Archives for : July 2016

Neoliberalism, Part 3, I’m gonna buy me a Mercedes Benz!

As Americans we are awash in the ‘freedom’ to choose; retail opportunities abound. We can select from a teeming cornucopia of entertainment options. We find it difficult to imagine life without the shallow but narcotic ‘liberty’ of channel surfing. We revel in the niche markets created for us because we have the ‘liberty’ to adopt the styles (of life, of clothes, of self expression) that we use to individuate ourselves; to create our personal brand. Thanks to an innovative, entrepreneurial ‘free’ enterprise system, we are deluged with what I will gloss as lower case ‘freedom’ (I will get to ‘Freedom’ later). As long as there are no barriers, we have ‘freedom’. We are free to buy cigarettes (if we are older than 18) and we are free to smoke them (in someplaces and not in others).

Because we have come more and more to define ourselves in terms of these narrow (and primarily commercial) ‘freedoms’, Americans are wont to object strenuously when we encounter any abridgement of our liberty. This very second, some Americans somewhere are outraged about a liberty denied or circumscribed: that they are required to purchase health insurance or can’t smoke in bars or can’t buy pot legally or can’t graze their cattle for free on public land or can’t take their AR-15 to the supermarket. Any political decision abridging a ‘freedom’ can be seen as an embarkation down the slippery slope to statism and slavery.*

The rhetoric of neoliberalism equates the freedom of shopping choice with political freedom; capitalism is talked about as economic democracy. Even a brief look at recent history and the world around us should disabuse of this naive view. The Bush administration and its avatar Paul Bremer were dumbfounded that the laissez faire “free enterprise zone” they created in Iraq failed to unleash Iraqi entrepreneurialism and provide the backbone for Iraqi democracy. A “free” market does not a polity make. The Chinese now have many of the economic ‘freedoms’ that Americans enjoy. No one is stopping the Chinese from buying a Biagio bag or a Mercedes Benz. But the Chinese people do not live in a democracy and do not have a soupcon of the political liberties that Americans or most Europeans enjoy. Capitalism does not a democracy make.

While I am “free” to buy a Meredes Benz, this freedom exists in a particular social, political and economic context. All Americans are ‘free’ to travel around the world; but how many Americans can afford this ‘freedom”? Much of the support that Bernie Sanders, Donald Trump and the Brexiters mustered, comes from the dawning recognition that the government does not care that most of us live from paycheck to paycheck. Of what value is ‘freedom’ if your society has not fostered the kinds of social and economic conditions that allow “freedom” to be meaningful. If you are a poor American you are ‘free’ to stay that way and so are your children:

If you are born into a middle-class family in the United States, you have a roughly even chance of moving up or down the ladder by the time you are an adult. But the story for low-income Americans is quite different; going from rags to riches in a generation is rare. Instead, if you are born poor, you are likely to stay that way. Only 35 percent of children in a family in the bottom fifth of the income scale will achieve middle-class status or better by the time they are adults; in contrast, 76 percent of children from the top fifth will be middle-class or higher as adults.

To borrow a trope from Yeats, surely there is a greater “Freedom” at hand?

*This is a long lived American political meme that Richard Hofstadter dubbed the “paranoid style” of American politics and my Dad used to call “fluoride libertarianism”.

Neoliberalism, part the Second, Where is my “free market”?

The ‘liberal’ in neoliberal has nothing to do with US political labels but instead refers to the Enlightenment underpinnings of Western culture. The political progenitors of the United States were deeply influenced by Locke, Hume, Adam Smith, Voltaire and Rousseau. Creatures of the Reformation all, they rejected the divine right of kings and the divine conduit of the abbotts and elevated the sovereignty of each person’s reason. Free from the arbitrary rule of prince and priest, they enshrined the political principles by which we govern ourselves; the freedoms of speech, religion, press and markets. These original ‘liberals’ (among others) developed;

a vision of liberty and freedom that came to underpin a self-regulatory structure of governance that placed limits on the abitrariness of state power at the same time as it led and enabled individuals to regulate their own conduct to the rules of a market society.

Building upon this historical base, the rhetoric of neoliberalism has made good use of our American fetish for the word ‘freedom” . Markets must be ‘free’; deregulated and allowed to operate without the state impinging upon them just as we individual economic actors must be ‘free’ to purchase whatever smart phone we wish to buy. This is the basic conflation of market and individual “freedoms” which now undergirds American discourse; it simply feels like common sense.

But let’s begin with “freedom” as it applies to the market. It is also a common sense notion in America that pre-tax economic activity is the domain of the “market”. The State is seen to step in after the fact to impose its taxes and and regulations…making the market less ‘free’. (True neoliberals believe that “market” based economic distribution of income will be “just” whereas taxes are a form of theft by the State). In point of fact, no market is “free”. Modern markets (in particular) are creations of the state. The state creates the conditions whereby “property” can be created and protected and whereby commercial relations can be made relatively predictable. Who gets what marginal tax rates, who has access to the judicial system, how much transactional transparency is provided to investors and central banks that control currencies and interest rates are all ways that the State sets the stage for who is going to be successful. The marketplaces in Singapore, China, the U.S. and Sweden are as different as their political systems but the winners and losers in any marketplace are to a great extent, already “baked into the cake” by the State.

No only do markets not start out “free”, they are subject to the inexorable cupidity of economic actors trying game the system and put a thumb on the scale. The crash of 2008 is a case study of a financial system being gamed; by mortgage lenders, rating agencies and huge financial institutions playing casino with the money of widows and orphans. Just last month, our planetary big banks got caught trying to rig the international currency market.

Next up: If the ‘market’ is not truly ‘free’, if the system (to use Bernie’s term) is rigged, what does that say about my own ‘freedom’ as an individual economic actor?

Neoliberalism, Part the First

I think this election is turning out to be an inchoate plebiscite on neoliberalism.

What is “neoliberalism” you ask?

It is a political economic belief system that deifies “the market”. Planetary prosperity will rise and fall with “the market”. If this phrase – “the market will decide” – does not raise your hackles, you have digested some neoliberal ideology yourself. Because “the market” is a transcendental source of wisdom, neoliberalism demonizes government as too big, too inefficient, too likely to “distort” the pure signals sent to us by the market and too likely to make the markets less “free”. It follows then that the best path to prosperity for all is too keep government small and make “the market” bigger. We should cut taxes (starve the government) and privatize governmental functions (give “the market” greater sway). Any social entity that impedes the free flow of capital (unions) or is not viewed as enabling to entreprenuers (the social safety net) is viewed as retarding our common progress to market utopia.

The spawn of economists like Frederich Hayek and Milton Friedman, neoliberalism’s early adopters were Margaret Thatcher and Ronald Reagan. They lowered taxes, “deregulated” markets, weakened unions, assured the global flow of capital, stepped away from any concern about full employment and attenuated the social safety net for the poorest citizens. The social and economic policies they inspired have resulted in the hollowing out of the middle class and near catastrophic levels of economic inequality. Friedman and Hayek devotees aside, neoliberalism as a planetary force is neither a single school of economic thought nor is it a coherent ideology. Rather, its has slowly become “common sense”. It is a tissue of internally inconsistent myths and notions which can be ascribed to in bits and pieces by people of all political persuasions (i.e., Bill Kristol and Bill Clinton).

Here in America, the canards of neoliberalism have been tilled into our native soil of racism, sexism, xenophobia and know-nothingism. The result is the rich loam of political and economic confusion in which Donald Trump is growing. Central to the rhetorical misdirection of neoliberalism is the use and misuse of the word “free”. More to follow.

(Other brief summaries of neoliberalism are available here, here and the first two chapters here.)