potlatch

the myopia of neoliberals (and their critics)

I recently read Angus Bergin's The Great Persuasion: Reinventing Markets Since the Depression. It's the most complete historical take on the development of neoliberal thought, from the 1920s through to the 1970s, that I know of. I thoroughly recommend it to anyone interested in this intellectual history. Aspects of the book irritated me a little, namely the constant stress placed upon the heterogeneity of neoliberal thought and thinkers; if you look at anything closely enough it turns out to be heterogeneous (a simple philosophical premise that hasn't prevented generations of STS scholars examining things into heterogeneous smithereens). This also gives the book a somewhat nerdish feel, which coupled with the fact that the author appears to fall slightly in love with Milton Friedman, makes its necessarily apolitical narrative a little hard to stomach at times. But as a piece of scholarship, yes, read it. I think Philip Mirowski is too harsh here.

But what I really marvelled at, by the time I'd finished, was something that was absent from the book: finance. Given the exhaustiveness of the archival research contained in the book, one can assume that this is a representative absence, and not simply an oversight by the author. We are all familiar with the institutions that animate neoliberals, from Von Mises and Viner onwards: markets, entrepreneurs, anti-trust (sometimes), the state (parts of it), individual choice, and so on. The book doesn't extend up to the 'efficient markets hypothesis', which is a distinctly Chicagoan neoliberal idea which pertains to finance, but is ultimately an argument about markets, not about financial instruments themselves. Friedman's arguments about money, meanwhile, were made to challenge Keynes in the realm of macro-economics, and again did not confront what money actually is, other than that it should hold its value.

Given that the 'actually existing' neoliberal era can now be viewed principally as an era of financialisation (for the best evidence on this, see Greta Krippner's Capitalizing on Crisis), which succeeded in converting the sovereign state into a massive underwriter of private risk-taking, for private profit, the absence of any direct confrontation with finance by neoliberal thinkers is interesting. But then perhaps it's not surprising. Perhaps their continued insistence on analysing capitalism in terms of voluntaristic, individual decision-making (be that of an Austrian, disruptive ilk, or a neo-classical, rationalist one) meant that they were entirely blind to the capitalist capacity of actors to dominate each other using contract and credit. In this, they were simply unable to understand capitalism properly, because they refused to accept that capitalism thrives on relationships of constraint as much as on acts of self-expression and choice. 

For the same reason, neoliberals have nothing to say about work or management, other than that trade unions are a block on efficiency and wealth creation. The fact that neoliberals and business schools are so obsessed with 'leadership' is a weird myopia, which assumes that the only significant things that go on in a business occur at the top. This same nonsense is reflected in the way in which corporate governance debates, dominated by agency theory, make scarcely any reference to what goes on outside of the boardroom (that's the same 'outside of the boardroom' where people agree to fix prices, manipulate Libor,  etc).

If neoliberals did ever look at work, its likely that they would be unable to properly see it. The distinguishing characteristic of an employment relationship, as a Martian who landed on earth tomorrow would be able to see, is that it represents a check on individual freedom. A job where you can do anything you please is not really a job, unless you're lucky enough to be living in imagineering-Google-job-on-a-bouncy-castle cloud cuckoo land. Ronald Coase's theory of the firm may be clever, but tells us nothing about this aspect of an organisation, given it has to reduce even contracts and domination to a premise that everyone rationally chose this in the first place, in order to remain consistent with rational choice economics.

Work, like credit, is a form of bond. For that matter, so are a lot of consumer goods today: mobile phone contracts, electricity, software with lots of unread T&Cs. Even goods or services which are in principle entirely alienable tend to be used by capitalists today to form some longer term, asymetric relationship (why the hell do I need to supply my date of birth and telephone number when I buy an airline ticket or a pair of headphones in an apple store?). Capitalism today involves the creation of social bonds, arguably far more than it involves exploiting spot markets, which are typically used only as opportunities to walk away from low-level fraud. Fungible money is replaced by traceable, networked, digital money, as Visa's privatisation of exchange at last summer's Olympics demonstrated. The anonymity of the mass market, that entranced the dandies and sociological flaneurs such as Georg Simmel in the late 19th century, is replaced by enforced identification, as a pre-condition of exchange.

That the neoliberals did not anticipate any of this is not in itself an intelletual inditement of them. The fact is that their understanding of the market (and of capitalism) was mainly forged in contradistinction to their vision of state socialism. Often, Friedman and others let their Cold War nationalist enthusiasms cloud their view of economic reality, creating silly oppositions between tyranny and freedom that Margaret Thatcher then parroted like the simplistic Daily Mail columnist that we all wish she had actually been.

It should be added that the Left did not do all that much better in understanding the capitalism that was emerging in the 1980s, assuming that the neoliberals were telling the truth when they declared it was about the 'individual' and the 'market', whereas in fact it was about the use of lawyers, money and digital surveillance to ensnare people in various traps that are no less restrictive than a trade union closed shop. As I argued in this New Statesman essay (part of this ippr publication) if you return to Marxism Today's famous 1988 'new times' edition, you do not see the words 'finance' or 'credit' once. But that was where power was drifting, and how political control was becoming exerted, including over the state itself.

So hindsight is a wonderful thing. But what my analysis does suggest are two things. Firstly, one wonders what rational choice social science (including neo-classical economics) can really offer any longer. Do they now have to build into their always esoteric psychological presuppositions the even crazier assumption that consumers read all the terms and conditions when they pay for something via digital media? Do they assume that the 18-year-old prospective student, considering whether to invest in their 'human capital', is also rationally calculating the bond that this will impose on them and as-yet-unthought-of family for the next third of their life? Without any theory of bond, of the relational and, ultimately, of domination (and not simply a theory that collapses back into rational choice, qua Coase), rational choice modelling is basically glorified sudoku. And lets not pretend that cognitive heuristics is sufficient to make much difference.

Secondly, the critique of capitalism needs to place far less emphasis on individual alienation and annomie, and more on the forms of sociality that are constructed and enforced. This is what I hint at in these two pieces: techniques of the social, preventing individuals from walking away, being anonymous, carrying out cash-based exchange, are now key tools in the armoury of capital. And in reconstructing the pre-history of neoliberal thought, as Bergin admirably does, we also need to notice how wrong they were about the world they thought they were designing, and not simply how influential they were.

Thatcherism: a red herring?

I am impatient to know how history is going to judge the multiple institutional and moral collapses of the past five years. Specifically, the interesting question is: what exactly is coming to an end? It could, of course, be various things, operating with various historical rhythms, as I suggested here. But here's a brief thought: what if the entire idea of 'Thatcherism' turns out to be a red herring? Or, at any rate, what if we were so distracted by all the conservative rhetoric of markets and entrepreneurship, that we entirely failed to see what was really going on?

The unfolding Barclays scandal forces the left and the right to wake up to the reality of what's been going on. Specifically, when we thought we were placing our trust in 'markets', we were actually placing our trust in highly complex firms and exotic cultures of individual expression, that are largely opaque to the outside world. When the rhetoric was of 'market freedom', it actually meant an abnegation of public responsibility on the part of firms and individuals. The term 'market' did for banks what the term 'God' does for Catholic Priests, in keeping government and public at bay (for a while I've had an idea for a comparative sociological research project, looking at banks and psychoanalysts side by side, to identify common strategies for achieving non-regulation; not that I want to see the entire world regulated, far from it, but it is interesting to consider what rhetorical strategies are used to avoid formal accountability). Understanding what precisely we have been placing our faith in, and accepting it isn't quite what we thought we were placing our faith in (for better or worse), is the first step to removing our faith from it. This is more of a challenge for the Left than the Right, seeing as the former still have their opponents' word 'market' echoing in their ears, whereas the latter have realised their own error.

When did this now-crumbling era begin? We (and I'm as guilty of this as anyone) like to pinpoint the late 1970s as the moment when neoliberalism emerged. It was then that the crisis of Keynesianism was completed, and a new paradigm for economic policy-making began. But this may reveal something of the narcissism of liberal elites, who like to believe that intellectuals and ideas are central to historical and economic periodization. (One might also characterise it as bloody-minded Hegelianism or conservatism, which insists that reason drives history, and not vice versa). A more pragmatist approach would recognise that ideas simply help to stabilise and legitimise forms of behaviour that have already emerged.

If the Barclays scandal proves to be decisive and telling, then we will need to shift our periodisation, such that 1968-71 becomes the key transition point in the formation of neoliberalism (or whatever we might call it instead). Two things took place during these turbulent years.

Firstly, '68 and its aftermath generated a new ethos of anti-moralism, that might have appeared heroically Nietzschean or Freudian in its more explosive and exciting moments, but could only translate into a dull masturbational culture of pleasure-seeking and deceit, as it permeated beyond the intellectual world of Guy Debord et al. Rooseveltian liberals, such as Daniel Patrick Moynihan and Daniel Bell, spotted this immediately, leading to a form of Left Neo-conservatism (which Britain seems only now to be developing in the form of Blue Labour). By the late 1970s, even younger cultural critics, such as Richard Sennett, had cottoned on to what their generation had done. The 'great refusal', advocated by Marcuse, had its noble elements, but these have eventually be vastly out-numbered by its depressingly adolescent ones.

Secondly, 1971 was when paper money was divorced from reality, following Nixon's decision to disconnect dollars from gold. Admittedly, faster telecommunications and offshore trading had been placing tremendous strains on the dollar since the late 1960s, so no doubt there is some telecoms satellite launched around this time that could claim to be even more decisive. From this point forward, the monetary system became a battle between rival symbolic codes, with the symbolic code of '$$' enforced upon the world through the alliance of Wall Street and Washington DC (see Peter Gowan's The Global Gamble). Disconnected from any tangible or material notion of value, the monetary system became a game of dictating perceptions and propping up linguistic rules.

In the broader sweep of history - as, for example, portrayed in Giovanni Arrighi's 700-year history of capitalism - it is unsurprising that a combination of these two occurences would end in political and economic disaster. The divorce of ethics from normativity ('68) combined with the divorce of money from material reality ('71) creates the conditions for a frictionless financial culture, in which critics conspired by coining the term 'postmodernism', and in which lying about the price of money is an entirely reasonable and legitimate thing to do. Taking a longer sociological view of the Barclays scandal, the question is not 'why did they do it?', but really, 'why wouldn't they do it?' On what basis, really, did any of us expect pleasure-seeking individuals, far from the disciplining reach of any market, trading paper whose value had nothing to do with utility or human need, to do anything other than manipulate perceptions of that paper's value? How else does paper attain any value, without perceptions being manipulated to some extent? And why, honestly, did anyone believe that individuals, high on the legacy of '68, would manipulate that value for the benefit of the public or mortgage-holders, and not for themselves?

Thatcherism was therefore a late-comer, providing post hoc rationalisation for a surge of egoism and monetary game-playing that was probably unstoppable by 1979 anyhow. Thatcherism provided a new paradigm for the state's role in this, to tackle inflation rather than unemployment and build sufficient prisons to make such a policy practicable, but in this it was reacting not proscribing. Perhaps Thatcherism's one stroke of courage was to dress this elite decadence up, quite preposterously, as a return to conservative Victorian England. For some reason, it is only now that Tories such as Peter Oborne and Ferdinand Mount appear to have spotted that this, like Libor, was another audacious fix. Bob Diamond, born 1951 and reaching adulthood as Nixon was sworn in, was less naive, and continues to exhibit his own 'great refusal' to accept any public judgement placed upon him.