, more efficient business models, naturally
talented individuals, new urban visions, successful national strategies, potent entrepreneurs
and so on. Even if this is correct (and the work of Thomas Piketty on how wealth begets wealth
is enough to cast considerable doubt on it) there is a major defect: it consigns the majority
of people, places, businesses and institutions to the status of'losers'. The normative and
existential conventions of a neoliberal society stipulate that success and prowess are things
that are earned through desire, effort and innate ability, so long as social and economic
institutions are designed in such a way as to facilitate this. But the corollary of this is
that failure and weakness are also earned: when individuals and communities fail to succeed,
this is a reflection of inadequate talent or energy on their part.
This has been critically
noted in how 'dependency' and 'welfare' have become matters of shame since the conservative
political ascendency of the 1980s. But this is just one example of how a culture of obligatory
competitiveness exerts a damaging moral psychology, not only in how people look down on others,
but in how they look down on themselves. A culture which valorises 'winning' and
'competitiveness' above all else provides few sources of security or comfort, even to those
doing reasonably well. Everyone could be doing better, and if they're not, they have themselves
to blame. The vision of society as a competitive game also suggests that anyone could very
quickly be doing worse.
Under these neoliberal conditions, remorse becomes directed inwards, producing the
depressive psychological effect (or what Freud termed 'melancholia') whereby people search
inside themselves for the source of their own unhappiness and imperfect lives (Davies, 2015).
Viewed from within the cultural logic of neoliberalism, uncompetitive regions, individuals or
communities are not just 'left behind by globalisation', but are discovered to be inferior in
comparison to their rivals, just like the contestants ejected from a talent show. Rising
household indebtedness compounds this process for those living in financial precarity, by
forcing individuals to pay for their own past errors, illness or sheer bad luck (Davies,
Montgomerie & Wallin, 2015).
In order to understand political upheavals such as Brexit, we need to perform some
sociological interpretation. We need to consider that our socio-economic pathologies do not
simply consist in the fact that opportunity and wealth are hoarded by certain industries (such
as finance) or locales (such as London) or individuals (such as the children of the wealthy),
although all of these things are true. We need also to reflect on the cultural and
psychological implications of how this hoarding has been represented and justified over the
past four decades, namely that it reflects something about the underlying moral worth of
different populations and individuals.
One psychological effect of this is authoritarian attitudes towards social deviance: Brexit
and Trump supporters both have an above-average tendency to support the death penalty, combined
with a belief that political authorities are too weak to enforce justice (Kaufman, 2016).
However, it is also clear that psychological and physical pain have become far more widespread
in neoliberal societies than has been noticed by most people. Statistical studies have shown
how societies such as Britain and the United States have become afflicted by often inexplicable
rising mortality rates amongst the white working class, connected partly to rising suicide
rates, alcohol and drug abuse (Dorling, 2016). The Washington Post identified close geographic
correlations between this trend and support for Donald Trump (Guo, 2016). In sum, a
moral-economic system aimed at identifying and empowering the most competitive people,
institutions and places has become targeted, rationally or otherwise, by the vast number of
people, institutions and places that have suffered not only the pain of defeat but the
punishment of defeat for far too long.
NEOLIBERALISM: DEAD OR ALIVE?
The question inevitably arises, is thus thing called 'neoliberalism' now over? And if not,
when might it be and how would we know? In the UK, the prospect of Brexit combined with the
political priority of reducing immigration means that the efficient movement of capital
(together with that of labour) is being consciously impeded in a way that would have been
unthinkable during the 1990s and early 2000s. 1'he re-emergence of national borders as
obstacles to the flow of goods, finance, services and above all people, represents at least an
interruption in the vision of globalisation that accompanied the heyday of neoliberal policy
making between 1989-2008. If events such as Brexit signal the first step towards greater
national mercantilism and protectionism, then we may be witnessing far more profound
transformations in our model of political economy, the consequences of which could become very
ugly.
Before we reach that point, it is already possible to identify a reorientation of national
economic policy making away from some core tenets of neoliberal doctrine. One of the main case
studies of this book is antitrust law and policy, which has been a preoccupation for neoliberal
intellectuals, reformers and lawyers ever since the 1930s. The rise of the Chicago School view
of competition (which effectively granted far greater legal rights to monopolists, while also
being tougher on cartels) in the American legal establishment from the 1970s onwards, later
repeated in the European Commission, meant that market commitments to neoliberal policy goals
is still less than likely. Free trade areas such as NAETA, policies designed to attract and
please mobile capital, the search for global hegemony surrounding international markets (as
opposed to naked, mercantilist self-interest) may then continue for a few more years. But the
collapse of legitimacy or popularity of these agendas will not be reversed.
Meanwhile, the inability of the Republican Party to defend these policies any longer signals
the ultimate divorce between the political and economic wings of neoliberalism: the
conservative coalition that came into being as Keynesianism declined post-1968, and which got
Ronald Reagan to power, no longer functions in its role of rationalising and de-politicising
economic policy making. If neoliberalism is the 'disenchantment of politics by economics', then
economics is no longer performing its role in rationalising public life. Politics is being
re-enchanted, by images of nationhood, of cultural tradition, of'friends' against enemies, ot
race ana religion, une ot me many political miscalculations mat lea to Brexit was to
under-estimate how many UK citizens would vote for the first time in their lives, enthralled by
the sudden sovereign power that they had been granted in the polling booth, which was entirely
unlike the ritual of representative democracy with a first-past-the-post voting system that
renders most votes irrelevant. The intoxication of popular power and of demagoguery is being
experienced in visceral ways for the first time since 1968, or possibly longer. Wendy Brown
argues that neoliberalism is a 'political rationality'' that was born in direct response to
Fascism during the 1930s and '40s (Brown, 2015). While it would be an exaggeration to say that
the end of neoliberalism represents the re-birth of Fascism, clearly there were a number of
existential dimensions of'the political' that the neoliberals were right to fear, and which we
should now fear once more.
While there is plenty of evidence to suggest that 2016 is a historic turning point indeed as
I've argued here, possibly the second 'book-mark' in the crisis of neoliberalism we need also
to recognise how the seeds of this recent political rupture were sown over time. Indeed, we can
learn a lot about policy paradigms from the way they' go into decline, for they always contain,
tolerate and even celebrate the very activities that later overwhelm or undermine them.
Clearly, the 2008 financial crisis was triggered by activities in the banking sector that were
not fundamentally different from those which had been viewed as laudable for the previous 20
years. Equally, as we witness the return of mercantilism, protectionism, nationalism and
charismatic populism, we need to remember the extent to which neoliberalism accommodated some
of this, up to a point.
The second major case study in this book, in addition to anti-trust policy, is of strategies
for 'national competitiveness'. The executive branch of government has traditionally been
viewed as a problem from the perspective of economic liberalism, seeing as powerful politicians
will instinctively seek to privilege their own territories vis-a-vis others. This is the threat
of mercantilism, which can spin into resolutely anti-liberal policies such as trade tariffs and
the subsidisation of indigenous industries and 'national champions'. These forms of
mercantilism may now be returning, however, the logic of neoliberalism was never quite as
antipathetic to them as orthodox market liberals might have been. Instead, I suggest in Chapter
4, rather than simply seek to thwart or transcend nationalist politics, neoliberalism seizes
and reimagines the nation as one competitive actor amongst many, in a global contest for
'competitiveness', as evaluated by business gurus such as Michael Porter and think tanks such
as the World Economic Eorum. To be sure, these gurus and think tanks have never been anything
but hostile to protectionism; but nevertheless, they have encouraged a form of mild nationalism
as the basis for strategic thinking in economic policy. As David Harvey has argued, 'the
neoliberal state needs nationalism of a certain sort to survive': it draws on aspects of
executive power and nationalist sentiment, in order to steer economic activity towards certain
types of competitive strategies, culture and behaviours and away from others (Harvey, 2005:
85).
There is therefore a deep-lying tension within the politics of neoliberalism between a
'liberal' logic, which seeks to transcend geography, culture and political difference, and a
more contingent, 'violent' logic that seeks to draw on the energies of nationhood and combat,
in the hope of diverting them towards competitive, entrepreneurial production. These two logics
are in conflict with each other, but the story I tell in this book is of how the latter
gradually won out over the long history of neoliberal thought and policy making. Where the
neoliberal intellectuals of the 1930s had a deep commitment to liberal ideals, which they
believed the market could protect, the rise of the post-war Chicago School of economics and the
co-option of neoliberal ideas by business lobbies and conservatives, meant that (what 1 term)
the 'liberal spirit' was gradually lost. There is thus a continuity at work here, in the way
that the crisis of neoliberalism has played out.
Written in 2012-13, the book suggests that neoliberalism has now entered a 'contingent'
state, in which various failures of economic rationality are dealt with through incorporating
an ever broader range of cultural and political resources. The rise of behavioural economics,
for example, represents an attempt to preserve a form of market rationality in the face of
crisis, by incorporating expertise provided by psychologists and neuroscientists. A form of
'neo-communitarianism' emerges, which takes seriously the role of relationships, environmental
conditioning and empathy in the construction of independent, responsible subjects. This remains
an economistic logic, inasmuch as it prepares people to live efficient, productive, competitive
lives. But by bringing culture, community and contingency within the bounds of neoliberal
rationality, one might see things like behavioural economics or 'social neuroscience' and so on
as early symptoms of a genuinely post-liberal politics. Once governments (and publics) no
longer view economics as the best test of optimal policies, then opportunities for post-liberal
experimentation expand rapidly, with unpredictable and potentially frightening consequences. It
was telling that, when the British Home Secretary, Amber Kudd, suggested in October 2016 that
companies be compelled to publicly list their foreign workers, she defended this policy as a
'nudge'.
The Limits of Neoliberalism is a piece of interpretive sociology. It starts from the
recognition that neoliberalism rests on claims to legitimacy, which it is possible to imagine
as valid, even for critics of this system. Inspired by Luc Boltanski, the book assumes that
political-economic systems typically need to offer certain limited forms of hope, excitement
and fairness in order to survive, and cannot operate via domination and exploitation alone. For
similar reasons, we might soon find that we miss some of the normative and political dimensions
of neoliberalism, for example the internationalism that the IiU was founded to promote and the
cosmopolitanism that competitive markets sometimes inculcate. There may be some elements of
neoliberalism that critics and activists need to grasp, refashion and defend, rather than to
simply denounce: this book's Afterword offers some ideas of what this might mean. But if the
book is to be read in a truly post-neoliberal world, 1 hope that in its Interpretive
aspirations, it helps to explain what was internally and normalively coherent about the
political economy known as 'neoliberalism', but also why the system really had no account of
its own preconditions or how to preserve them adequately. The attempt to reduce all of human
life to economic calculation runs up against limits. A political rationality that fails to
recognise politics as a distinctive sphere of human existence was always going to be
dumbfounded, once that sphere took on its own extra-economic life. As Bob Dylan sang to Mr
Jones, so one might now say to neoliberal intellectuals or technocrats: 'something is happening
here, but you don't know what it is'.
... ... ...
Most analyses of neoliberalism have focused on its commitment to 'free markets, deregulation
and trade. I shan't discuss the validity of these portrayals here, although some have
undoubtedly exaggerated the similarities between 'classical' nineteenth-century liberalism and
twentieth-century neoliberalism. The topic addressed here is a different one the character of
neoliberal authority, on what basis does the neoliberal state demand the right to be obeyed, if
not on substantive political grounds? To a large extent, it is on the basis of particular
economic claims and rationalities, constructed and propagated by economic experts. The state
does not necessarily (or at least, not always) cede power to markets, but comes to justify its
decisions, policies and rules in terms that are commensurable with the logic of markets.
Neoliberalism might therefore be defined as the elevation of market-based principles and
techniques of evaluation to the level of state-endorsed norms (Davies, 2013: 37). The authority
of the neoliberal state is heavily dependent on the authority of economics (and economists) to
dictate legitimate courses of action. Understanding that authority and its present crisis
requires us to look at economics, economic policy experts and advisors as critical components
of state institutions.
Since the banking crisis of 2007-09, public denunciations of 'inequality' have increased
markedly. These draw on a diverse range of moral, critical, theoretical, methodological and
empirical resources. Marxist analyses have highlighted growing inequalities as a symptom of
class conflict, which neoliberal policies have greatly exacerbated (Harvey, 2011; Therborn,
2012). Statistical analyses have highlighted correlations between different spheres of
inequality', demonstrating how economic inequality influences social and psychological
wellbeing (Wilkinson & Pickett, 2009). Data showing extreme concentrations of wealth have
led political scientists to examine the US political system, as a tool through which inequality
is actively increased (Hacker & Pierson, 2010). Emergent social movements, such as Occupy,
draw a political dividing line between the '99%' and the '1%' who exploit them. Political
leaders and public intellectuals have adopted the language of'fairness' in their efforts to
justify and criticize the various policy interventions which influence the distribution of
economic goods (e.g. Hutton, 2010).
It is important to recognize that these critiques have two quite separate targets, although
the distinction is often blurred. Firstly, there is inequality that exists within reasonably
delineated and separate spheres of society. This means that there are multiple inequalities,
with multiple, potentially incommensurable measures. The inequality that occurs within the
market sphere is separate from the inequality that occurs within the cultural sphere, which is
separate from the inequality' that occurs within the political sphere, and so on. Each sphere
can either unwelcome politically, or impractical (Davies, 2013). Hayek's support for the
welfare state, Simons' commitment to the nationalization of key industries, the ordo-liberal
enthusiasm for the 'social market' demonstrate that the early neoliberals were offering a
justification for what Walzer terms 'monopoly' (separate inequalities in separate spheres) and
not 'dominance' (the power of one sphere over all others).
As the next chapter explores, it was Coasian economics (in tandem with the Chicago School)
that altered this profoundly. The objective perspective of the economist implicitly working for
a university or state regulator would provide the common standard against which activity could
be judged. Of course economics does not replace the price system, indeed economics is very
often entangled with the price system (Callon, 1998; Caliskan, 2010), but the a priori equality
of competitors becomes presumed, as a matter of economic methodology, which stipulates that all
agents are endowed with equal psychological capacities of calculation. It is because this
assumption is maintained when evaluating all institutions and actions that it massively
broadens the terrain of legitimate competition, and opens up vast, new possibilities for
legitimate inequality and legitimate restraint. Walzerian dominance is sanctioned, and not
simply monopoly. The Coasian vision of fair competition rests on an entirely unrealistic
premise, namely that individuals share a common capacity' to calculate and negotiate, rendering
intervention by public authorities typically unnecessary: the social reality of lawyers' fees
is alone enough to undermine this fantasy. Yet in one sense, this is a mode of economic
critique that is imbued with the 'liberal spirit' described earlier. It seeks to evaluate the
efficiency of activities, on the basis of the assumed equal rationality of all, and the
neutrality of the empirical observer.
Like Coase, Schumpeter facilitates a great expansion of the space and time in which the
competitive process takes place. Various 'social' and 'cultural' resources become drawn into
the domain of competition, with the goal being to define the rules that all others must play
by. Monopoly is undoubtedly the goal of competitiveness. But unlike Coase's economics,
Schumpeter's makes no methodological assumption regarding the common rationality' of all
actors. Instead, it makes a romantic assumption regarding the inventive power of some actors
(entrepreneurs), and the restrictive routines of most others. Any objective judgements
regarding valid or invalid actions will be rooted in static methodologies or rules.
Entrepreneurs have no rules, and respect no restraint. They seek no authority or validation for
what they do, but are driven by a pure desire to dominate. In this sense their own immanent
authority comes with a 'violent threat', which is endorsed by the neoliberal state as Chapter 4
discusses.
These theories of competition are not 'ideological' and nor are they secretive. They are not
ideological because they do not seek to disguise how reality is actually constituted or to
distract people from their objective conditions. They have contributed to the construction and
constitution of economic reality, inasmuch as they provide objective and acceptable reports on
what is going on, that succeed in coordinating various actors. Moreover, they are sometimes
performative, not least because of how they inform and format modes of policy, regulation and
governance. Inequality has not arisen by accident or due to the chaos of capitalism or
'globalization'. Theories and methodologies, which validate certain types of dominating and
monopolistic activity, have provided the conventions within which large numbers of academics,
business people and policy makers have operated. They make a shared world possible in the first
place. But nor are any of these theories secret either. They have been published in
peer-reviewed journals, spread via policy papers and universities. Without shared, public
rationalities and methodologies, neoliberalism would have remained a private conspiracy.
Inequality can be denounced by critics of neoliberalism, but it cannot be argued that in an era
that privileges not only market competition but competitiveness in general inequality is not
publicly acceptable.
These theories of competition are not 'ideological' and nor are they secretive. They are not
ideological because they do not seek to disguise how reality is actually constituted or to
distract people from their objective conditions. They have contributed to the construction and
constitution of economic reality, inasmuch as they provide objective and acceptable reports on
what is going on, that succeed in coordinating various actors. Moreover, they are sometimes
performative, not least because of how they inform and format modes of policy, regulation and
governance. Inequality has not arisen by accident or due to the chaos of capitalism or
'globalization'. Theories and methodologies, which validate certain types of dominating and
monopolistic activity, have provided the conventions within which large numbers of academics,
business people and policy makers have operated. They make a shared world possible in the first
place. But nor are any of these theories secret either. They have been published in
peer-reviewed journals, spread via policy papers and universities. Without shared, public
rationalities and methodologies, neoliberalism would have remained a private conspiracy.
Inequality can be denounced by critics of neoliberalism, but it cannot be argued that in an era
that privileges not only market competition but competitiveness in general inequality is not
publicly acceptable.
The contingent neoliberalism that we currently live with is in a literal sense unjustified.
It is propagated without the forms of justification (be they moral or empirical) that either
the early neoliberals or the technical practitioners of neoliberal policy had employed, in
order to produce a reality that 'holds together', as pragmatist sociologists like to say. The
economized social and political reality now only just about 'holds together', because it is
constantly propped up, bailed out, nudged, monitored, adjusted, data-mincd, and altered by
those responsible for rescuing it. It does not survive as a consensual reality: economic
judgements regarding 'what is going on' are no longer 'objective' or 'neutral', to the extent
that they once were. The justice of inequality can no longer be explained with reference to a
competition or to competitiveness, let alone to a market. Thus, power may be exercised along
the very same tramlines that it was during the golden neoliberal years of the 1990s and early
millennium, and the same experts, policies and agencies may continue to speak to the same
public audiences. But the sudden reappearance of those two unruly uneconomic actors, the
Hobbesian sovereign state and the psychological unconscious, suggests that that the project of
disenchanting politics by economics has reached its limit. And yet crisis and critique have
been strategically deferred or accommodated. What resources are there available for this to
change, and to what extent are these distinguishable from neoliberalism's own critical
capacities?
... ... ...
Neoliberalism, as this book has sought to demonstrate, is replete with its own internal
modes of criticism, judgement, measurement and evaluation, which enable actors to reach
agreements about what is going on. These are especially provided by certain traditions of
economics and business strategy, which privilege competitive processes, on the basis that those
processes are uniquely able to preserve an element of uncertainty in social and economic life.
The role of the expert be it in the state, the think tank or university within this programme
is to produce quantitative facts about the current state of competitive reality, such that
actors, firms or whole nations can be judged, compared and ranked. For Hayek and many of the
early neoliberals, markets would do this job instead of expert authorities, with prices the
only facts that were entirely necessary. But increasingly, under the influence of the later
Chicago School and business strategists, the 'winners' and the 'losers' were to be judged
through the evaluations of economics (and associated techniques and measures), rather than of
markets as such. Certain forms of authority are therefore necessary for this game' to be
playable. Economized law is used to test the validity of certain forms of competitive conduct;
audits derived from business strategy are used to test and enthuse the entrepreneurial energies
of rival communities. But the neoliberal programme initially operated such that these forms of
authority could be exercised in a primarily technical sense, without metaphysical appeals to
the common good, individual autonomy or the sovereignty of the state that employed them. As the
previous chapter argued, various crises (primarily, but not exclusively, the 2007-09 financial
crisis) have exposed neoliberalism's tacit dependence on both executive sovereignty and on
certain moral-psychological equipment on the part of individuals. A close reading of neoliberal
texts and policies would have exposed this anyway. In which case, the recent 'discovery' that
neoliberalism depends on and justifies power inequalities, and not markets as such, may be
superficial in nature. Witnessing the exceptional measures that states have taken to rescue the
status quo simply confirms the state-centric nature of neolibcralism, as an anti-political mode
of politics. As Zizek argued in relation to the Wikileaks' exposures of 2011, 'the real
disturbance was at the level of appearances: we can no longer pretend we don't know what
everyone knows we know' (Zizek, 2011b). Most dramatically, neoliberalism now appears naked and
shorn of any pretence to liberalism, that is, it no longer operates with manifest a priori
principles of equivalence, against which all contestants should be judged. Chapter 2 identified
the 'liberal spirit' of neoliberalism with a Rawlsian assumption that contestants are formally
equal before they enter the economic 'game'. Within the Kantian or 'deontological' tradition of
liberalism, this is the critical issue, and it played a part in internal debates within the
early neoliberal movement. For those such as the ordoliberals, who feared the rationalizing
potential of capitalist monopoly, the task was to build an economy around such an a priori
liberal logic. Ensuring some equality of access to the economic game', via the active
regulation of large firms and 'equality of opportunity' for individuals, is how neoliberalism's
liberalism has most commonly been presented politically. As Chapter 3 discussed, the American
tradition of neoliberalism as manifest in Chicago Law and Economics abandoned this sort of
normative liberalism, in favour of a Benthamite utilitarianism, in which efficiency claims
trumped formal arguments. The philosophical and normative elements of neoliberalism have, in
truth, been in decline since the 1950s.
The 'liberal spirit' of neoliberalism was kept faintly alive by the authority that was
bestowed upon methodologies, audits and measures of efficiency analysis. The liberal a priori
just about survived in the purported neutrality of economic method (of various forms), to judge
all contestants equally, even while the empirical results of these judgements have increasingly
benefited alreadydominant competitors. This notion relied on a fundamental epistemological
inconsistency of neoliberalism, between the Hayekian argument that there can be no stable or
objective scientific perspective on economic activity, and the more positivist argument that
economics offers a final and definitive judgement. American neoliberalism broadens the 'arena'
in which competition is understood to take place, beyond definable markets, and beyond the
sphere of the 'economy', enabling cultural, social and political resources to be legitimately
dragged into the economic 'game', and a clustering of various forms of advantage in the same
hands. Monopoly, in Walter's terms, becomes translated into dominance.
The loss of neoliberalisms pretence to liberalism transforms the type of authority that can
be claimed by and on behalf of power, be it business, financial or state power. It means the
abandonment of the globalizing, universalizing, transcendental branch of neoliberalism, in
which certain economic techniques and measures (including, but not only, prices) would provide
a common framework through which all human difference could be mediated and represented.
Instead, cultural and national difference potentially leading to conflict now animates
neoliberalism, but without a commonly recognized principle against which to convert this into
competitive inequality. What I have characterized as the 'violent threat' of neoliberalism has
come to the fore, whereby authority in economic decision making is increasingly predicated upon
the claim that 'we' must beat 'them'. This fracturing of universalism, in favour of political
and cultural particularism, may be a symptom of how capitalist crises often play out (Gamble,
2009). One reason why neoliberalism has survived as well as it has since 2007 is that it has
always managed to operate within two rhetorical registers simultaneously, satisfying both the
demand for liberal universalism and that for political particularism, so when the former falls
apart, a neoliberal discourse of competitive nationalism and the authority of executive
decision is already present and available.
One lesson to be taken from neoliberalism, for political movements which seek to challenge
it, is that both individual agency and collective institutions need to be criticized and
invented simultaneously. Political reform does not have to build on any 'natural' account of
human beings, but can also invent new visions of individual agency. The design and
transformation of institutions, such as markets, regulators and firms, do not need to take
place separately from this project, but in tandem and in dialogue with it. A productive focus
of critical economic enquiry would be those institutions which neolibcral thought has tended to
be entirely silent on. These are the institutions and mechanisms of capitalism which coerce and
coordinate individuals, thereby removing choices from economic situations. The era of applied
neoliberal policy making has recently started to appear as one of rampant 'financialisation'
(Krippner, 2012). So it is therefore peculiar how little attention is paid within neoliberal
discourse to institutions of credit and equity, other than that they should be priced and
distributed via markets. Likewise, the rising power of corporations has been sanctioned by
theories that actually say very little about firms, management, work or organization, but focus
all their attention on the incentives and choices confronting a few 'agents' and 'leaders' at
the very top. Despite having permeated our cultural lives with visions of competition, and also
permeated political institutions with certain economic rationalities, the dominant discourse of
neoliberalism actually contains very little which represents the day-to-day lives and
experiences of those who live with it. This represents a major empirical and analytical
shortcoming of the economic theories that are at work in governing us, and ultimately a serious
vulnerability.
A further lesson to be taken from neoliberalism, for the purposes of a critique of
neoliberalism, is that restrictive economic practices need to be strategically and inventively
targeted and replaced. In the 1930s and 1940s, 'restrictive economic practices' would have
implied planning, labour organization and socialism. Today our economic freedoms are restricted
in very different ways, which strike at the individual in an intimate way, rather than at
individuals collectively. In the twenty-first century, the experience of being an employee or a
consumer or a debtor is often one of being ensnared, not one of exercising any choice or
strategy. Amidst all of the uncertainty of dynamic capitalism, this sense of being trapped into
certain relations seems eminently certain. Releasing individuals from these constraints is a
constructive project, as much as a critical one: this is what the example of the early
neoliberals demonstrates.
Lawyers willing to rewrite the rules of exchange, employment and finance (as, for instance
the ordo-liberals redrafted the rules of the market) could be one of the great forces for
social progress, if they were ever to mobilize in a concerted w'ay. A form of collective
entrepreneurship, which like individual entrepreneurs saw' economic nonnativity as fluid and
changeable, could produce new forms of political economy, with alternative valuation
systems.
The reorganization of state, society, institutions and individuals in terms of competitive
dynamics and rules, succeeded to the extent that it did because it offered both a vision of the
collective and a vision of individual agency simultaneously. It can appear impermeable to
critique or political transformation, if only challenged on one of these terms. For instance,
if a different vision of collective organization is proposed, the neoliberal rejoinder is that
this must involve abandoning individual 'choice' or freedom. Or if a different vision of the
individual is proposed, the neoliberal rejoinder is that this is unrealistic given the
competitive global context. Dispensing with competition, as the template for all politics and
political metaphysics, is therefore only possible if theory proceeds anew, with a
political-economic idea of individual agency and collective organization, at the same time.
What this might allow is a different basis from which to speak of human beings as paradoxically
the same yet different. The problem of politics is that individuals are both private, isolated
actors, with tastes and choices, and part of a collectivity, with rules and authorities. An
alternative answer to this riddle needs to be identified, other than simply more competition
and more competitiveness, in which isolated actors take no responsibility for the collective,
and the collective is immune to the protestations of those isolated actors.
America loves its free market heroes, as Peter Ubel
admits. Just think of the West Berlin Coca-Cola manager
who, on hearing that the Berlin Wall was coming down,
headed off to the barrier with cases of the soft drink and
offered a bottle to every East German crossing the border.
Ubel doesn't for a second doubt that that act was a
triumph for free markets and for Coca-Cola - but was it
logical or in the best interests of the rest of society?
"Was Coca-Cola the very best thing that the (free
market's) invisible hand could bring to people just
escaping from decades of communism? And should we, then,
celebrate the increase in tooth decay and diabetes
diagnoses now spreading through Eastern Europe?" In a
perfectly free market, obesity, dying of emphysema after a
lifetime of smoking or failing to save a dime for
retirement may be seen as completely logical choices by
libertarian economists and policymakers. But sometimes the
best outcomes for free markets are not the best outcomes
for the people within those markets - and then what do we
do?
The factors that lead to such illogically logical (or
logically illogical?) decisions are the focus of Peter
Ubel's accessible, lively and very important discussion of
the emerging field of behavioral economics. While there
are numerous other books out there on the topic, this
serves as a much-needed primer for readers who aren't ever
going to read the scholarly works on the subject and who
prefer a solid introduction to the topic itself before
delving into policy issues that flow from it. The `what to
do' element is the weakest portion of the book, but the
rest is a fascinating introduction to the nature of the
conundrums that policymakers face.
Ubel identifies and describes, with an eye for what will
make the concepts most comprehensible, many of the
paradoxes with which behavioral economics concerns itself.
Why do people continue to overeat and overspend? These are
some of the most vital economic and social question we
face. When investors succumb to greed instead of making a
rational decision, they lose money. (Just think back to
the heady days of the dot.com stocks, or, more recently,
to the irrational decisions made by home-buyers when it
came to figuring out how much home they could afford or
what kind of mortgage was the right one to select.) We
postpone saving and accelerate consumption, sending our
personal debt levels soaring. We don't exercise enough; we
smoke and drink too much. And we eat too much - leading to
epidemic levels of obesity. We are stubborn, we react
based on emotions rather than reason and we really hate
being told what to do, by our parents or anyone else in
authority. All of which has ramifications not just for
each of us individually, but for our society.
Ubel doesn't address the financial markets often in his
discussions, but the publication of this book is very
timely from that perspective. Why do investors picking a
mutual fund always select the one with the strongest
recent track record, despite all the research that has
shown that no fund manager can continue to outperform for
very long and the warnings all the mutual funds are
required to display on their prospectuses that past
performance is no guarantee of future results? Certainly,
no one can doubt that a free market was thriving during
the subprime mortgage boom - why, then, were home buyers
purchasing more house than they could afford and then
financing those purchases (sometimes unnecessarily) with
risky mortgage structures?
Ubel's perspective on behavioral economics is different
from that of others who have written about it; he has to
deal, day by day, with the fallout of many of the poor
choices made by his own patients. No one sets out to
become obese or addicted to tobacco or alcohol. Yet one of
Ubel's alcoholic patients, he recounts, was so desperate
for a "fix" that he drank the contents of three of the
hospital's dispensers of hand-sanitizer and collapsed: an
utterly irrational act. He shows how our innumeracy
hinders our ability to correctly understand risk (most of
us worry more when told we have a 130 in 1,000 chance of
death than 13 in 100 - even though the risk is numerically
identical). And when we do make rational decisions, these
can lead to what most of us would admit are irrational and
unintended outcomes. For instance, a family living near
the poverty line and struggling to pay for groceries would
actually fare better if they bought cookies instead of
carrots with their scarce dollars; the former contain more
calories per scarce dollar. Ubel even offers examples of
supposedly rational individuals, from eBay auction
participants to economists, behaving irrationally.
Unlike the handful of other accessible tomes revolving
around decision-making and behavioral finance, Ubel is
diagnostic rather than prescriptive. Were it not for the
existence of books like Nudge:
Improving Decisions About Health, Wealth, and Happiness,
that would be a bigger weakness than it is. (The reality?
That is primarily a policy book -- and a brilliant one --
while this is more general in nature. Works by Daniel
Kahneman, some of which I have read, would logically
replace Ubel's work for the specialist reader familiar
with economics and scholarly writing, but they will be
harder sledding for all but the most committed general
reader.) Still given the relative newness of much of this
material to the same general reader, I would recommend
Ubel's work as a lively and knowledgeable general
introduction to the many conundrums posed by unbridled
free markets, as written by a passionate non-economist.
Anyone interested in understanding the policy implications
more deeply can then move on to Nudge.
I shared this book with two highly economics-resistant
friends over the holidays and their comments ("oh, NOW I
get what you're talking about....") earned it its
four-star rating. I'm willing to bet that it will be hard
for anyone who reads this book to not stop and think about
its arguments whenever they next confront the temptation
posed by a Krispy Kreme donut.
Recommended primarily for those new to the subject, or who
aren't ready to tackle the nitty-gritty of the policy
implications.
Fred Block discusses his book "The Power of Market Fundamentalism," which extends the work of
the great political economist Karl Polanyi to explain why free market dogma recovered from
disrepute after the Great Depression and World War II to become the dominant economic ideology of
our time.
The flavor of concerns that should have been
central to Strange's volume was captured by
Keynes in a passage in The General Theory
that is part of the currency of every economist:
Speculators may do no harm on a steady stream
of enterprise. But the position is serious when
enterprise becomes a bubble on a whirlpool of
speculation. When the capital development of
a country becomes a by-product of the activities
of a casino, the job is likely to be ill done. (p.
159)
The implication of Keynes' comment, and therefore of the title that Strange appropriated, is
that speculation and efficient investment - capital development - are inversely related. It
follows that a volume on Casino Capitalism needs to begin with a serious consideration of the
determinants of investment in capitalist economies with sophisticated and ever evolving financial
structures. Although in the beginning of the book some awareness of the relation between speculation and efficient investment is
evident, Strange does not examine closely how
the capital development of capitalist economies
was affected by the financial evolution of the
past decades. What she does do is present in
a discursive and somewhat journalistic fashion
the development of the international financial
structure in recent years as well as a partial
review of some interpretations of the import
of financial arrangements.
In spite of her approach the volume is useful.
Economists, especially those who are comfortable wearing the blinders of neoclassical theory,
tend to believe that the evolution of markets
and institutions results mainly from the utility
and profit seeking behavior of units. To this
Strange offers the useful antidote that "a monetary system cannot work effectively unless there
is a political authority . . ." (p. рб), i.e., con*-"
tracts need to be enforced. Therefore the outcomes in both the short and the longer runs are the
joint result of decisions by market participants and authorities. Furthermore, economic evolution leads to shifts in the balance
of power between markets and states.
This insight helps explain how the Bretton
Woods system broke down. The "chaos" that
Strange now finds in the international monetary
regime is imputed to key decisions and nondecisions, mainly by the United States, both early
on in the postwar period and after 1971. Her
main point is that domestic concerns dominated
decisions in the United States both when the
United States acted and when it did not. As a result havoc was played with the order needed
for world economic stability.
I would have liked to report that Strange offers a coherent view of the evolutionary processes that have transformed (and continue to
transform) the international economy since
Bretton Woods, but I cannot. Her basic premise that evolution results from the interplay of
market and authority is a unifying concept that
is potentially powerful. This potential power
is vitiated because Strange suffers from a common British addiction, which is to blame the
United States for all that goes wrong, at the
same time never holding it responsible for
things going well.
It is evident that the world's financial markets
have become more fragile and the volatility of
rates and instruments has increased. This com-
bined with the irresponsibility and ignorance
of governments has adversely affected many na-
tional economies. However there was nothing
in U.S. economic policy or in the evolution of
financial markets that determined that Mexican
nationals would literally steal the nation's oil
enterprise blind or that Argentina's junta would
stash away billions.
The continuum between flight capital and
portfolio diversification and the issues this
raises is completely absent from Strange's analysis. The mess to which she continuously refers
is in good part due to the attractiveness of assets
in the United States for international portfolios;
this was a factor in the disastrous run up of
the dollar as the growth of trade literally forced
the authorities to liberalize markets. Strange
is not happy with fluctuating rates, but she does
not examine the impact of portfolio choices
upon exchange rates as a means of explaining
why the fluctuations are far greater than the
theoretical arguments had indicated. The im-
pact on trade balances of the overvalued dollar
that resulted from portfolio choices has reduced
the United States to a hat-in-hand giant, dependent upon the favors of trading and investing
partners.
Beggar my neighbor is a useful term that describes the behavior of economies that maintain
domestic employment and profit levels by devices that depress profits and employment of
their trading partners. Keynes' scheme, for a
sterile international asset for settlement purposes that the banking authorities of countries
with substantial international asset positions
would have to accept if they persisted in maintaining surpluses, was an attempt to make beg-
gar-my-neighbor policies obviously foolish. In
today's global financial market nationals of
countries that beggar the United States acquire
dollar earning assets, so that such behavior
seems to have a positive payoff and therefore
is not obviously foolish.
The basic idea of this book isn't necessarily
new, but it's worth repeating: that neoliberalism isn't just bringing economics into a more prominent
role in public policy, it's destroying the very institutions of democracy and changing how we
talk about politics. What might be novel about it is that the author's (WB's) argument is targeted
to a very particular audience: Americans who are steeped in critical theory.
Even though I'm outside the target audience and had encountered the basic idea elsewhere on a
number of occasions (and agree with it), my copy now has a few stars in the margins, too. What
I especially liked was WB's emphasis in several places on language: how the neoliberal vocabulary
of governance -- based ostensibly on compromise and optimization -- is replacing that of politics,
which is based on conflict; and that by doing so, neoliberalism is robbing us of ways to think
about politics. In this regard, WB makes the striking observation that through "the vanquishing
of homo politicus" and its replacement with "homo oeconomicus," neoliberalism eliminates the "open
question of how to craft the self or what paths to travel in life" (@41).
WB's concepts of the
political draw heavily from Aristotle's Politics and Machiavelli's Discourses, two of my own favorite
source-texts. There's also a very heartfelt and jargon-free chapter near the end of the book (Chap.
VI) about the impact of neoliberal policies on public education, which I found all the more interesting
since I myself recently started teaching undergraduates.
By overstretching its financial means (weapon systems are profligate economic waste), the US
risks a long lasting downfall of the dollar.
The US and its population need an industrial not a military or intelligence policy, because a
new rival hegemon points at the horizon: China, which will be the superpower of the 21st
century. China will not be contained. The US will have to adjust to it.
In a world of hypocritical and gagged media, Chalmers Johnson's much needed voice proposes human
solutions for the world's problems: `bring most overseas land-based forces home and reorient
foreign policy to stress leadership through example, economic aid, international law,
multilateral institutions and diplomacy, instead of military intervention, economic bullying or
financial manipulation.'
Colin Crouch's analysis of the continuing dominance of neoliberalism starts with a definition
and history of his terms, showing how the word 'liberal' in particular has gone through some almost
total reversals since the repeal of the Corn Laws. The ascendency of 'neo-liberalism', however,
began in the 1980s, after the perceived failure of Keynsian economics.
The original 'Hayekian'
or 'Ordoliberalismus' anti-totalitarian formulation whereby competition is seen as 'a process
that would maintain in existence large numbers of firms, near-perfect markets and widespread consumer
choice' was replaced by the Chicago School's view that competition should be seen in terms of
its 'outcome' as the destruction of small firms and medium-sized enterprises, the dominance of
giant corporations and the replacement of the demotic idea of consumer choice by a paternalistic
concern for 'consumer welfare' (P16-17)
This concept of 'consumer welfare' is crucial. Unlike Hayek, this formulation accepts, even
welcomes, the idea that competition will eliminate competition:
'If there would be efficiency gains from a number of smaller firms being bought out by a larger
one, then that would be the outcome that would maximise what they called consumer 'welfare', even
if it led to reduced competition and left consumers with a reduced choice of goods. What should
therefore be the concern of the law courts in deciding antitrust cases is what outcome would be
most conducive to the maximisation of consumer 'welfare', not 'choice' as such.' (P55)
By 'welfare', the Chicago economists considered the overall wealth of the society. The fact
that the wealth may become increasingly concentrated in the hands of a small and diminishing number
of transnational corporations (or TNCs) and a stateless elite is neither here nor there. Any redistribution
of wealth should be undertaken by governments and is not the concern of the corporation.
But then, the Chicago school has a major problem with the idea of government. Here, their ideas
fit neatly in with those of the University of Virginia. The Virginia school considers that civil
servants, politicians et al, are there purely for self-advancement - as portrayed in Margaret
Thatcher's favourite sitcom 'Yes
Minister' where the Machiavellian machinations of Sir Humphrey had little to do with the promotion
of societal good. Governments are seen as 'at best incompetent and at worst corruptly self-seeking'
(P63).
The only way to ensure any efficiency and effectiveness in government is to apply the rules
of the market. In other words, governments should act like, and learn from, firms. Thus we have
the endless setting of targets, the breakup of government agencies into competing bodies and,
most importantly, the inclusion of firms in the running of government in Public Private Partnerships
(PPP), Private Finance Initiatives et al in almost an odd sort of reversal of mercantilism.
What develops from all this is a tripartite division - firms (TNCs), national governments and,
surprisingly perhaps, the market. Here, 'the market' really refers to small and medium sized enterprises
(or SMEs). It is perhaps interesting to compare this with
Dani Rodrik's 'trilemma' where power is negotiated between the 'nation state', 'democratic
politics' and 'hyperglobalization' - here 'hyperglobalization' more or less equates with the TNCs
while the 'nation state' and 'democratic politics' conflate into national government, but the
market is not really considered. I find Colin Crouch's model more convincing.
Although Crouch doesn't use the term kleptocracy, he does refer to oligopolies. Quite frankly,
in the case of international banking in paricular, the difference is only one of degree. The virtual
merger of politics and corporations, particularly in the US, is plain to see. The revolving door
between government agencies, lobbying organisations and the corporations is notorious (see Thomas
Frank's excellent 'The
Wrecking Crew') but, at the same time, corporations consider themselves to be only responsible
to their shareholders - the maximisation of shareholder value is considered to be management's
sole aim, even though they are increasingly intimately involved in the legislative process.
It is odd, then, to see the rise of Corporate Social Responsibility (CSR). More often than
not, of course, this is simply just a marketing tool. Crouch puts it nicely in the heading of
chapter 6 - 'From Corporate Political Entanglement to Corporate Social Responsibility'. Political
power has become increasingly concentrated in firms, or governments acting like firms or firms
working for/with governments. This is hardly surprising. As Crouch says:
'a polity in which economic resources were very unequally shared would be likely to be one
in which political power was also concentrated, economic resources being so easily capable of
conversion into political ones.' (P125)
Later, he seems to echo Peter Oborne's 'The Triumph of the Political Class':
'...the state, seen for so long by the left as the source of countervailing power against markets,
is today likely to be the committed ally of giant corporations, whatever the ideological origins
of the parties governing the state.' (P145)
It seems that CSR has, then, almost taken the role of what the French aristocracy used to refer
to as 'noblesse oblige' (P150). But, suggests Crouch, the growing CSR movement might be seen as
a reaction to pressure from a fourth element outside the 'firms, state and market' - 'civil society':
'Civil society includes, though extends further than, the voluntary sector. It defines all
those extensions of the scope of human action beyond the private that lack recourse to the primary
contemporary means of exercising power: the state and the firm...States and firms do dominate
our societies, but there is a lively field of contention. Challenges to domination can be made,
concepts of public goals explored and turned into practical projects, against the state's claim
to monopoly of the legitimate interpretation of collective values, and against the firm's claim
that the conversion of values into the maximisation of shareholders' interests is as good as life
can get.' (P153-4)
Crouch considers that there are potentially five types of groups that may challenge the state
and the firm. Most of these are pretty well compromised, he feels, and I would agree. Political
parties (see Peter Oborne) and most organised religions - both seem unlikely contestants. Whether
campaigning groups, the voluntary sector and ethically motivated professionals can make the difference
and wield the 'power of the powerless' is finally what this book is about. Where Dani Rodrik calls
for a 'reining in', a deliberate limitation to 'hyperglobalization' in order for nation states
to again exert a moderating influence, Crouch sees the nation state as hopelessly compromised
and the only moderating and humanising influence coming from civil society:
'Civil society...operates in the interstices left among the great erections of political and
economic power, like little houses springing up busily and untidily, creating vitality in a street
dominated by the inaccessible security-controlled doors of skyscrapers. Since it contains a vast
array of competing groups, with different and sometimes opposed moral agendas, it also embodies
a kind of moral relativism. But this is moral relativism only at the meta-level of the character
of the system as a whole. Within it the great majority of participants act with moral purpose.
In societies that contain a plurality of rival values, where no religion or set of beliefs has
hegemony, that is all we can hope for.' (P161)
The question is, is it enough? Is this anything more than a 'post-modern relativist politics'
or a restatement of 'pressure group politics'? I'm not convinced - but the ideas just might help
fuel resistance to the neoliberal monolith. Thank-you Professor Crouch. :-)
RACKETS AND REVOLUTIONS October 31, 2011
The general public, such as myself, need to understand economics these days, supposing we didn't
before. This book is the right kind of adult reading. It explains, with severe and unflagging
concentration but without jargon or statistics, the economic theories that have dominated the
last 80 years. Professor Crouch sees neoliberalism as having stepped into the vacant space left
after the inflationary excesses of the 70's were taken as a sign that the generally Keynesian
consensus that had dominated `western' economies since the 30's was played out. I think he should
have gone one step further and made a point that would fit his later argument perfectly, namely
that the reaction was not so much against Keynesian theory as against the behaviour of the working
classes whom Keynesian demand management and deficit spending had empowered. They had created
wage-push inflation, so here was the opportunity to push back and reduce them to the statistics
that is all they constitute in market-forces economics of various varieties.
Crouch is repelled by this mentality and so am I, but he has written no kind of tract or political
pamphlet. He issues no simplistic demands to change the system or even to reform it drastically,
because however repellent it is not nonsense. There is strong economic argument underpinning it,
and Crouch states in so many words that the Chicago economic theory at least describes the present-day
economy. However it is masquerading as being some triumph of free markets, and Crouch demonstrates
powerfully that it is nothing of the sort. What has happened behind the presentational sleight
of hand is that the manipulation of the economy has reverted into the hands of a few movers and
shakers in the big corporations. It has largely obliterated the kind of free market that Adam
Smith and other such dreamers envisaged, and reduced `consumer choice' to choice among such options
as it has itself contrived through gaining a grip on legislatures and controlling the terms of
popular debate. The masquerade consists in the monstrous effrontery of representing this oligarchical
outcome as the result of untrammelled consumer choice. We have got what we really asked for, apparently,
it's just that we don't know it.
On the one hand this reduces individual consumers to statistics contained within aggregate
economic performance, on the other it places the control of the economy
in comparatively few hands; and that, I slightly suspect, may be neoliberalism's Achilles heel.
To me, it seems to follow from Crouch's arguments that while there are some basic economic laws,
such as supply and demand, that are more or less as immutable as gravity, others depend on what
people in general will accept. It is convenient to depersonalise the
behaviour of `money' or `capital' as if it moved itself without human intervention, but they can
only get away with this story if it represents some genuine mass activity. Once
it gets down to traceable individuals then sooner or later they can be traced. Technology helped
to create the problem by allowing money to move so quickly that the transactions are done and
dusted before anyone else realises, but technology can also now see into places that were once
beyond inspection, even if there is a time-lag before the scrutiny happens. Disclosure, not by
lumbering governments and regulators, but by the public at large, may yet be neoliberalism's nemesis.
I rather wish that Crouch had separated his analysis more, putting manufacturers in one category
and the bankers and such like in another. There is surely a clear difference between firms that
produce genuine products, items that at least have a genuine cash price and value, and the manipulators
of `money' that is really no longer true money but a figment that gets progressively more fictional
as it gets wrapped in bundles containing goodness knows what supposed transactions, valued according
to what are literally bets on what the next punter, equally ignorant of what he is supposedly
buying, might be willing to pay. How this current display of human arrogance and folly may develop
obviously I have no idea, but it must be at least possible that if public outrage boils over it
will target the money barons most. Major manufacturers may have the US congress, for example,
eating out of their hands, but when the only financial reality is cash, something everyone knows
and something that no conceivable economic system can change, then the spectacle of this or that
finance house playing tricks it may not even itself understand in order to pile up phantom finances,
thereby putting real people's real finances in peril, may just come to seem a racket too far.
It takes me back to school history classes when we were required to identify the `causes of the
French Revolution'. The causes could be summarised as one basic cause,
namely that the oligarchy pushed their arrogance and presumption too far. Obviously
an international money market is a different kind of target, and any putative onslaught on it
would take different forms, but if the balloon goes up one thing for certain is that academic
niceties, such as supposed inevitable rightness as markets work out their own impersonal logic,
will be sidelined for the time being.
The international aspect is giving the whole show a breathing space, allowing, for one thing,
outrageous remuneration to be given to banking executives on specious grounds of international
comparability. That particular bluff will surely be called sooner or later, but in general Crouch's
handwringing at the way in which the money miscreants are getting away with it is a little misplaced.
It can't all be stopped in its tracks, but he should not have fallen for the simple error of feeling
he has to provide alternatives. These are bound to be easy prey for critics. The real value of
this important book is in the earlier chapters; and the answer to any supporter of the status
quo who said `You have to provide an alternative' should have been `No, you'.
In his newest book, Martin Wolf relentlessly explores the ins and outs of the financial and economic
crisis which began in 2007-2008.
Mr. Wolf first reviews the shocks that have humbled many high-income countries, whose subdued performance
stands in sharp contrast with the strong showing of many emerging and developing economies in the
aftermath of that crisis.
1. A credit crash that has forced many households and businesses to stop spending consistently more
than their incomes.
2. A reconfiguration of entire sectors of activity such as construction and finance in many high-income
countries.
3. The higher cautiousness of chastised financial institutions in a changing regulatory environment.
4. The specter of deflation, or at least, consistently falling inflation rates in many high-income
countries, especially in the Eurozone.
5. The vicious circle behind the weakening of the "animal spirits" of businesses in the same economies.
The author then clearly articulates the shifts that have led to the fragility of the world economy:
1. No living memory of the large financial and economic busts of the distant past, which bred complacency
among the economic, financial, intellectual, and political elites of the West before 2007-2008.
2. No clear understanding of the ramifications associated with the evolution of the financial system,
i.e., liberalization, globalization, innovation, leverage, and incentives, among the same elites.
Subsequently, Mr. Wolf reviews what has been done to make the financial system more resilient than
it was before the above-mentioned crisis. The author is clearly not impressed with the post-crisis
central-bank orthodoxy as it is embraced in the high-income countries of North America and Europe.
He dubbed it the new orthodoxy, i.e. inflation targeting, macroprudential policy, the strengthening
of the role of central banks as lenders of last resort, and the orderly resolution of troubled institutions.
Mr. Wolf is especially critical of the sheer complexity of the regulatory structure that will probably
be dead on arrival in the recurrence of a major financial and economic crisis. Unsurprisingly, the
author pleads for a significant increase in the capital requirements of banks as a key improvement
to the new orthodoxy.
Finally, Mr. Wolf makes the case for radical reform. Radical reform does not include liquidationism
light as practiced within the Eurozone under the influence of Germany. Fiscal austerity, asymmetric
adjustment of competitiveness, and limited assistance with recapitalization of banks in crisis-hit
countries will probably not turn around the fortunes of these countries that are operating in less
auspicious external circumstances that those that benefited Germany previously.
The author mentions as examples of radical reform the creation of a global currency to replace the
national currencies currently used as anchors of the system, or a partial break-up of the open world
economy. Mr. Wolf makes himself no illusion about the feasibility of these radical reforms. It will
depend on 1) what sort of recovery emerges and 2) how much risk societies will be prepared to tolerate.
In summary, the author calls for a reassessment of the merits of the new orthodoxy which will probably
fail too many economies in dealing successfully with the recurrence of a major financial and economic
crisis.
A sweeping account of rising inequality… Eventually, Piketty says, we could see the reemergence
of a world familiar to nineteenth-century Europeans; he cites the novels of Austen and Balzac.
In this 'patrimonial society,' a small group of wealthy rentiers lives lavishly on the fruits of
its inherited wealth, and the rest struggle to keep up…
The proper role of public intellectuals is to question accepted dogmas, conceive of new methods
of analysis, and expand the terms of public debate. Capital in the Twenty-first Century does
all these things… Piketty has written a book that nobody interested in a defining issue of our era
can afford to ignore. (John Cassidy New Yorker 2014-03-31)
Piketty's treatment of inequality is perfectly matched to its moment. Like [Paul] Kennedy
a generation ago, Piketty has emerged as a rock star of the policy-intellectual world… But make no
mistake, his work richly deserves all the attention it is receiving… Piketty, in collaboration with
others, has spent more than a decade mining huge quantities of data spanning centuries and many countries
to document, absolutely conclusively, that the share of income and wealth going to those at the very
top-the top 1 percent, .1 percent, and .01 percent of the population-has risen sharply over the last
generation, marking a return to a pattern that prevailed before World War I…
Even if none of Piketty's theories stands up, the establishment of this fact has transformed political
discourse and is a Nobel Prize–worthy contribution. Piketty provides an elegant framework for making
sense of a complex reality. His theorizing is bold and simple and hugely important if correct. In
every area of thought, progress comes from simple abstract paradigms that guide later thinking, such
as Darwin's idea of evolution, Ricardo's notion of comparative advantage, or Keynes's conception
of aggregate demand.
Whether or not his idea ultimately proves out, Piketty makes a major contribution by putting forth
a theory of natural economic evolution under capitalism… Piketty writes in the epic philosophical
mode of Keynes, Marx, or Adam Smith… By focusing attention on what has happened to a fortunate few
among us, and by opening up for debate issues around the long-run functioning of our market system,
Capital in the Twenty-First Century has made a profoundly important contribution. (Lawrence
H. Summers Democracy 2014-05-01)
Piketty's ground-breaking work on the historical evolution of income distribution is impressive,
but he covers many other areas, including the erosion of meritocracy by inherited wealth, public
debt, education, health and taxation. He also proposes challenging ideas for funding the social state
in the 21st century…Capital in the Twenty-First Century will be embraced by progressives and
rejected by conservatives wary of change. But, if those conservatives who support a meritocracy are
convinced, it could be a catalyst for reform. This book is challenging, but one of the best economic
books in decades. (Paul Sweeney Irish Times 2014-03-28)
In the 19th century, tsarist censors banned John Stuart Mill's On Liberty while letting through
Karl Marx's Das Kapital. Mill's message was so lucidly expressed that it posed an obvious
and immediate threat to the regime; Marx's prose was clotted and convoluted and his economics littered
with leftovers from his youthful enthusiasm for Hegel.
Thomas Piketty's Capital in the Twenty-First Century shares its title with Marx's
work but its argumentative verve with Mill's, and it has been a runaway bestseller in the United
States. In spite of the efforts of conservative American economists to persuade their readers that
anyone who raises questions about inequalities of income and wealth must be a Marxist, Piketty has
no time whatsoever for Marx. Piketty's economics is 'data driven,' while Marx was short of useful
data, did not make good use of what data he had and generalized wildly from a few exceptional cases
of capital-intensive industries…The book is a terrific achievement. (Alan Ryan Literary Review
2014-06-01)
Aguadito
A truly unique work for this generation, April 24, 2014
EDIT: I would like to point out that it is ridiculous that literally all of the 1-star reviews
(except for one that I counted) for this book are from people who did not purchase the book or even
read it. It looks like there was some kind of invasion from April 22nd of right-wingers who were
told this book is "communist" or something to make a 1-star vote just to bring down the rating of
the book. Amazon should not allow this kind of manipulation, and should limit reviews only to those
who are verified customers that purchased this book.
If I could give more than 5 stars I would. As a former Libertarian who realized the path quickly
leads to oligarchy with such an ideology, Piketty's book is a wonderful reminder of just how wrong
I was back then.
The empirical work he has done in assembling the income and wealth concentration for countries
is simply invaluable. We have some data like gini and labor vs. capital income, but to meticulously
collect and analyze specific percentiles of income and wealth in many nations is truly groundbreaking.
No longer can people who deny the inequality we have in the United States. No longer can people deny
that we are in a new gilded age. The regulatory capture in our wild west capitalism has led to
outright corruption being "legalized", and the politicians merely keep deregulating, cutting taxes,
cutting spending on public programs.
Piketty not only provides the important data, and the historical context and analysis, but makes
some very clear policy prescriptions. Tax inheritances, get some sane corporate governance standards
to stop the insane overpaying of executives, and strengthen public institutions that provide opportunity
to the masses.
Adam
A relentless drive toward inequality, March 11, 2014
Thomas Piketty's "Capital in the Twenty-First Century" is a brilliant analysis of the long term
distribution of income and wealth. The book draws on reams of data from the United States and
numerous other countries. Most of the data comes from income tax records and estate tax/inheritance
records. The sheer quantity of data that underlies Piketty's conclusions is unprecedented, and
as a result his work deserves a great deal of credibility.
While the book is quite long, the major conclusion can be summarized very briefly: Piketty has
found that, over the long run, the return on capital is higher than the growth rate of the
overall economy. In other words, accumulated and inherited wealth becomes a larger fraction
of the economic pie over time. This happens more or less automatically, and there is no reason
to believe this trend will change or reverse course. Although Piketty does not focus on it, there
is also an argument that modern technologies like robotics and AI could accelerate the process
even more. (For more on this, I'd suggest also reading
The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future).
Piketty argues that the reduction in inequality in developed countries after World War II
was a "one-off" that was driven entirely by political choices and policies. It did not happen
automatically. Those policies have now been largely reversed, especially in the United States.
As a result the drive toward increased inequality is likely to be relentless.
Piketty's solution is a global wealth tax. While this seems politically unfeasible, he argues
that it is the only thing likely to work. In particular he is is dismissive of the idea that more
education and training for the masses can solve the problem. Conservatives in the US will almost
certainly dismiss Piketty as a socialist, but his book makes it clear that this is not the case.
His conclusions are backed by more hard data than any other economist has so far amassed, and
they deserve to be taken very seriously.
Mike P. "Mike P."
3.0 out of 5 stars Insightful, provocative and well written, but I don't agree with solution,
May 25, 2014
I'm a software developer by trade, but for career advancement reasons I obtained financial certification
a few years ago with CFA Institute, and am now required to maintain my professional credentialing
through continued education. This book has generated a lot of discussion in recent months, so
I thought it would be a worthwhile read. I was not disappointed.
First, I have to say that the English translation is very good throughout most of the book. I
get the feeling that towards the end they were a little rushed to get to print, but overall a
very nice job.
As I said, I have only recently started learning finance as an adjunct to my primary career (I
work as a systems analyst for a small fixed income investment firm) and as part of this I have
begun to learn the fundamental theories of economics and the various systems, predominantly monetary
and market, which underpin it. So I can't really argue the merits of this book from an academic
basis, as I'm a neophyte in this area.
However, I am encouraged by Piketty's assertion at the end of his book that it is precisely people
like me who should be taking a more active interest in how capital is distributed in today's world,
and in the political systems that serve to enable such distributions. The author wants the little
guy to get the big picture, and has written a book that speaks to us.
So, from a little guy's perspective, I have a few observations to share about Piketty's book:
- Data. In recent days (I am writing this in late May 2014) doubt has been cast in some conservative
circles as to the accuracy of Piketty's data collection methods. I get the impression that the
accusations themselves are overblown, as the data trend lines for some graphs presented by the
Financial Times differ mainly in degree, not direction, to those presented by Piketty. However,
some plausible gaps have been identified in the data presented in the book, and these need to
be addressed in a future edition.
- Plausibility. Data aside, do I agree with Piketty that the rich are getting richer and the poor
poorer? Well, yes, if one believes his data, there is certainly a trend over the past 30 years
that indicates an ever-increasing concentration of wealth in the upper decile of the population.
But Piketty also concedes that the share of wealth in the (patrimonial) middle class, measured
both in terms of income and asset ownership, has also increased in post war America and Europe,
and is rising in Asia. In other words, the rich are getting richer, but the less rich have also
never had it so good (by pre-WWI standards). The poor who occupy the bottom 50% may indeed be
getting poorer, but they have always been poor, at least as far back as the data allow us to measure
such things. In fact, they were much, much poorer over a century ago when one takes into account
what they had access to in terms of goods and services.
- Solutions. The primary solution offered up by Piketty as a means to stem the growing divergence
of capital is a progressive tax on the top earners, especially the so-called "rentier" class,
whose ownership of assets, either through inheritance or entrepreneurship (or a combination both)
allows them to continually accumulate income without necessarily generating jobs (r > g).
A progressive tax idea is nothing new, and is obviously at the core of all the controversy, pro
and contra, surrounding Piketty's work. After all, we are talking about taking something from
one set of people and depositing it elsewhere.
It's the elsewhere that bothers me. As Piketty notes, taxes are necessary, as they provide for
the common defense and basic social needs of a society. With the aging of the population in the
Western world there will be an ever -increasing strain on budgets to provide care to people whose
life expectancies far exceed those of their not-too-distant ancestors. Fair enough. We need to
have mechanisms in place to care for the vulnerable in our society.
My problem with progressive taxes, however, has to do with human nature itself. We naturally tend
to abhor those in the top centile of earners who loll around all day, while earning income from
others (in the form of rents of one sort of another), on account of the assets they inherited.
Deep down, I think almost all believe that one should be worthy of his wage. The idea of meritocracy
is a universal principle, one could argue a moral one. If you have a good idea and are willing
to work for it, you should be rewarded.
So it is natural and good that we look with disdain upon people who are enjoying the good life
without having to work much to maintain that lifestyle. This applies just as much to the lazy
rich trust fund kid (think of the Dudley Moore movie) as it does to the listless welfare recipient.
We just know it's not fair. It's funny though how we are always happy for the lottery winner,
as if an act of fate based on random number selection exempts them from the same kind of scrutiny
as those who benefit by other means.
So back to taxes. A yearly progressive tax, based on net assets, would definitely help to close
the divergence gap between the top decile and the rest of us. The question is, what will be done
with that money? Piketty mentions education as the primary beneficiary of such funds. This is
not surprising, as he is, well, an educator. Yet, I wonder if his arguments regarding super-manager
salaries and the concept of "marginal productivity" cannot be equally applied to that of education.
In other words, what guarantee do we have that throwing money into the public sector is going
to make our kids smarter? Will we end up with more bureaucrats making (semi) super-manager salaries,
followed by super-pensions in the last three decades of their life? If you want a taste of this,
Google salaries for state employees in Massachusetts. You'll find that most of the highest
paid occupy positions in the half dozen or so state universities. What exactly are all these people
who are making 100k+ doing? And are they in fact productive?
Jaal says:
"My problem with progressive taxes....."
A true progressive tax code gave us the healthiest socioeconomic balance in world history 1945-1975.
When we switched to Supply Side policy for the 0.1%-class, it has created a wealth imbalance
not seen since just before the Great Depression. Trickle Down economic policy has allowed U.S.
wealth to be radically redistributed into the hands of the 1%. In 1976 the ratio of 99% to
1% wealth was 80/20. Today it is right around 60/40. In 1929, it was 55/45, which triggered
the great depression. We're on that same path.
Qoqoqoq says:
"- Solutions. The primary solution offered up by Piketty as a means to stem the growing
divergence of capital is a progressive tax on the top earners, especially the so-called "rentier"
class, whose ownership of assets, either through inheritance or entrepreneurship (or a combination
both) allows them to continually accumulate income without necessarily generating jobs (r >
g)."
They certainly don't need to generate more mindless jobs that make everyone worse off. The
point is they should contribute something, because they are tying up societies wealth. What
they have will never belong to them in the ultimate sense. They acquired it by a kind of private
tax. From my point of view when they are separated from the money that they associate with
themselves (in the high end rent seeking category) they aren't losing anything, it was only
an accident that it came to be associated with them. It belongs to society and those who can
best use it.
Also the meritocratic idea doesn't mean that much. Its called "unearned," for a reason but
its not the sacrifice that's necessary just that they have contributed equal value to society
for what they claim to have a say over, otherwise they are unqualified, a very inefficient
and ineffective use of capital as it were.
"A progressive tax idea is nothing new, and is obviously at the core of all the controversy,
pro and contra, surrounding Piketty's work. After all, we are talking about taking something
from one set of people and depositing it elsewhere."
Correcting distribution with regard the destabilizing accumulation of the super rich is again
not a taking, its a return and placing it in the hands of those who could use it out of need
is the most natural thing to do. You mention the lottery. That is not an accident that they
want to push and encourage the acceptance of arbitrary wealth. And for that reason we should
eliminate the lottery, because it unduly dulls scrutiny just as it is meant to. Remember in
the time of Voltaire the first lottery to protect some King who messed up with the people's
money and to spare himself sought to return a portion of it buy lottery. Wealthy speculators
bought up enough tickets to win the lottery and people were out the money. This history and
strategy are not accidental.
5.0 out of 5 stars Economics is Not a Science, October 4, 2014
Loyd E. Eskildson "Pragmatist" (Phoenix, AZ.) - See all my reviews
(HALL OF FAME REVIEWER) (REAL NAME)
This review is from: Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World
(Kindle Edition)
The pretense that economics is a science gives economic ideas more credibility than they often deserve.
We're unaware of the weak underpinning of much of their advice, their frequently/consistently gravely
incorrect policy decisions, and consistent failure to look at the evidence of disastrous results
associated with those incorrect policies. Their positions ignore research by reputable economists
at schools, making a mockery of any claim that economics is a science. Instead, it has largely become
a purveyor of Wall Street-friendly ideology, at the expense of Main Street. Meanwhile, we continue
to believe that most economists know what they are talking about - despite these obvious shortcomings.
Almost no economist predicted the 2008 financial crisis and its aftermath. Leading economists publicly
proclaimed the arrival of a new economic era (the Great Moderation) that prevented wild swings and
deep recessions or worse. Prevailing economic theory was that government's role in the economy should
be far more limited - laissez-faire and Adam Smith's 'invisible hand' were now seen as the keys to
success, Keynesianism was dead.
Left alone, the economy would supposedly manage itself, needing only Federal Reserve management of
interest rates through monetary policy. Thus, we'd reduced regulations in many areas, and chosen
to not regulate derivatives (including credit default swaps - CDS) that played a key role in bringing
about 'The Great Recession.' Further, there were no legal requirements to hold a reserve that would
ensure sellers of such insurance (eg. AIG) would likely hold reserves to cover payouts. And economists
also said little at the time about the obvious conflicts between those issuing securities and the
agencies they hired to rate them, or about the bias for risk-taking caused by traders' lavish pay
when they were correct, and lack of commensurate penalization when they were wrong.
Madrick also contends that America's economy had been handicapped since 1980 by the (re)-rise of
devotion to Adam Smith's 'invisible hand,' and that this weakness had gone unnoticed. Wages for most
U.S. workers rose only 3% since 1979, while the top 1% earned roughly 20% of national income, compared
to 10% in 1970. Meanwhile, concentrations of carbon-dioxide grew rapidly in the atmosphere, our transportation
infrastructure was crumbling, government-funded R&D falling, and health-care expenditures soaring
far above those in every other nation - with mediocre results. (Lifespans lengthened, but mostly
due to reduced smoking and improved cardiovascular drugs, often developed by government-funded researchers,
rather than economic vitality or increased health care expenditures.)
In 2008, the 'Great Moderation' turned into a great-jobs emergency. Ironically, corrective actions
and mediating programs all involved government taking an active role - almost $1 trillion in stimulus
spending, food stamps, unemployment insurance, and Medicaid.
Madrick's second bad economic idea is Say's Law - that savings are automatically invested, there
cannot be a shortage of demand, and government stimulus can never do any good because such will always
displace an equal amount of private spending. The Great Depression (and the Great Recession) threw
a wrench into the 'great assumption' that the economy would adjust itself. Attacking Say's Law became
the principal objective of Keynes' 1936 'The General Theory of Employment, Interest and Money.' Low
interest rates often do not lead to more business investment in a deep recession - eg. offshoring
today has removed most impetus for adding capacity. Consumers' fear of job losses during a recession
can induce them to save instead of spending - 'Paradox of Thrift.' Keynes also contended that stock
markets can distort economies - stock prices are often dependent on fashion (eg. the 2000 dot.com
bubble), creating too much investment.
A major implication of Keynes' thinking is that an economy could remain indefinitely mired in depression
or recession. (Opponents counter that these would only be 'temporary.' The Arab states, Mexico?)
He also taught that government budget deficits were often necessary. Keynes' thinking did not rely
simply on obvious market failures - eg. unions and monopolies undermining the Invisible Hand. The
sharp 1931 U.S. economic recovery is credited to added government spending, though largely undermined
by a return to austerity in '37 caused by fear of inflation. Friedman, on the other hand, contended
that higher interest rates over a few months in '31 pushed a moderate recession into a depression.
Others added that union power contributed to rising wages and also blamed Smoot-Hawley. Conventional
theory is that as prices fall, buyers quickly step in - but what about those holding back for further
drops?
Reinhart and Rogoff's 'This Time is Different' analysis concluded that when debt reached 90% or so
of GDP, economic growth slowed sharply. However, nobody could replicate their results, and it was
later shown to contain several fundamental flaws. Germany has both succeeded and followed an austerity
program post-2008 - Madrick explains this as due to its government keeping wages low enough to help
support exports.
Milton Friedman is author Madrick's go-to punching bag in a number of instances - especially Friedman's
emphasis on a minimal role for government. Madrick pummels Friedman for opposition to government
social programs (eg. Social Security, unemployment insurance, Medicaid, Food Stamps). Later, Madrick
attacks Friedman for unrestricted endorsement of Free Trade, beginning by explaining how rising new
economies post-WWII all began with protectionist actions (most generously subsidized exports to stimulate
growth), as well as the U.S. early in its history. Madrick points out that free-trade would have
us believe that everyone benefits - obviously a falsity for America. True, world poverty rates have
fallen, but this was largely due to China and to a lesser degree India, neither of which adopted
recommended market liberalization policies. (Russia undertook shock therapy liberalization, immediately
crashed, and is still struggling.) Further, the free flow of investment contributed to major crises
in East Asia, Russia, Argentina, and Turkey in the mid-1990s, and then the demise of LTCM. Massive
trade imbalances are simply not sustainable indefinitely. Another point - a lot of America's productivity
growth has been due to scale economies - how can start-ups in developing nations succeed against
such, per the 'Washington Consensus?'
Bottom-Line: 'Seven Bad Ideas' is one of the best books on macro-economics that I've ever read.Selected
Skeptical Comments
One of the principle complaints of conservatives is that all education in America is deliberately
skewed with a "left-wing" bias from kindergarten to college. And yet the field where this "bias",
(if you accept this view) is clearly undone is the field of economic education. Whether you read
the business section of the New York Times, the Harvard Business Review or National Public Radio,
the actual bias present is really for the neo-classical economic model (AKA, neo-liberal economics)
of the laissez-faire variety.
Dr. Chang, a professor of economics at Cambridge and former World Bank researcher, deconstructs
in general and in detail many of the prevailing myths of the neo-liberal school of economic development.
My favorite chapters were these two:
Chapter 1-The Lexus and the olive tree revisited. In this chapter Dr. Chang explains why he
thinks that NYT columnist and author Thomas Friedman is full of crap about the benefits of globalization
for ordinary people [pages 19-40].
Chapter 3-My six-year-old son should get a job. Says Chang: "I have a six-year-old son. His name
is Jin-Gyu. He lives off me, yet is quite capable of making a living. I pay for his lodging, food,
education and health care. But millions of children of his age already have jobs. Daniel Defoe,
in the 18th century, thought that children could earn a living from the age of four. Moreover,
working might do Jin-Gyu's character a world of good. Right now he lives in an economic bubble
with no sense of the value of money. He has zero appreciation of the efforts his mother and I
make on his behalf, subsidizing this idle existence and cocooning him from harsh reality. He is
over-protected and needs to be exposed to competition, so that he can become a more productive
person. Thinking about it, the more competition he is exposed to and the sooner this done, the
better it will be for his future development. It will whip him into a mentality that is ready
for hard work. I should make him quit school and get a job. Perhaps I could move to a country
where child labour is still tolerated, if not legal, to give him more choice in employment" [page
65].
I found this tongue-in-cheek style of criticism of global capitalism both hilarious and enlightening.
There are many more examples of Chang's knowledgeable and funny criticism of neo-liberalism I
could list here, but I don't want this review to be a spoiler. So go read Chang's book.
Robert David STEELE Vivas
Speaking truth to power, helpful revisionism
By HALL OF FAMETOP 500 REVIEWER on February 22, 2008
While other books (linked below) have focused on the evils done in our name, this is the first
book I have seen that dissects economic history in order to demonstrate the hypocrisy of the current
regime that bullies lesser developed countries with the IMF-WTO-World Bank interlocking conditionalities.
The author comes down solidly in favor of protectionism, foreign investment controls, state-owned
enterprises, avoidance of privatization, not allowing patents to clash with the public interest,
the need to defy the marketplace and respect the role of manufacturing, and the influence of culture
(and changing the culture through government direction).
This is a nuanced book that trashes the neo-liberals while speaking truth to power. On any given
prescription, the author will say "it depends" and avoid leaning to one extreme over another.
He touches on democracy as not necessarily good for development, and corruption not necessarily
bad.
By Loyd E. Eskildson HALL OF FAME on February 4, 2008
Time to Update Economics
"Free Trade" has been progressively wrecking America's economy for at least two decades. Meanwhile,
economists in our colleges continue, almost without exception, to warn of protectionism while
extolling the writings of Adam Smith and David Ricardo - written long before today's gross wage
imbalance between Asia and the U.S., instant communications, and fast, economical international
transportation. Finally, a Cambridge economist, Ha Joon Chang, brings facts and common sense to
the debate - aided considerably by the free-trade ignoring successes of his native country, South
Korea - eg. Samsung, and Pohang Iron and Steel. (And then there's Toyota - started out in textiles,
was protected by auto tariffs, and now the world's #1 auto manufacturer and teacher of advanced
management techniques.)
"Bad Samaritans," as Chalmers Johnson points out, refers to "people in the rich countries who
preach free markets and free trade to the poor countries in order to capture larger shares of
the latter's markets and preempt the emergence of possible competitors." They are saying "do as
we say, not as we did" and take advantage of others who are in trouble. He also points out that
all of today's rich countries (INCLUDING the U.S.) used protection and subsidies to encourage
their manufacturing industries - anathema in today's economic orthodoxy and contrary to the WTO,
IMF, and World Bank. As a result, third-world nations' growth rates have fallen to less than half
of that recorded in the 1960s (1.7 percent instead of 4.5 percent).
As for corruption being incompatible with high growth, Chang points to Zaire vs. Indonesia. Both
suffered from murderous corruption, yet the former's living standards fell two-thirds while Indonesia's
tripled. The difference was that corruption funds in Zaire fled to Swiss banks, while those in
Indonesia remained in the country to help create additional jobs.
"Level playing field" rhetoric is often used to justify WTO and IMF prescriptions. Chang, however,
reminds us that this is inconsistent with our practice of segregating sports by size and age,
and that it is similarly unrealistic to expect eg. Honduras to compete evenly with the U.S.
Capital markets have a bias towards short-term gains, not risky, large-scale projects with long
gestations. This is especially pronounced in the earliest stages of development - thus, government
support is kick-starting, not replacing capitalism. In France, Renault, Alcatel, Thomson, etc.
used to be SOEs. Brazil's EMBRAER was also, and the state (lower Saxony) is VW's largest shareholder.
Taiwan began with key industries owned by the state; even after 1996 privatization the government
maintains a controlling stake (average = 35%) and appoints 60% of their directors.
Absent government support in developing economies is akin to becoming frozen in the status quo.
Break-out requires government intervention, including subsidies, tariffs, regulation (eg. maintain
quality), infrastructure, prohibiting exportation of raw materials, exempting imported raw materials
from tariffs, currency controls. IMF, WTO, and World Bank decrees associated with loans have been
a disaster.
Communists early-on saw private ownership as not just the source of distributive injustice but
also economic inefficiency. Too many capitalists routinely invested in the same things because
they did not know their competitors' plans, or overestimated future potential. Communism failed
as a system, but that does not demonstrate that SOEs don't work. Conservatives argue that the
imbalance of information between principals and agents makes it very difficult to appropriately
pay/incentive managers. The 'free-rider' problem also essentially eliminates citizen monitoring.
'Soft budget constraints' (mid-year added subsidies) is another problem impeding SOEs, per conservatives.
Change, however, contends these same problems confront private enterprise, with the 'soft-budget'
issue becoming 'too big to fail,' and the 'Greenspan put.'
China's TVEs are a hybrid ownership form - owned by local authorities but usually operated as
if privately owned by powerful political figures.
SOEs can be ideal where 'natural monopolies' exist - utilities, railroads, communications, etc.
where the main cost is that of a distribution network. Assuring equity is another reason - eg.
mail service in rural areas. Regulation is an alternative, but not always satisfactory - eg. California's
electricity deregulation, England's defacto re-nationalization of rail tracks. Corrupt SOEs are
difficult to sell off without even greater corruption (eg. Russia); privatization of natural monopolies
without appropriate regulation can bring new problems (eg. Bolivia's 1994 sale of a water company
to Bechtel brought a tripling of rates, riots, and re-nationalization). SOE performance can often
be improved without privatization by simplifying and prioritizing goals. Simplifying regulation
by consolidating agencies is another alternative. Requiring SOEs to export and compete internationally
or setting up another SOE for competition also are used. There are no hard and fast answers as
to when an SOE is best.
Chang also points out the strong agricultural subsidies in Europe (milk), the U.S. (corn), and
Japan (rice). The good news is that these subsidies keep farming viable in those areas and the
nations involved more independent; the bad news is that U.S. corn is exported to Mexico - making
economic survival impossible for their farmers and driving them to illegal immigration into the
U.S.
Free-trade reduction of tariff revenues also plays undermines national budgets in poor countries
because they lack efficient tax collection capabilities and tariffs are the easiest taxes to collect.
Combined with free-trade-caused damage, the struggling nations are left far less able to
fund health care and education for their citizens.
Still another Chang insight is his pointing out that pursuit of copyrights and patents are
simply a sophisticated form of protectionism that again works against third-world nations by preventing
their starting important new industries (eg. drug manufacture) that boost not only their economy
but citizens' health as well. (97% of all patents and the vast majority of copyrights are held
by rich countries - these are also a special problem for poor countries wanting textbooks. IMF
also insists on enforcement mechanisms, further adding costs to poor nations.) Chang sees the
U.S. as the worst offender in this area. Chang asserts that self-development of new technology
is difficult in third-world nations, using North and South Korea as examples. North Korea has
tried to be self-sufficient (and done poorly), while South Korea has assiduously copied wherever
possible and is now an industrial powerhouse.
Chang suggests that third-world countries use tariffs to protect their developing industries.
However, he does not propose that the U.S. do likewise - perhaps in his next book. Nonetheless,
"Bad Samaritans" punches enough holes in free trade thinking to help others rethink America's
self-destructive commitment to it.
The Triumph of Finance and the Decline of America, 1970 to the Present
By Jeff Madrick
Illustrated. 464 pp. Alfred A. Knopf. $30.
Seven years ago, James Mann published
"Rise
of the Vulcans," a history of the neoconservative foreign-policy advisers who rose to prominence
with the presidency of George W. Bush. Mann traced the group's origins to the 1970s, when figures
like Dick Cheney and Donald Rumsfeld got their start in government, and told how events from East
Asia to Kuwait solidified their faith in American assertiveness abroad. Of course, Mann was writing
against the backdrop of the Iraq invasion. The belief system he chronicled had culminated in overreach.
Jeff Madrick's "Age of Greed" almost seems to have set out to be the economic equivalent of
Mann's history. Writing against the backdrop of the 2007-9 financial crisis, Madrick, the author
of "The End
of Affluence," also starts his story in the 1970s, tracing the regulatory and cultural changes
that led to our current trouble. In Madrick's telling, a cabal of conservatives,
driven first by greed and second by "extreme free-market ideology," gradually seized power.
The result, as proclaimed in his bold subtitle, was "the triumph of finance and the decline of America."
It's clear from the outset that Madrick has his work cut out for him. Where Mann's story concentrated
on six individuals who held office through successive Republican administrations, Madrick draws in
a far wider cast of characters: thinkers like Milton Friedman; business leaders like Jack Welch;
presidents like Richard Nixon and Ronald Reagan. It's not always obvious what connects these disparate
figures, so the book jumps from pen portrait to pen portrait without always advancing its main theme.
And the theme itself is slippery. A history of neoconservatism can home in on self-professed neocons,
whose actions are clearly informed by a defined body of beliefs. But it's harder to identify
a cabal that self-consciously embraced greed as a guiding philosophy. To be sure, the insider
trader Ivan Boesky once defended greed at a forum in Berkeley, Calif. But an undertow of avarice
is surely a human constant. Was Sandy Weill, the Wall Street executive
who retained a corporate jet while slashing retired employees' health insurance, really so very different
from a 19th-century Rockefeller or Vanderbilt?
If the greed of Boesky or Weill is unsurprising, the lack of greed evinced by some of Madrick's
characters is striking. Paul Volcker, the Fed chairman whom Madrick eccentrically berates for his
determined fight against inflation, was known to be frugal; John Reed, Citigroup's boss during the
1990s, was by Madrick's own account "thoughtful and unflashy." Reagan himself was more enthusiastic
about self-reliance and hard work than about material advancement, remarking that "free enterprise
is not a hunting license." Early in his career, Walter Wriston, Reed's predecessor at Citi and perhaps
the character whom Madrick conjures most successfully, was offered a salary of $1 million to move
to Monaco and work for Aristotle Onassis. He chose to remain in a middle-income housing project in
Stuyvesant Village.
If "Age of Greed" is an unhelpful label, what of Madrick's secondary contention - that the
era was defined by extreme free-market ideology? Well, the extreme was pretty mainstream.
Free-market ideas were embraced by Democrats almost as much as by Republicans.
Jimmy Carter initiated the big push toward deregulation, generally with
the support of his party in Congress. Bill Clinton presided over the growth of the
loosely supervised shadow financial system and the repeal of Depression-era restrictions on commercial
banks. Centrist intellectuals like Lawrence Summers, who was fully aware of market failures - indeed,
who had emphasized them in his academic writings - nonetheless embraced pro-market public policies
because, he thought, they were more right than not.
Besides, free-market policies were never embraced with the unqualified enthusiasm that some imagine.
Throughout Madrick's period, entitlement spending grew and armies of supervisors at multiple agencies
tried to keep the financial sector in check. Contrary to Madrick's view that the regulators were
always retreating, the 1980s saw the imposition of new capital-adequacy rules on banks, and the 2000s
brought the passage of the ambitious Sarbanes-Oxley accounting reforms. These regulatory efforts
proved hard to enforce, but the record hardly supports Madrick's argument that policy was captured
by free-market extremists.
The real causes of the crisis are more subtle and interesting than Madrick believes.
Frequently, as the nation built the system that ultimately imploded,
intelligent, pragmatic, nonideological and generally ungreedy individuals wrestled with the options
that confronted them - and concluded that some measure of deregulation was the least bad way forward.
Consider the response to Wriston's efforts in the 1960s to end-run Regulation Q, the rule that
restricted banks' freedom to pay interest on demand deposits. Regulators fully understood that
the demise of Reg Q would drive up the banks' borrowing costs, which would in turn lead them to chase
higher-yielding loans to riskier customers. But regulators could also see that Q was an anachronism.
Given the inflation of the Vietnam period, savers were not going to hand banks their money unless
they were paid interest. If Q was enforced, depositors would lend directly to companies by buying
their debt in the securities markets. The choice was between deregulating the banks, which would
be risky, or seeing financial activity move into hard-to-monitor markets, which might be even more
risky.
By allowing such stories into his narrative, Madrick rescues his book from his own unconvincing
thesis. He makes extensive and generally good use of secondary sources (I am among the many authors
cited), though there are some confusions and errors. He twice states that the hedge fund manager
Julian Robertson escaped losses during the October 1987 crash. Actually, Robertson took a 30 percent
hit that month, and afterward told his investors that "probably none of us have ever lost so much
money so fast in our lives." More seriously, Madrick misconstrues the Princeton economist Alan Blinder,
citing him in support of the curious view that policy makers could have dealt with the Carter-era
inflation by waiting it out. What Blinder actually wrote was that part of the 1970s inflation required
no policy response, since it resulted from temporary spikes in food and fuel prices that would self-correct.
But the other part of the decade's inflation, Blinder acknowledged, reflected excessively loose money,
and the Fed had no choice but to tighten the supply.
Even though Madrick does not deliver on his thesis, readers will still find worthwhile stories
in his pages. In 1970 Walter Wriston, having loaded up on risky assets after sidestepping Reg Q,
faced the prospect of a large loss when Penn Central railroad defaulted. He immediately called the
Fed and announced that the financial system itself was at risk, demanding that the central bank's
emergency lending operations be kept open over the weekend. The Fed obliged, easing Wriston's
losses. Four decades ago, in other words, the "too big to fail" doctrine was already operative.
Sebastian Mallaby, the Paul A. Volcker senior fellow at the Council on Foreign Relations, is the
author of "More Money Than God: Hedge Funds and the Making of a New Elite."
Beginning with the failure of two Bear Stearns hedge funds and the consequent freezing of the
high-risk collateralised debt obligations market in June 2007, the financial crisis deepened in 2008,
and at the time of writing in April 2009, the wheels of finance are yet to start turning again even
though governments and central banks around the world have taken many measures -- "dropping money
from helicopters", metaphorically speaking, into the financial markets, going much further than merely
acting as "lenders of last resort", exercising their "too big to fail" policy, and so on.
By all accounts, the financial catastrophe is the worst since the Great Depression, bringing
in its wake a severe economic crisis, and it is time to seriously examine its causes and consequences,
a challenge the book under review takes up quite admirably.
The feeding of the speculative bubble in the home mortgage market by massive credit expansion,
the selling of large amounts of subprime mortgages, the peculiar securitisation of the mortgage loans
and the speculative trading of such securities in the global financial markets, the credit rating
agencies' fraudulent ratings, the off-balance sheet device of the structured investment vehicle,
and role of credit default swap arrangements have, taken together, commanded a fair share of attention
among financial analysts. To make sense of this whole host of factors, the authors, John Bellamy
Foster and Fred Magdoff place their description of the unfolding of the crisis quite neatly into
the basic pattern of speculative bubbles outlined by Charles Kindleberger in
Manias, Panics, and Crashes: A History of Financial Crises -- a novel offering ("displacement"),
credit expansion, speculative mania, distress, and crash/panic -- and, with the same clarity and
wit so characteristic of the "literary economist".
Going by this, it might be tempting to view the crisis as a direct consequence of the deregulation
of the financial system since the 1970s, especially the cumulative dismantling of Glass-Steagall
that was finally buried when the then US President, Bill Clinton signed the Financial Services Modernisation
Act in 1999. But this is not a liberal-left account. The authors come from an intellectual
tradition (the Monthly Review
school) that has its origins in Paul Sweezy's synthesis of Marx's political economy with J M Keynes'
insights on investment, effective demand,1 and the
structure and behaviour of modern finance, as well as the theory of oligopoly. They locate
the roots of the financial bust in the "real" economy and in the underlying accumulation (savings-and-investment)
process, both its financial and "real" aspects.
Finance to the Fore
Since the late 1970s, a gravitational shift of economic activity from the production of goods
and non-financial services to finance has been underway. One indicator of this process
has been the rapid growth since then of the share of financial profits in total corporate profits.
Also reflective of this process of "financialisation" is the explosive growth of private debt --
household, non-financial, and financial business -- as a proportion of gross domestic product, and
the piling of layers upon layers of claims with the existence of instruments like options, futures,
swaps, and the like, and financial entities like hedge funds and structured investment vehicles.
With financialisation, the employment of money capital in the financial markets and in speculation,
more generally, to make more money, bypassing the route of commodity production, increasingly became
the name of the game. In Marx's terms, financialisation entailed a shift from the general
formula for capital accumulation, M-C-M', in which commodities are central to the generation of profits,
to one "increasingly geared to the circuit of money capital alone, M-M', in which money simply begets
more money with no relation to production" (p 133).
The flood of private debt to finance such activity has been sustained by successive booms in asset
prices; indeed, such booms have, in turn, been fed by the explosion of debt.2
As long as the asset price bubble grows, consumers and businesses get access to more credit to buy
more home or financial assets because their creditworthiness is determined by the market values of
the assets they hold, which act as collateral. The rise of asset values and the intensification
of the speculative mania contribute to the growth of borrowing, which, in turn, flames the fires
of speculation and the further rise of asset values. On the supply side of the financial markets,
in the competitive race to grab the hindmost of the profits in store, a whole array of players get
into the act of frenzied "financial innovation", leading to the multiplication of financial assets
of all kinds, for instance, the securitisation of mortgage loans through the collateralised debt
obligation, or the credit default swap to speculate on the quality of credit instruments. It
is only when the asset price bubble pops and the underlying collateral thus vanishes in thin air
that all hell breaks loose across financial institutions and markets, and across countries in this
world of globalised finance.
Weak Propensity to Invest
But what brought on the financialization of the economy in the first place? The US economy
entered a period characterized by slow economic growth, high unemployment/underemployment and excess
capacity beginning with the sharp recession of 1974-75 after around 25 years of rapid ascent following
the second world war.
The inducement needed to generate investment high enough to sustain the vigorous growth of the
so-called Golden Age was no longer to be found. But capitalism as a profit-directed system
has an imperative to accumulate capital -- it cannot stand still; it either expands or it slumps.
An important "solution" to the problem of long-term "stagnation" was found in financialization,
which proved functional for capitalism, in that, what growth the economy produced over the period
of the 1980s to the present has, to a significant extent, been due to the financial explosion.
Speculative finance became "the secondary engine for growth given the weakness in the
primary engine, productive investment" (p 18).
The system was now "more and more dependent on a series of financial bubbles to keep it going,
each one bigger than the last" (p 18).
As the authors themselves give credit to, their analysis leans heavily on Paul Sweezy and Harry
Magdoff's documentation and analysis of developments in the US and world economy in the pages of
the Monthly Review over a period
stretching from the late 1960s to the late 1980s (as also, short perspective articles by Sweezy up
to the mid-1990s), a number of these pieces tracing the process of what later came to be called financialisation.
The analytical framework of the book draws on Paul Baran and Paul Sweezy's 1966 classic,
Monopoly Capital: An Essay on the American Economic and Social Order (New York: Monthly
Review Press, 1966). Rather than a tendency for the rate of profit to fall,3
Baran and Sweezy hypothesised a tendency for the relative share of the economic surplus4
to rise. The main problem is one of finding ways to absorb this gigantic actual and potential
economic surplus.
"Underconsumption" -- the shift in the distribution of income from labour to capital exacerbating
the problem of effective demand -- as an ex ante tendency draws the economy towards stagnation, for
the process of accumulation of capital is predicated upon an increase in the rate of surplus value
while at the same time having to rely on mass consumption to spur investment and economic growth.
High levels of inequality hold down the relative purchasing power of the working class, weakening
consumption and adding to overcapacity, thus lowering expected profits on new investment, and thereby
dampening the willingness to invest.
Counteracting Tendencies
The problem of capitalism is that individual units of capital strive to expand their wealth to
the maximum possible extent without considering the ultimate overall effect this would have on effective
demand in the context of the economy's expanding capacity.
Truly, "The real barrier of capitalist production is capital itself", as Marx once put it.5
Under monopoly capitalism, this barrier is raised even higher.
First, in the class struggle -- the relationship between the two main classes, involving exploitation
by capital and the workers' resistance to it -- capital has the upper hand, thus raising the rate
of surplus value to attain a higher rate of profit, and thereby making possible a higher rate
of accumulation.
Second, with oligopolistic pricing, the uniform rate of profit of competitive capitalism gives
way to a "hierarchy of profit rates" -- highest in "tightly" oligopolistic product markets and
lowest in the most competitive ones. This leads to a skewed distribution of the surplus
value generated, one that favors the larger, more monopolistic firms; they, in turn, could "re-invest"
a larger proportion of their profits, making possible a higher rate of accumulation. But
on the demand side, the large oligopolistic units of capital tend to regulate and slow down "the
expansion of productive capital in order to maintain their higher rates of profit".
Underconsumption as an ex ante tendency and the problem of effective demand thus asserts itself
even more under monopoly capitalism than under its competitive counterpart. But there are counteracting
tendencies. Civilian government spending picks up some of the slack in effective demand; however,
there are forces opposing such spending, especially where the projects or activities undertaken either
compete with private enterprise or undermine class privileges. But there are other offsetting
tendencies, such as militarism and imperialism, expansion of the sales effort, and financialisation,6
which have been the main external stimulants boosting effective demand and thus aggregate output.
As already mentioned, financialisation has been functional for capitalism in the context of a tendency
to stagnation; indeed, more recently, it has been the main "response of capital to the stagnation
tendency in the real economy".
But the present crisis of financialisation, symptomatic in the financial crash, "inevitably
means the resurfacing of the underlying stagnation endemic to the advanced capitalist economy" and
there now seems to be "no other visible way out for monopoly-finance capital" (p 133).
'The Truth Is in the Whole'
It must be mentioned that the book focuses almost exclusively on the financial crisis in the context
of the US economy. No doubt this is the epicentre of the catastrophe. Nevertheless, in
these times of financialisation of the capital accumulation process globally (albeit an Americanisation
of global finance), if one were to go by Hegel's dictum that "The Truth is in the Whole", then to
understand what is going on in the US, one has to also take account of what is happening in the whole
world, just as developments in the US make a difference elsewhere. In particular, the structure
and distribution of world effective demand along with the huge imbalances reflected in the massive
deficits and corresponding surpluses in the current accounts of the balance of payments of the major
economies, and the structure of capital flows7 thereby
engendered, need to be brought into the picture. The neo-mercantilist direction of the Chinese,
German (also, some other European economies), and Japanese economies come to mind, which needs to
be taken together with the fact that despite the phenomenal rise in inequality in the US, the country's
savings rate has secularly declined, in part due to the wealth effect brought on by financialisation.
These developments have, in turn, led to increasing US current account deficits, matched by huge
capital inflows, and reflected in the accumulation of massive non-resident holdings of dollar-denominated
financial assets. To what extent has all of this buttressed the speculative mania and the crash?
Again, confronted with Hegel's dictum, and reminded of Rosa Luxemburg's thesis of capitalism's
imperative to move into the non-capitalist regions of the world, we might also ask whether as
time has gone by in this post-cold war era of a fully globalised capitalism, the system is now more
prone to deep crises, given that it can now grow only by internal expansion.
'Monopoly-Finance Capital'
The main chapters, apart from the introduction, were "originally written as parts of a running
commentary [in the Monthly Review] during the years 2006-08 as the present crisis took shape"
(p 21). In fact, the four chapters following the introduction --
"The Household Debt Bubble"
(May 2006), "The Explosion
of Debt and Speculation" (November 2006),
"Monopoly-Finance Capital"
(December 2006), and "The Financialization
of Capitalism" (April 2007) -- were all written before the crisis began. But this does
not diminish their value. The chapter on "The Household Debt Bubble" presents interesting data,
for instance, debt service payments as a percentage of disposable income by income percentiles, which
together suggest that "financial distress is ever more solidly based in lower-income, working-class
families" (p 31). The chapter on "The Explosion of Debt and Speculation", after presenting
data on the sky-rocketing of debt -- household, non-financial sector, financial business, and government
-- suggests a decline in the stimulatory effect of the expansion of debt on the economy as a
result of its changing composition. In particular, "financial sector debt now larger than any
other single component and growing faster than all the rest (a shift from M-C-M' to M-M'), may explain
much of the decreased stimulation of the economy by debt expansion" (p 49).
Importantly, in the chapter on "Monopoly-¬Finance Capital", the authors argue that the new way
monopoly capitalism has found of reproducing itself, namely, through the explosive growth of finance,
suggests that it has moved into a "new hybrid phase", which they designate "monopoly-finance
capital"8 (p 64). Drawing on Sweezy, the
chapter outlines how the "financial explosion has reacted back in important ways on the structure
and functioning of the corporation-dominated "real" economy"9
(p 66). And, in the chapter on "The Financialization of Capitalism", Foster and Magdoff profile
its class and imperial implications (pp 84-88).
But, in order to absorb these and other insights in each of the six chapters, the reader will
have to put up with a lot of repetition. And, there seems to be an analytical flaw.
In chapter 6, in a section
"From Financial Explosion
to Financial Implosion" dealing with the instability and fragility of a system, while examining
the massive increase in private debt, the authors state that "the problem is further compounded if
government debt (local, state, and federal) is added in" (p 122). This is analytically untenable.
Unlike private debt instruments, US Treasury securities have a zero default risk -- they can be held
indefinitely (for they are continuously "rolled over") at no financial risk to the government or
to the private sector holder, for the government can never become bankrupt if it borrows in the same
currency it has the power to declare as legal tender (fiat money). In fact, in the midst of
the present crisis, Treasury securities are preferred holdings, for they can be readily sold for
money or pledged as collateral for availing of loans.10
But of course, Treasury securities face purchasing power risk -- inflation can erode their purchasing
power or deflation can result in an increasing real value of the debt for the government.
There is apprehension though about the value of the dollar, the currency in which these securities
are denominated -- a depreciation of the dollar relative to the asset holder's own currency -- but
this foreign exchange risk is faced by such holders for all forms of dollar denominated assets that
they may hold. A significant fall, though, in value of the dollar would adversely affect the
very growth strategies of the US's neo-mercantilist rivals (China, Germany and some other European
countries, and Japan), as also those of US financial interests (which exercise significant power
and influence in shaping the US exchange rate policy), predicated as these grand designs are upon
the maintenance of a "strong" dollar. Given this, and the fact that the portfolios of the foreign
assets of the neo-mercantilist powers are largely dollar-denominated, presently, all the countries
at the apex of the global pyramid of power and wealth want a "strong" dollar, and will thus do all
they can to ensure this. So it is highly unlikely the neo-mercantilist powers will shift their
foreign portfolios of wealth away from the dollar leading to a collapse in its value. However,
with the plunge in the net worth of firms geared to the circuits of money capital alone, and the
consequent decline in their relative power and influence, in the event of the dollar losing say 30-40%
of its value, given its "overvaluation" in the light of persistently high US current account deficits,
all hell is bound to break loose with a further deepening of the financial and economic crisis globally.
The historical parallel over here is the loss of international confidence in the pound sterling in
1931 in the midst of the Depression and the many bankruptcies and financial failures that resulted
therefrom. Is the international role of the dollar then at stake?11
Crying Out for Answers
Clearly, we are all crying out for answers and there is a lot to gain from working one's way through
this book. However, with all its strengths, there is something, I feel, missing in this volume
-- the authors refrain from taking on other Marxist writers on the subject. Marxists usually
differ a great deal in many matters of interpretation and evaluation, and there is a lot to learn
from their debates. There are, for instance, those who endorse Marx's falling rate of profit
theory, with whom the Monthly Review school differs. The former focus on systemic
tendencies that, they contend, have lowered the rate of profit, and seek to link these with the role
of monetary and financial phenomena disrupting the accumulation process. The disinclination
to debate with other schools of Marxist thought on the financial crisis is our loss. Picture
the young Paul Sweezy, penning his The Theory of Capitalist Development in the 1930s, boldly
taking on a whole bunch of Marxist thinkers on crisis theory, from Henryk Grossman to Mikhail Tugan-Baranovsky,
and Marx too, and the positive "externalities" flowing from this initiative.
Be that as it may, there is a whole new generation today wanting to know what caused the present
financial catastrophe and what might be its likely ramifications. After all, not long ago,
the cold war ended with the restoration and triumph of capitalism on a global scale, and then, less
than two decades later, capitalism is bankrupt.
This book, with its cogency that is the hallmark of the Monthly Review, needs to
be widely read.
Notes
1 Keynes considered effective demand -- demand, at
a profitable price, for the volume of goods and services that could be produced with existing capacity
-- to be capitalism's most fundamental macroeconomic problem.
2 We follow what appears as the typical pattern of
speculative bubbles from the 1980s onwards, as outlined by Paul Sweezy and Harry Magdoff,
"The
Stock Market Crash and Its Aftermath", in their book,
The Irreversible Crisis (New York: Monthly Review Press), 1988, pp 43-55.
3 In Marxian terms, a rise in the "organic composition
of capital" (the ratio of the value of used-up means of production and the value produced by "necessary
labour") increases labour productivity, which raises the rate of surplus value -- the ratio of the
value produced by "surplus labour" ("surplus value") and the value produced by "necessary labour".
So an increasing organic composition of capital proceeds pari passu with a rising rate of surplus
value, making the direction in which the rate of profit (the surplus value divided by the sum of
the value of the used-up means of production and the value produced by "necessary labour") moves
indeterminate. See Paul Sweezy's 1942 classic,
The Theory of Capitalist Development (New York: Monthly Review Press, 1970), p 102.
4 The economic surplus is difference between total
output and the "socially necessary" costs of producing it.
5 In this paragraph, we draw on Paul Sweezy's "Monopoly
Capitalism" in John Eatwell, Murray Milgate and Peter Newman (eds.),
Marxian Economics
(London: Macmillan), 1990: 302.
6 Here, effective demand is stimulated via the "wealth
effect" -- a tendency for consumption to grow, even in the absence of the growth of incomes, due
to rising asset prices.
7 The increase in net liability of a country to the
rest of the world, represented by the current account deficit, if persistent and high, as in the
case of the US, leads to a huge cumulative build-up of net claims by non-residents on the domestic
economy. In contrast, in the case of a country with a current account surplus, there is a net
outflow of funds, and, if that surplus is persistent and high, as in the case of countries following
neo-mercantilist growth strategies, it will result in a huge cumulative build-up of net claims by
residents on the rest of the world's economies. But, of course, there are also autonomous capital
flows -- strategic rivalry between nations is not merely manifested in trade; it also takes the form
of controlling resources beyond national boundaries through foreign direct investment and militarism.
And, given the role of the dollar as international money, the US has an advantage over its neo-mercantilist
rivals, China, Germany and Japan, in this respect -- it can finance much of its foreign investment
and militarism by creating monetary liabilities abroad.
8 According to Paul Sweezy, from the latter half of
the 1970s a "relatively independent -- relative, that is, to what went before -- financial superstructure
sitting on top of the world economy and most of its national units" began to take shape, emerging
around the mid-1990s. See his perspective piece,
"The
Triumph of Financial Capital" (Monthly Review, Vol 46, No 2, June 1994, pp 1-11).
9 There is also the need to take account of the impact
of increasing "openness" (in the trade and financial sense) on product market structures, for instance,
the impact of foreign direct investment on transforming a "tight" oligopolistic market into a "loose"
one, or the impact of price competition from imports on profit rates in oligopolistic industries
facing global excess capacity. All this may call for a relook at the hypothesis of the relative
share of the economic surplus to rise, using more recent data.
10 Prabhat Patnaik also finds it untenable to lump
together the private and the public debt "to show the fragility of the system". See his
"The
Economic Crisis and Contemporary Capitalism", EPW, Vol 44, No 13, 2009, p 49.
Chris Hedges, the Pulitzer-Prize winning author of "War is a
Force That Gives Us Meaning" and "I Don't Believe in
Atheists", is back with another diatribe about our
morally-bankrupt society. Whether you agree with all of his
assertions or not, "Empire of Illusion" is a necessary,
thought-provoking work on the role of entertainment in
American culture.
Particularly fascinating is Hedges's take on professional
wrestling. Whenever an academic brings up wrestling, it is
usually as an example of low-brow culture. Hedges doesn't
snub his nose, however: He merely observes and reports.
His thesis that wrestling storylines have "evolved to fit the
new era...by focusing on the family dysfunction that comes
with social breakdown" is on the money: Gone are the simple
bouts of good vs. evil. "Morality is irrelevant," he writes.
"Wrestlers can be good one week and evil the next. All that
matters is their own advancement." The "illusion" here isn't
that wrestling is fake. The "illusion" is that the wrestlers
are idealized versions of what we want to become. He asserts
that this mirrors a fundamental change in society.
Hedges traces this change through other American institutions
(reality television, celebrity culture, the adult industry,
universities, psychologists), arguing that we are "unable to
distinguish between illusion and reality". We forgo morals
for an elusive and unattainable happiness. He states that we
"will either wake from our state of induced childishness...or
continue our headlong retreat into fantasy".
The subtitle--"The End of Literacy and the Triumph of
Spectacle"--is somewhat of a misnomer. Even with the alarming
illiteracy rate in this country, it's a stretch to say that
literacy has literally come to an end. "The Triumph of
Spectacle" is a more accurate description of the book's
contents.
"Empire of Illusion" is a snapshot of America, circa 2009 AD.
Some of the precepts that it touches on--such as universities
churning out morally-dubious graduates--are already coming
under populist fire due to the banking crisis. WWE,
wrestling's most popular promotion, has toned down the sex
and violence in recent years. The once-popular Jerry Springer
Show limps along on basic cable, its cultural relevancy
having long since expired.
Hedges believes that the financial crisis "will lead to a
period of profound political turmoil and change." In a recent
Truthdig article, he wrote that "Those who care about the
plight of the working class and the poor must begin to
mobilize quickly or we will lose our last opportunity to save
our embattled democracy." "Empire of Illusion" makes a strong
case to be the much-needed cry for arms.
Chairman Luedtke, Old School Political Science January 26, 2001
Polanyi's "The Great Transformation" is a broad, sweeping work that encompasses history, sociology,
economics and political science. MacIver writes that the book's particular relevance for a political
scientist is that "it will help him to restate old issues and to evaluate old doctrines" (xi).
However, with the recent renaissance of liberal/classical economic doctrines (what Polanyi would
scornfully call the utopia of the "self-adjusting market") it seems that the issues restated and
the doctrines evaluated by Polanyi are not so "old" after all. For this reason, the book has even
more relevance now than it did for past readers, even just twenty years after its publication,
when the heyday of planned economics appeared to be carrying out Polanyi's proposed remedies for
the excesses of free marketism, and blunting the force of his critique as applied to post-transformation
society.
But in the era of WTO and NAFTA, a strong case can be made that his critique has attained newfound
relevance beyond even its original application. This critique can be phrased into a causal historical
argument as follows: The Great Depression and two World Wars are Polanyi's dependent variable
(the outcome to be explained). For Polanyi, this turmoil of 1917-1945 was a catastrophic indicator
that 19th Century civilization had collapsed. And since 19th Century civilization rested upon
the "classical" economic liberal doctrine of a self-regulating market, (with accompanying balance-of-power
system, gold standard, and laissez-faire liberal state that defended property rights above all
else and viewed human labor as no more than a commodity) it is this doctrine that is Polanyi's
independent, explanatory variable. For him, the "utopian" and unattainable
ideal of the self-regulating market was in reality a destructive force that robbed humanity of
its freedom, by causing one hundred years of relative peace (the veritable calm before the storm)
and then unleashing heretofore unheard of levels of economic dislocation and political repression.
The "Great Transformation" itself is merely the mechanism by which this causal relationship unfolded.
It is the process by which the ideal of the self-regulating market utopia brought about the destruction
of the old world and the dawning of a new, more dangerous world.
Polanyi's evidence for this process is both deductive and inductive. Most of the book masquerades
as a straightforward historical account of the Great Transformation and its exact social processes,
but at times Polanyi reads less like an empiricist and more like a deductive rationalist. For
instance, he proposes a general covering law of historical causality whereby countries that are
apparently "opposed to the status quo would be quick to discover the weakness of the existing
institutional order and to anticipate the creation of institutions better adapted to their interests"
(28). He then gives Germany in the 1930s as an example of such a process, Germany for him being
one of the "catalyst" states that sped up the Great Transformation by abandoning market liberalism
in favor of fascism. While the example is fascinating and has obvious historical merit, it's not
clear how Polanyi arrived at the general law of which Germany is an example, not to mention whether
he truly believes that such a law applies consistently throughout history, or whether he merely
means to inductively show the importance of Germany's opposition to the status quo for the particular
historical causal mechanism of the Great Transformation.
Polanyi's work obviously runs counter to a great deal of conventional wisdom on the topic of
economic and political doctrines and their relationship to social change in the 19th Century.
For instance, the 19th century is often called the "age of nationalism," but Polanyi's Great Transformation,
like the work of Marx, minimizes the role of the nation-state in shaping the lives of its own
citizens, by arguing that state governments were merely pawns for the ideal of the self-regulating
market and its stooges in power, both financial and political. Indeed, as a remedy to the negative
effects of the Great Transformation, Polanyi seems to advocate a rise in the power of the nation-state,
through the active securing of freedom and rights by its citizens in opposition to the stateless
self-regulating market. One could brand Polanyi a collectivist for this reason, although he would
resist such a charge precisely because of his defense of individual freedom against the market
and his warnings about the dangers of erring on the other side: the potential loss of human freedom
that would come from free individuals attempting to subjugate and regulate markets through government.
"Regulation both extends and restricts freedom; only the balance of the freedoms lost and won
is significant" (254). In other words, Polanyi is certainly not a Marxist, because of
his lack of both economic determinism and any clear theory of class conflict and revolution, but
neither can he be an apologist for capitalism since he seeks to shatter the myth of the self-regulating
market as being a "natural" ideal independent of social moorings and above general social welfare.
Therefore, instead of these two extremes, he strikes a middle ground that is as paradoxically
complex as it is eloquently defended.
Robert Moore, A masterpiece of economic history that is as relevant as ever sixty years
on June 12, 2006
HALL OF FAMETOP 100 REVIEWERVINE™ VOICE
Although this book was published in 1944, the same year as Hayek's THE ROAD TO SERFDOM, it
remains as relevant as ever. Some say that it is dated and it is true that many of the historical
references are not the ones that would spring to mind today, but the
critique of the myth of the self-regulating free market remains as relevant and to-the-point as
ever. One of the main targets of his book was the Vienna school of economics, the
central figures of which were Ludwig von Mises and F. A. Hayek. What Polanyi does is help one
to see how hopelessly naïve and ahistorical many of their central
assumptions are. Though one might question some of the details of Polanyi's thesis,
especially regarding the gold standard the causes of the two world wars, he makes two incredibly
powerful arguments about the myth of the self-regulating market to which proponents of that theory
have offered no convincing reply. More of this is a second.
Polanyi's method is multi-disciplinary. He wants to show by a multitude of ways that the central
historical contentions of those advocates of the self-regulating market are simply false. These
people have argued, for instance, that by nature humans engage in market trade and that these
markets by nature are self-regulating. If this were, as they insist, true, then wherever one would
look in human history one would find markets that were by their nature self-regulating. Remember,
Adam Smith's Austrian heirs were making arguments not just about what ought to be, but what naturally
is in a state of nature. They are making claims about what is the case if government and others
will just get out of the way of the workings of nature. So to this end Polanyi looks at the results
of anthropological and historical studies to see what the evidence shows. Overwhelmingly, he finds
no evidence that things have been in the course of human history as the self-regulators have claimed.
In fact, Polanyi finds little or no evidence of the worldwide prevalence of markets at all. He
finds little historical evidence for the kinds of claims about the state of nature that self-regulating
free marketers posit. Instead, he finds a world of evidence that free
markets were human artifacts, created and maintained entirely by government intervention.
The chapters that detail Polanyi's argument can be a bit heavy going, but they are crucial to
his overall argument.
Polanyi makes two central claims about the myth of the self-regulating free market. The first
is that in its essential nature it is utopian and nonhistorical. It is utopian in that it describes
not the world as it ever has been or ever could be, but a fantasy that exists only in the minds
of its adherents. It is a powerful myth because whenever one points to the failures and shortcomings
of attempts to promote free market principles, its adherents reply by insisting that the market
hasn't yet been made pure enough. If only we decrease government involvement, further reduce regulation,
remove restrictions on the kinds of compacts companies can form with one another, further gut
the power of trade unions, and so forth, we will see the birth of a glorious new economic world
in which all will be right in the world and God will be on his throne. But as Polanyi argues,
not only has such a creature as a self-regulating free market economy never existed, it never
could. In fact, what has passed for self-regulating markets has in fact been the result of drastic
and pervasive government intervention. Additional interventions take place to protect society
as a whole from the damage that a self-regulating economy inflicts on the citizenry as a whole.
The second major point that Polanyi makes is that of embeddedness: any economic system is embedded
in society as a whole, with a host of moral, political, and religious values that are not primarily
economic in nature. The self-regulating free marketers would somehow wish for an economic system
that is distinct from and separated from those values; that is, an economic system that is not
embedded. But such a thing, Polanyi argues, is impossible. This is another reason why belief in
a self-regulating free market is a sheer fantasy: it is predicated on a host of impossible situations
being possible. As the effects of a self-regulating free market occur, society intervenes to counteract
the harmful effects of that economy. For instance, workers compensation is neither required nor
desirable by pure free market principles. The same is true for unemployment insurance or anti-trust
legislation. Or pollution standards. There is no question that keeping a plant from polluting
is an interference with the market, but this is an example of noneconomic values trumping economic
ones.
The basic dilemma of free market capitalism has always been this: is an economic system that
generates a great deal of wealth for a society as a whole but concentrates most of that wealth
in the hands of a few people, leaving most with less than they would have in a different economic
system, a good economic system? Most of us would say no. Even free marketers would have to concede
this, which is why they have had to concoct articles of faith (though not of fact) such as the
trickle down theory. "Trickle down" has been debunked repeatedly over the years, both in theory
and reality, but perhaps never so eloquently as by Will Rogers. Some people, he said, thought
gold water like water: put it at the top and it will trickle down to everyone below. But, he went
on, gold wasn't like water at all; put it at the top and it just stays there. Polanyi's book gives
meat to the question of whether one would prefer a society where a very large amount of profit
were concentrated in the hands of a very small number of people (essentially the situation in
the United States today) or a somewhat smaller overall amount distributed more equitably among
al the people. Yes, the few who profited under the former would have less, but the vast majority
would have more.
I want to question one reviewer below who says that Polanyi doesn't understand the essential
nature of the free market. I find that an amazing statement. The reason that the myth of the self-regulating
free market has spread so easily and widely is that it is so incredibly easy to understand. What
one can question is whether this easy-to-understand, perhaps simplistic, theory is right. We have
no examples of self-regulating economies from history even though in the utopian fantasy one of
the tenets is that it is the "natural" course of things. Of course Polanyi understands the theory
he is criticizing. He just finds it naïve and silly. My only hope is that more people in the United
States come to realize this. Ever since the election of Reagan in 1980, though in fact the tendency
began under Jimmy Carter (most Americans don't seem to remember how conservative he was on economic
matters, far more conservative than either Ford or Nixon), America has toyed with ideas promulgated
by the free marketers. The result? Vast accumulation of wealth, especially in the financial markets
despite the progressive decay in the industrial base, concentrated almost exclusively in the top
2% of the population. In fact, real wages for the vast majority of Americans has fallen since
1980, the percentage of the population to live below the poverty line has increased, and America
has become the industrial nation with the greatest economic inequality.
My own fantasy is that more people would read Polanyi and fewer Hayek. I can understand why
they don't. Hayek is easy to read and understand and feeds the fantasy that one can pursue economic
advantage with no thought of the damage it might do; the invisible hand will take care of everything.
Polanyi is difficult and complex and subtle and pricks a hole in the fantasy. Polanyi reminds
us that economics has to be tempered by our values as a whole, that we cannot be reduced to economic
animals. My fantasy--or is it a hope?--is that we as a society will come to care more for the
welfare of the majority more than the welfare of the few. I would love to see a world in which
our highest values did not have a price put upon them. 8 Comments |
A Kid's Review, Absolutely Brilliant January 23, 2005
Polanyi's The Great Transformation is truly a masterpiece of historical analysis and social
theory. Polanyi deftly uses his extensive knowledge of economic history, anthropology, and political
theory to demonstrate the failure of "market society" and the myopia of those who believe that
the "free" market is the answer to all social ills. He's at his best when he combines his historical
analysis of 18th and 19th century capitalism -- an experiment with a free market economy that
resulted in the Great Depression and world war -- with anthropological data showing that there
is no innate human propensity to engage in trade or accumulate wealth at the expense of others.
Conservatives and libertarians hate this book because it thoroughly undermines their claims
that markets are natural, spontaneous, and reflect the uncoerced interaction of free agents;
the reviewer below who gave it 1 star is a case in point (he argues that "Polanyi fails to understand
the essential nature of a free market, voluntary trade for mutual benefit," but the problem isn't
that Polanyi doesn't understand such a concept, but rather that he shows it isn't true). Other
critics like to misrepresent Polanyi's arguments and paint him as a Marxist, a romantic, or an
opponent of modernity; in reality, he was merely pointing out how devastating it is when every
aspect of human life is left up to the market, with its cold logic of efficiency.
The Great Transformation is an exceptionally lucid and well-researched study that should be
required reading for anyone interested in economics, social theory, political history, or international
relations. Some reviewers have suggested that the book is outdated, but anyone interested
in the current debates surrounding free trade, the IMF/World Bank, or Social Security privatization
would be wise to pick up a copy of this fascinating book.
The problems of the US mount daily from a ballooning deficit to heightened opposition from multiplying
points on the globe. Walden Bello's Dilemmas of Domination is a tour de force dissection of the causes
of these mounting problems.
He argues from an objective and non-partisan position in the global South.
Because he primarily works outside of the US and because his method relies heavily on history, his account
is compelling.
Dilemmas of Domination contends that the US has entered into a period of decline as the
world's hegemon. Three crises characterize the loss of power and prestige.
The first crisis is the problem
of manufacturing and raw materials overproduction that leads to a decline in profits, and as wages are
squeezed to stabilize profits demand falls further. Added to these problems is the fact that the US,
the consumer of last resort, cannot continue to borrow and buy forever. The IOUs to the rest of the
world will eventually have to be repaid.
A second critical problem is military overextension. According
to Bello, the wars on Afghanistan and Iraq demonstrate the US is not invincible. If it were, how could
guerillas continue to move about these occupied nations so freely and make nation-building into such
a farce? The US military is so strained that it has to hire mercenaries from companies like Blackwater
to protect its corporate interests abroad because a draft would undermine all of its imperial adventures.
The third crisis, perhaps the most enduring, is legitimacy. Ideologically, the US has lost its currency
to lead the world. Because the US dominates international financial institutions like the IMF, World
Bank and most of the regional development banks, their imposition of neo-liberal structural adjustments
programs has led to a revolt against their destructive policies as witnessed by the left ferment especially
in Latin America but also in the rest of the global South. Furthermore, the US bullying and sometimes
insulting treatment of the UN has further sullied the US's reputation. Added to this international delegitimation
is the quagmire of domestic politics from the surrender of civil liberties to the patently obvious corporate
control of both major parties. For readers looking for a rich and clear formulation of why the US government
is detested and feared by much of the earth's population this is the best primer.
For practical purposes the eastern Pacific is an American lake, yet how many
readers understand the role an obscure island like Okinawa plays in keeping it
so. I didn't. But I do now, thanks to Johnson's valuable little book. Yes, the
work's title is misleading; it needs a qualifier like Blowback in East Asia to
be more accurate. Nonetheless, the chapters on Japan, and Meltdown,
respectively, are little gems. Everyone knows that Japan sells alot to the US,
but buys little in return. It doesn't seem fair. Their workers are employed,
while ours increasingly aren't, and those who are need food stamps to survive.
So should we blame them for taking away good American jobs. Not if Johnson is
correct. The primary locus lies in Washington and Wall Street, not in Tokyo,
Seoul or Jakarta. Simply put, it's the economics of empire that's to blame,
although the term "empire" is never used in polite discourse, nor for that
matter does Johnson bother to define it. But, regardless of what the network is
called, reality is reality, and problems of imperial maintenance do arise, even
for the experienced managers of Washington DC.
The challenge lies in strong
but dependent economies, like Japan's and South Korea's, who have evolved their
own competing form of capitalism, yet still need markets to survive. Hence, to
keep dependent Asian economies dependent and their subordinate polities
subordinate, markets must be regulated and upstarts punished. The chief tools in
this regard are trade policy and capital flows, topics about which the American
electorate thankfully knows little. If using these for reasons of empire
requires undercutting America's own manufacturing sector and the good wages that
go with it, then that's the price of remaining Number One. How long the imperium
can continue the juggling act, however, remains to be seen.
Not every chapter is the equal of Japan, or Meltdown. The chapter on North
Korea is very helpful for understanding the current standoff. The two on China
are informative, but have little to do with blowback or empire, while the one on
stealth imperialism is sub-Noam Chomsky. Moreover, the final chapter, which
should be strong in summation, has little substance beyond the mildly
speculative. On the other hand, prologues are often little more than bland
introductions. This one however isn't. Johnson's prologue outlines in brief but
telling detail a personal journey from empire's unwitting spear-carrier to that
of clear-eyed critic. In its own way, it's a rather inspiring odyssey. One can
only hope that increasing numbers of Americans make the same journey, because,
unfortunately, empires are neither peaceable nor democratic, and rarely if ever
self-liquidate.
I came across this book when I was looking for the recently published book
by Profs. Mearsheimer and Walt on the Israeli lobby. I was familiar with
Chalmers Johnson's name, but knew nothing about his work. I just read
Blowback and am eager to read the other two in his trilogy. I have a
generally good awareness of the idiocy of most American foreign policy
simply from reading newspapers regularly and well-researched books
occasionally on foreign policy or political science or history - as well as
from spending some time outside the USA at various times and in various
roles.
The disparity between how the USA as an entity and through the citizens
(mostly soldiers) it sends abroad to perform official roles behaves outside
the confines of its borders and how the average citizen goes about his/her
daily life and therefore perceives his/her country is frighteningly wide.
However, I was truly stunned at the well-written, clearly well-researched
and even-handed account that Prof. Johnson gives of USA policy and USA
actions in regard in particular to Asia. I do not doubt the accuracy of his
analysis and reporting. In support of his recounting of the utter waste of
citizens' tax dollars on most military and military-related activity
(so-called intelligence-gathering, covert undermining of non-dictatorial
governments and the like) I noted that the Bush Administration recently
(summer 2007) had one of its flunkies start blathering about the fact that
the USA maintains bases throughout the world, notably in Western European
countries, Okinawa and Korea even though there are no "hostilities" there.
The inadvertent raising of a pertinent issue regarding the USA military
presence (in less polite words, occupation) in those countries was
quickly excised from the arguments for establishing a permanent military
presence in Iraq. Good point. Why does the USA maintain a military presence
in these countries? Mr. Johnson's book admirably traces the why and thereby
makes clear the horrible impact our presence in these countries has had on
many people in the world and in turn on innocents in the USA, such as those
who died at the hands of Tim McVeigh and the suicide airline pilots. It is
books like Mr. Johnson's that should be on the forefront of discussion among
politicians, editorial-writers and any others who attempt to make or debate
policy. As the inanities, nonsense and outright lies that have no basis
whatsoever in fact emanating from the current roster of right-wing,
know-nothing Republicans in Congress - abetted on occasion by poorly
informed Democrats - attest, the current unending propaganda regarding
events and conditions in the rest of the world, notably in Iraq and in the
Middle East in general, is likely to continue to overwhelm outstanding
analyses such as this. I wish it wouldn't. I hope that those with some
curiosity about the wonders and diversity of the world - not to mention
facts about how the USA and other countries behave in the world - will
discover this book as I did.
Aaron
Great introduction to the unseen side of America's foreign policy, June 15, 2010
If all you do is read the standard textbooks and listen to the platitudes that come out the mouths of our ruling class, you will never get the complete picture of "why they hate us." Former Cold Warrior Chalmers Johnson details how the national security apparatus set up during that era and the foreign policies implemented has laid the groundwork for most today's international troubles. "Blowback", a CIA term referring to the unintended consequences of polices that were usually kept secret from the American public, is detailed and explained in depth. Despite the collapse of the Soviet Union, the United States has not fully adapted to the post-communist era by rolling back militarism and government secrecy. America continues to maintain a global garrison of bases and relentlessly intervenes in the internal affairs of other countries openly and covertly. In Johnson's words, "The evidence is building up that in the decade following the end of the Cold War, the United States largely abandoned a reliance on diplomacy, economic aid, international law, and multilateral institutions in carrying out its foreign policies and resorted much of the time to bluster, military force, and financial manipulation. The world is not a safer place as a result."
The one disappointment I had with this book was the lack of focus in the Middle East. Nevertheless, it is to be expected since the author is an East Asia expert and most of book focuses on American actions there.
The Last but not LeastTechnology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
Ph.D
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