Naked Capitalism on Neoliberalism

Gaius Publius: Neoliberalism, “Just Desserts,” and the Post-Climate-Crisis Economy

Posted on March 11, 2014 by

By Gaius Publius, a professional writer living on the West Coast of the United States and contributing editor at AmericaBlog. Follow him on Twitter @Gaius_Publius and Facebook. Originally published at AmericaBlog

Chris Hedges has a terrific piece up at Truthdig that I couldn’t resist showing to you, since we’ve been talking about neoliberalism and also the convulsions that climate change will bring to the world.

This piece has a couple of parts, since there are a couple of intersecting thoughts. I’ll discuss each of those parts in turn (see the subheadings below and also the summary).

But first, a definition. We’ve talked before about how “neoliberalism” is the same as “old (pre-FDR) liberalism,” which is also the same as Adam Smith–style “free market capitalism.” In the context of Adam Smith, neoliberalism is just “liberalism.”

But that’s not where most people today get their words. For most people, “liberalism” means FDR and the revolutionary role for government he brought to the U.S. — a role hated by the rich ever since. In the context of FDR liberalism, “neoliberal” means “not liberal” in the same sense as Tony Blair’s “New Labour” means “Not Labour.”

See how easy? They just name it what it isn’t, pretend it still is, and voilà — they’ve fooled at least half the people. Welcome to Bill Clinton World, where ending welfare is “neoliberal.” Apply our definition and you have it just right.

Now for the pieces of the idea I want to present.

“Neoliberalism” is a “Just-World” Idea; Winners and Losers Deserve What They Get

In Chris Hedges’ piece he writes up an interview with the widely respected economic historian Professor Avner Offer. Here’s his introduction to Offer and his work (my emphasis everywhere and some reparagraphing):

Offer, the author of “The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain Since 1950,” for 25 years has explored the cavernous gap between our economic and social reality and our ruling economic ideology. Neoclassical economics, he says, is a “just-world theory,” one that posits that not only do good people get what they deserve but those who suffer deserve to suffer.

Another word for a “just-world” theory is a “just-desserts” theory, because once you get yourself into position to get all the goodies, you keep yourself there by stigmatizing the losers. After all, if the losers aren’t getting their “just desserts,” then they should be getting some of what you’re hoarding. Can’t have that. Which is why the winners are always talking about why you (or the person next to you) deserves to lose. If the losers don’t deserve to lose, the winners don’t deserve to win.

Offer lists and describes other “just-world” (just-desserts) theories. This is a fascinating list:

Offer cited a concept from social psychology called the just-world theory. “A just-world theory posits that the world is just. People get what they deserve. If you believe that the world is fair you explain or rationalize away injustice, usually by blaming the victim.

“Major ways of thinking about the world constitute just-world theories,” he said. “The Catholic Church is a just-world theory. If the Inquisition burned heretics, they only got what they deserved. Bolshevism was a just-world theory. If Kulaks were starved and exiled, they got what they deserved. Fascism was a just-world theory. If Jews died in the concentration camps, they got what they deserved. The point is not that the good people get the good things, but the bad people get the bad things. Neoclassical [pre-FDR liberal] economics, our principal source of policy norms, is a just-world theory.”

Offer quoted the economist Milton Friedman: “The ethical principle that would directly justify the distribution of income in a free market society is, ‘To each according to what he and the instruments he owns produces.’ ”

“So,” Offer went on, “everyone gets what he or she deserves, either for his or her effort or for his or her property.

“For his or her effort or for his or her property.” The “effort” part kind of makes sense (but only kind of; think of an Indian tribe and how they don’t starve the weak). But you’re deserving based on your “property”? That’s what neoclassical economics, “free market” capitalism asserts. Yet as we know, every property “right,” if you take it far enough back, rests on a theft.

Offer says the same: “No one asks how he or she got this property.”

Just-World (Just-Desserts) Theories are a “Warrant for Inflicting Pain”

This is the second piece of the ideas I’m bringing together today. Offer says, correctly, that when a theory fails to describe the reality of the world, the only way to reconcile the two is to adjust the theory, or adjust (do violence to) the reality. As a result, all just-world theories inflict pain. Look again at the bolded list in the large quote immediately above. We could add to that list.

Note that this is the mechanical explanation for pain-inflictment …

[Offer] says this model is “a warrant for inflicting pain.”

… as though some mindless mechanism were operating in its own defense. But as Offer says elsewhere in the interview, there’s a second reason for people to hold to this theory — a degree of self-interest and goodie-preservation is involved. Or as Offer more elegantly puts it:

“One of the issues here is when those in authority, whether political, academic or civic, are expounding their doctrines through Enlightenment idioms and we must ask, is this being done in good faith?” he said. “And here I think the genuine insight provided by the economics of opportunism is that we cannot assume it is being done in good faith.” …

“When I hear Republicans in the United States say that taking away people’s food stamps will do them good I ask, what do you know that allows you to say this? … Enlightenment discourse should not be taken at face value. We have to again ask whether it is being carried out in good faith.”

And I’ll offer a third reason as well for pain inflictment — man’s cruelty to man. Almost all societies practice some degree of torture, even some of our noble Indian tribes, and all torture has just one goal — to satisfy the torturers and their audience. It’s why Bush II killed all those Texas prisoners, innocent or not. It’s why he blew up frogs as a child. And drones, well … let’s call them “manly notches” and move on.

What Will Happen in a Scarcity World?

You see where this is headed? We’re in a world where the dominant economic theory justifies the deprivation of the masses. And the worse a theory is at modeling the real world, the more pain it has to inflict to make the world conform back to the theory. Thus:

“Just-world theories are models of reality,” he said. “A rough and ready test is how well the model fits with experienced reality. When used to derive policy, an economic model not only describes the world but also aspires to change it. In policy, if the model is bad, then reality has to be forcibly aligned with it by means of coercion.

“How much coercion is actually used provides a rough measure of a model’s validity. That the Soviet Union had to use so much coercion undermined the credibility of communism as a model of reality.

“It is perhaps symptomatic that the USA, a society that elevates freedom to the highest position among its values, is also the one that has one of the very largest penal systems in the world relative to its population. It also inflicts violence all over the world. It tolerates a great deal of gun violence, and a health service that excludes large numbers of people.”

So these systems, including the “free market” (so called) system, are already inflicting great pain, and that in a world of abundance. Consider, for example, that if food distribution were efficient and based on need, we could feed the world:

The world produces enough food to feed everyone. World agriculture produces 17 percent more calories per person today than it did 30 years ago, despite a 70 percent population increase. This is enough to provide everyone in the world with at least 2,720 kilocalories (kcal) per person per day according to the most recent estimate that we could find.

We live in abundance, yet the “just desserts” (a/k/a the “I’m keeping mine”) theory that the rich constantly PR us with says that the many must suffer to serve the few. So what happens when abundance becomes real scarcity?

Our current economic model, he said, will be of little use to us in an age of ecological deterioration and growing scarcities. Energy shortages, global warming, population increases and increasing scarcity of water and food create an urgent need for new models of distribution. Our two options, he said, will be “hanging together or falling apart.” …

Offer has studied closely the economies of World War I. … He holds up these war economies, with their heavy rationing, as a possible model for collective action in a contracting economy. … “These war economies were relatively egalitarian. These economics were based on the safety net principle. If continued growth in the medium run is not feasible, and that is a contingency we need to think about, then these rationing societies provide quite a successful model.”

His conclusion: “There is not a free market solution to a peaceful decline.” In Offer’s (and Hedges’) view, if we enter a world of scarcity, we will have two social choices — emulate the WWI rationing economies and share what’s available, or stick with the past and administer even more pain and social control.

Climate Will Give us a Scarcity World

There’s more in the piece about the implications of this thinking for the economics profession, but let’s look at one other aspect of his thought. While Offer says that the scarcity world is coming, he doesn’t elaborate how. Allow me.

Aside from the obvious, that at some point population growth will outstrip food production, there’s a factor that perhaps no one but the geniuses in the bowels of the Pentagon have considered. The climate.

Modern human society depends on sufficient production of a number of commodities. Let’s just consider three: food, water, energy. First, there’s no question in anyone’s mind that climate changes will affect global supplies of food. (Click to see how, or search on the phrase “will climate change affect food production?” No one says, “We’ll be just fine.”)

The same with the water supply. In fact, I can almost bet that these commodities will go into scarcity because of one factor alone — the psychopaths in the investment community are giddy over the prospects. Everything from new shipping lanes through the formerly iced Northwest Passage, to opportunities for military contractors, to drilling for even more carbon (oil) in the formerly iced Arctic Ocean, to — you guessed it — profiting from drought and famine by cornering the market on food and water (pdf):

Overview: Why Invest in Water?
Examining the Core Drivers of a Compelling Theme

… [W]ater is still abusively undervalued relative to its real economic worth, so huge room exists for asset price expansion. Combined with the vigorous market drivers, shown below, that are now becoming globally and undeniably apparent, hydrocommerce presents a very compelling investment theme for the predictable future.

Supply/Demand Imbalances

• Available fresh water is less than ½ of 1% of all the water on earth. 6.5 billion people now compete [my emphasis] for this finite resource, with 8 billion by 2025.

• 80% of the global population relies on groundwater supplies that are dangerously depleted, if not exhausted, as they are mined beyond natural replenishment.

Pollution and climate change further exacerbate supply shortages, damaging vulnerable resources and causing drought and desertification at an alarming rate.

• Per capita water consumption has roughly doubled in the last century, a rate that will accelerate as more economies industrialize and populations become more urban.

Criminal in the worst way. Do you see why I use world like “psychopath” with such confidence? The same is happening in the food sphere, with Monsanto’s business practices a driver of scarcity.

But power — energy — scarcity is a special problem, because energy scarcity is also the solution. There is absolutely no question that we’ll enter a world of energy rationing in the next ten years, if not sooner. The question is, do we do it by choice or necessity?

The Zero Carbon economy, a Rationing Regime that Works

I’ll be plain — we can solve the energy crisis with extreme energy rationing now. We need to put the brakes on the carbon car hard and soon. That’s the only way to keep the world below the original +3°C “game over” scenario. That’s the only way to keep the world at or below the newer +2°C “life between the Ice Ages” scenario:

In studying cores drilled from both ice sheets and deep ocean sediments, [James] Hansen found that global mean temperatures during the Eemian period [a prehistoric warm period between two of the Ice Ages], which began about 130,000 years ago and lasted about 15,000 years, were less than 1 degree Celsius warmer than today. If temperatures were to rise 2 degrees Celsius over pre-industrial times, global mean temperature would far exceed that of the Eemian, when sea level was four to six meters higher than today, Hansen said.

“The paleoclimate record reveals a more sensitive climate than thought, even as of a few years ago [when he made his +3°C “game over” prediction]. Limiting human-caused warming to 2 degrees is not sufficient,” Hansen said. “It would be a prescription for disaster.”

And it’s the only way to mitigate the +1°C disaster we we’re experiencing right now. We need a Zero Carbon economy — now. Not Obama’s “carbon neutral” (“keep the Kochs in walking money”) economy, a Zero Carbon economy. The following was written in 2011:

Wartime effort reduction path

Emission reductions can still be the route to doing that, Hansen states. Based on these insights an American Environmental Coalition led by 23 high-ranking officials of American energy, climate and environmental NGOs, recently wrote an open letter to President Barack Obama and President Hu Jintao, calling for wartime-like mobilisation by the governments of the United States and China to cut carbon emissions 80 percent, based on 2006 levels, by 2020, in order to reach the 350 ppm atmospheric CO2 stabilisation level [indeed, that’s just nine years – the price of having done nothing before].

The bracketed comment was the author’s, not mine. It’s now 2014. We just wasted three years. The longer we do nothing, the worse it will get, the less time to put on the brakes, and the more drastic the rationing — either voluntary or forced — will be. Let’s look at what that means:

Voluntary rationing means the U.S. government steps in, absorbs all the excess capital from the economy it needs, and builds out a Zero Carbon energy regime at a man-on-the-moon rate, a wartime-rationing rate. It does so with zero-carbon goals, not comfortable-rate-of-change goals. To go to Zero Carbon use in, say, five years has to mean rationing, hard “wartime” rationing. Tough luck, but time marches on. Best to start now.

Your grandchildren's East Coast of the United States

Your grandchildren’s East Coast of the United States

Forced rationing means that the Exxons, Rex Tillersons and David Kochs are allowed to dump all the carbon they can into the gas tanks and carbon-fueled generating stations of the world at the fastest rate they can, for the highest price they can get. Then die rich.

Meanwhile, South Florida will flood in the next “Haiyan”–scale hurricane event, development will cease, property values will crater, insurance costs will soar, drinking water will go salty, and everyone who can get out, will. That will put fear into the eyes of every other American, and we’re off to crisis time as panic and disaster feed on each other. From that day on, it’s a whole new world.

Water will be rationed by its scarcity — food by the inability and unwillingness of owners to grow or deliver it — and energy by high prices (pricing power, baby!), crumbling infrastructure, and mounting social chaos in a world run by … yes, “just desserts” overlords who won’t give up a thing so the rest of us can survive.

Voluntary rationing means that we’ll have it very hard, World War I and II hard, for five-to-ten years, and then we’ll be carbon-free forever. Forced rationing means that the chaos and the population decimation of the next half century will play out, and most of who’s left will be hunter-gatherers in a post-Holocene world. Forced means “forced by circumstances and our own bad choice of whom to listen to.” Even vengeance won’t be an option; David Koch will be dead.

Two Bottom Lines

So we’re back to where we began. I want to leave you with two final thoughts.

1. How we got here. We’re here because a comfortable American middle class — a frog in water heating ever so slowly — has accepted a “just world” description of why the water is warmer for them, an acceptance based in part on a “just-desserts” explanation of why the water is boiling to death a group of (mainly brown, for now) others who “deserve” to be stewed with the potatoes and beans anyway.

We’re here because the American middle class has been taught by their predators that to be selfish is to be good; and that when everyone is perfectly selfish, the “invisible hand” will make everyone happy (if they “deserve” to be happy). A stupid dream to be sure, but how often each day do you see it sold?

We’re here because the U.S. inherited an economic boom in the post-war world, forged by won-battles by unions against predatory employers, won-battles about taxes on the predatory rich, won-battles about caring for others and the social good against the “dream of the invisible hand” — and won-battles against the world’s strongest economies, fought with armies and bombs, until only the U.S., unbombed and “socialist,” was left standing.

We spent about 25 years enjoying that world, then we took it apart.

2. What we should do. There’s quite a discussion in the actual-left world about how to organize the resistance we know we need, in order to solve our economic woes. I’ll leave them to that for now and focus instead on climate. We can solve the climate crisis with a crash-course Zero Carbon economy, or we can watch our world disappear. The minute most people wake up to that, there won’t be another discussion on the planet, I promise.

So what should we do?

We need to build a broad understanding and consensus around Zero Carbon (it’s why I’m writing this stuff). Hug the monster and act, knowing that there’s only one action worth the effort.

We need to name the Climate Criminals early and often. These people — including the pant-suited woman in the Exxon ads — are making human choices that have human consequences. The next hurricane should be named “David Koch”. The one after that, the “Tillerson Tropical Depression”. “Lying Pantsuit Lady” should have her own typhoon. (Anyone want to finance a Climate Criminals Project? Applications accepted now.)

We need to pray that the “panic when people get it” precedes the “panic when it’s too late.” When people get it, they’ll be begging the government for a solution.

Then we need to pray that the president in office at panic-time is an FDR-on-steroids type with a Zero Carbon rod up his or her spine.

Why a strong-arm president? Because I don’t see another way to organize an effective national response, and the alternative, a government even more deeply enslaved to the “just-desserts” rich, is terrible. A post-crisis government that serves only the rich is a government that will fall, NSA and riot-cops or not.

You can take part in actions, but if we’re pushing for carbon-neutral, that just delays the inevitable by a few years. Let’s start with understanding, by focusing on the right goal — Zero Carbon or Bust — followed by Naming the Climate Criminals. Tell your friends about Zero Carbon, and make that the test in every election you vote in. Then make sure your friends — everyone within your “reach” — know who the criminals are every time there’s a crisis.

We can only control ourselves, but we can do this. Remember, the climate is making its own case at the moment, it’s helping wake people up. We just need to do our part by speeding things along and keeping the direction correct. Zero Carbon all the way; carbon-neutral is a sop to the rich.

I’ll close here. Several of the points I made above, such as the fate of South Florida, will be expanded in future pieces. South Florida may survive longer if the hurricane gods are kind, but you get the idea. If the panic doesn’t start there, it will start somewhere else. The California Central Valley is in no better shape.

I’ll also deal later with an unmentioned subject — why am I only talking about U.S. policy? After all, isn’t the whole world at fault? Short answer: Yes, the world is at fault, but we can only control ourselves. Still, that could be plenty. If the U.S. sets a radical Zero Carbon course, a high-carbon China and India would be global pariahs in a year. The world is that hungry for leadership.

Besides, what’s the downside? If we don’t beat global warming in 5–10 years, there won’t be a “Chinese century” in the next ten thousand years, let alone the next thirty. There’s absolutely nothing to lose by taking the high ground.

Zero Carbon, that’s the secret word. Say it as loud and often as you can.

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