Naked Capitalism on Neo-Liberalism

rich-poor-inequality-neoliberalislm

Comments on David Harvey’s “A Brief History of Neoliberalism”

Posted on March 23, 2015 by

By Lambert Strether of Corrente.

I like physical bookstores (as opposed to virtual bookstores like the one to your right) because real shelves are easy to browse. Serendipitously, then, I encountered David Harvey’s A Brief History of Neoliberalism, bought it, and read it. Harvey[1] is a Distinguished Professor of Anthropology at CUNY but it could well be that anthropologists (like David Graeber) are better equipped to interpret our political economy to it than either politicians or economists. Here are two reviews of the book: Thom Hartmann, and Monthly Review; it’s also mentioned in a bibliographic review of neoliberalism in Theory, Culture, and Society

What we might call “the question of the state” — its nature, our experience of it, and its legitimacy, whether in particular or in general — has been coming up on the zeitgeist leaderboard lately; see the lively discussion at Naked Capitalism yesterday. And it does seem clear that since what Harvey labels “the neo-liberal turn” in the mid-70s — marked, if not defined, by the Powell Memo, the formation of the Business Roundtable, the advent of Thatcher and Reagan, and after which real wages were flattened and most gains from productivity necessarily accrued to the 1% and the 0.01% — the relationship of the citizen (now we say “consumer”) to the state changed. When, for example, I entered the labor market in the mid-70s, I had expectations for state provisioning of services that I no longer have (some measure of dignity with Social Security and Medicare) and assumptions about the limits of state power that I no longer hold (the Fourth Amendment). I know that readers who entered the labor market at later dates may not share the expecations and assumptions of my youthful self, but will perhaps consider expanding their sense of what was once possible, and could be again. Harvey’s book, then, is useful in understanding the neo-liberal turn, and may be useful in shaping what is to come next.

My aim in this post is to spark conversation and test out talking points. So, I’m not going to summarize Harvey’s thesis; see the reviews above. Rather, I’m going to quote great slabs of material from the Brief History — I know, I know, “That’s not writing. It’s typing” — and intersperse them with not-entirely-random commentary.

Two posts at Naked Capitalism provide some background on neoliberalism: First, Nathan Tankus’s 2013 interview with Philip Mirowski, where Mirowski proposes that

[Neoliberals] are constructivists, redefining and building a strong state to institute and maintain the kinds of markets they think will not come about on their own[2]. For the [neoliberal thought] collective, the most propitious time to make such bold interventions is during a crisis, when they are mobilized to define ‘exceptions’[3] to previous rules.

Hence “shock doctrine,” and so forth. Second, my own “Neoliberalism Expressed As Simple Rules,” which is not a theoretical treatment, but rather provides simple ways for you to spot neoliberals “in the wild”: The quasi-theological “because markets” as the axiom on which every neoliberal policy proposal rests, and the imperative “go die” is your fate if you don’t have the wherewithal to function in the markets they set up. (As a corollary, neoliberals exempt themselves from their own rules, rather like Ayn Rand collecting Social Security.)

I’m going to look at what Harvey as to say in four topic areas, most of which have come up in the NC comment area at one time or another:

  • Neoliberalism Defined
  • Neoliberalism and Elite Power
  • The Neoliberal State
  • Neoliberalism vs. Neoconservativism

In all these topic areas, “the question of the state” is paramount.

1. Neoliberalism Defined

Here is Harvey’s definition of neoliberalism (page 2):

Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices.

Because markets. If you’ll reread that paragraph, you’ll see that these views are so pervasive as to have been transformed into common sense; they are certainly shared by both legacy parties and the political class, and ideas that are not neoliberal (single payer, for example) are not permitted within the Overton Window that defines legitimate discourse; they cannot be expressed, and perhaps cannot even be thought. For example, the “tragedy of the commons” is a stable of neoliberal discourse, and is not merely untrue, but defines the only sane way to govern common pool resources like watersheds out of existence.

Here is Harvey’s description (pages 2 – 3) of “the neoliberal turn,” a phrase I obviously like:

There has everywhere been an emphatic turn towards neoliberalism in political-economic practices and thinking since the 1970s. The process of neoliberalization has, however, entailed much ‘creative destruction’, not only of prior institutional frameworks and powers (even challenging traditional forms of state sovereignty) but also of divisions of labour, social relations, welfare provisions, technological mixes, ways of life and thought, reproductive activities, attachments to the land and habits of the heart. In so far as neoliberalism values market exchange as ‘an ethic in itself, capable of acting as a guide to all human action, and substituting for all previously held ethical beliefs’, it emphasizes the significance of contractual relations in the marketplace. It holds that the social good will be maximized by maximizing the reach and frequency of market transactions, and it seeks to bring all human action into the domain of the market. This requires technologies of information creation and capacities to accumulate, store, transfer, analyse, and use massive databases to guide decisions in the global marketplace. Hence neoliberalism’s intense interest in and pursuit of information technologies (leading some to proclaim the emergence of a new kind of ‘information society’). These technologies have compressed the rising density of market transactions in both space and time.

This paragraph is so rich I hardly know where to begin. For a lunatically precise reductio ad absurdum of “contractual relations” and “habits of the heart,” see Andrew Ditmer’s “Journey into a Libertarian Future,” parts one, two, three, four, five, and six, with its oft-repeated catch-phrase “in a rights-respecting manner.” For “maximizing the reach and frequency of market transactions,” see many NC posts on the claims for “shopping” vs. the realities of the tax on time and (with ObamaCare) the deliberate obfuscation of market offerings by vendors. And on information technologies, see Greenwald, Snowden, et al.

Harvey also claims (pages 159 – 60) that “accumulation by dispossession” is a key feature of the neoliberal dispensation:

The main substantive achievement of neoliberalization, however, has been to redistribute, rather than to generate, wealth and income. I have elsewhere provided an account of the main mechanisms whereby this was achieved under the rubric of ‘accumulation by dispossession’. By this I mean the continuation and proliferation of accumulation practices which Marx had treated of as ‘primitive’ or ‘original’ during the rise of capitalism. These include the commodification and privatization of land and the forceful expulsion of peasant populations (compare the cases, described above, of Mexico and of China, where 70 million peasants are thought to have been displaced in recent times); conversion of various forms of property rights (common, collective, state, etc.) into exclusive private property rights (most spectacularly represented by China); suppression of rights to the commons; commodification of labour power and the suppression of alternative (indigenous) forms of production and consumption; colonial, neocolonial, and imperial processes of appropriation of assets (including natural resources); monetization of exchange and taxation, particularly of land; the slave trade (which continues particularly in the sex industry); and usury, the national debt and, most devastating of all, the use of the credit system as a radical means of accumulation by dispossession. The state, with its monopoly of violence and definitions of legality, plays a crucial role in both backing and promoting these processes. To this list of mechanisms we may now add a raft of techniques such as the extraction of rents from patents and intellectual property rights and the diminution or erasure of various forms of common property rights (such as state pensions, paid vacations, and access to education and health care) won through a generation or more of class struggle. The proposal to privatize all state pension rights (pioneered in Chile under the dictatorship) is, for example, one of the cherished objectives of the Republicans in the US.

Most of these techniques of primitive accumulation can be put under the heading of “enclosure”; to Harvey’s list we might add Monsanto’s attempt to privatize the germ plasm, the privatization of education both in charter schools and the general crapification of the university; and the conversion of law enforcement into a profit-making state enterprise, and not just in Ferguson.

However, I understand Harvey to be making the claim that these forms of extraction have come to outweigh profit in capitalism’s current, neoliberal implementation. I’m not so sure about that.

2. Neoliberalism and Elite Power

Here (page 15-16) Harvey describes the state of play in the mid-70s that drove the neo-liberal turn.

To have a stable share of an increasing pie is one thing. But when growth collapsed in the 1970s, when real interest rates went negative and paltry dividends and profits were the norm, then upper classes everywhere felt threatened. In the US the control of wealth (as opposed to income) by the top 1 per cent of the population had remained fairly stable throughout the twentieth century. But in the 1970s it plunged precipitously (Figure 1.2) as asset values (stocks, property, savings) collapsed. The upper classes had to move decisively if they were to protect themselves from political and economic annihilation. The coup in Chile and the military takeover in Argentina, promoted internally by the upper classes with US support, provided one kind of solution. The subsequent Chilean experiment with neoliberalism demonstrated that the benefits of revived capital accumulation were highly skewed under forced privatization. The country and its ruling elites, along with foreign investors, did extremely well in the early stages. Redistributive effects and increasing social inequality have in fact been such a persistent feature of neoliberalization as to be regarded as structural to the whole project. Gérard Duménil and Dominique Lévy, after careful reconstruction of the data, have concluded that neoliberalization was from the very beginning a project to achieve the restoration of class power. After the implementation of neoliberal policies in the late 1970s, the share of national income of the top 1 per cent of income earners in the US soared, to reach 15 per cent (very close to its pre-Second World War share) by the end of the century

Clearly, I think Harvey’s right to focus on the 70s; dear Lord, the leisure suit… Terrible music… It all must have meant something! However, when discussing elite angst, Harvey surely should include the 60s, as well as (perhaps) the idea that the reaction of a significant part of the elite to the New Deal was “Never again!” (Obama was able to actualize this elite desire when the time came in 2009.) I’d also like a better understanding of what “had to move decisively” meant in practice. How were the decisions taken? Clearly, however, I agree with Harvey that distributing wealth and power upward is a feature, not a bug, of the neoliberal project. (See the work of Outis Philalithopoulos on the nature of the thought collective that did the project work.) I also like very much the idea that even then, the elites were looking for new forms of power trans-nationally; elsewhere, Harvey mentions the New York bailouts of the 70s as a parallel case to Chile; I think the same thing happened after the failure of the Tahrir Square movement; dictators and wannabe dictators everywhere could tell themselves “not to worry.”

Reinforcing (page 19-20) the political character of the neoliberal project:

[We can] interpret neoliberalization either as a utopian project [q.v. Hayek, Friedman, the Chicago Boys, and other members of the neoliberal thought collective] to realize a theoretical design for the reorganization of international capitalism or as a political project to re-establish the conditions for capital accumulation and to restore the power of economic elites. In what follows I shall argue that the second of these objectives has in practice dominated. Neoliberalization has not been very effective in revitalizing global capital accumulation[4], but it has succeeded remarkably well in restoring, or in some instances (as in Russia and China) creating, the power of an economic elite. The theoretical utopianism of neoliberal argument has, I conclude, primarily worked as a system of justification and legitimation for whatever needed to be done to achieve this goal. The evidence suggests, moreover, that when neoliberal principles clash with the need to restore or sustain elite power, then the principles are either abandoned or become so twisted as to be unrecognizable. This in no way denies the power of ideas to act as a force for historical-geographical change. But it does point to a creative tension between the power of neoliberal ideas and the actual practices of neoliberalization that have transformed how global capitalism has been working over the last three decades.

As a caveat, Harvey’s discussion of class[5] leaves a good deal to be desired. In the passage above, for example, we have a process of “global capital accumulation” and we have “economic elites,” but the relationship between the two is not specified. However, I think Harvey’s idea that neoliberalism did not rejuvenate capitalism (as the New Deal surely did) but did increase the political power of the owners of capital (if that is what Harvey means by “economic elites) has a lot of be said for it. It speaks to the experience that most of us have of gradually crapified work and life experiences, at least where we encounter systems that have been prey to neoliberal infestations, while those who own and control those systems reap outsized rewards.

3. The Neoliberal State

Here (pages 79-81) Harvey presents a list of contradictions that, he claims, make the neoliberal state “a transitional” or “unstable” political form. (One might argue that a political class that is capable of producing a Clinton vs. Bush race in 2016 is about as stable as you can get, but then the ancien régime was stable, too; until it wasn’t. “If something cannot go on forever, it will stop,” and call me Pollyanna, but I can’t see continued dynastic conflicts causing anything other than disgust in the electorate, even with politics as degraded as it is.)

[The Neoliberal State] appears to be either a transitional or an unstable political form. At the heart of the problem lies a burgeoning disparity between the declared public aims of neoliberalism––the well-being of all––and its actual consequences––the restoration of class power. But beyond this there lies a whole series of more specific contradictions that need to be highlighted.

1. On the one hand the neoliberal state is expected to take a back seat and simply set the stage for market functions, but on the other it is supposed to be activist in creating a good business climate and to behave as a competitive entity in global politics. In its latter role it has to work as a collective corporation, and this poses the problem of how to ensure citizen loyalty. Nationalism is an obvious answer, but this is profoundly antagonistic to the neoliberal agenda. …

2. Authoritarianism in market enforcement sits uneasily with ideals of individual freedoms. The more neoliberalism veers towards the former, the harder it becomes to maintain its legitimacy with respect to the latter and the more it has to reveal its anti-democratic colours. This contradiction is paralleled by a growing lack of symmetry in the power relation between corporations and individuals such as you and me. …

3. While it may be crucial to preserve the integrity of the financial system, the irresponsible and self-aggrandizing individualism of operators within it produces speculative volatility, financial scandals, and chronic instability. ….

4. While the virtues of competition are placed up front, the reality is the increasing consolidation of oligopolistic, monopoly, and transnational power within a few centralized multinational corporations: the world of soft-drinks competition is reduced to Coca Cola versus Pepsi, the energy industry is reduced to five huge transnational corporations, and a few media magnates control most of the flow of news, much of which then becomes pure propaganda.

5. At the popular level, the drive towards market freedoms and the commodification of everything can all too easily run amok and produce social incoherence. … The reduction of ‘freedom’ to ‘freedom of enterprise’ unleashes all those ‘negative freedoms’ that Polanyi saw as inextricably tied in with the positive freedoms.

Every one of these contradictions speaks to the legitimacy of the neo-liberal state. I’d focus on “authoritarianism in market enforcement,” since that is exactly what ObamaCare does (and is what retirement will turn into, with a “marketplace” of its own, if we aren’t careful). That’s also what debtor’s prisons do, and its what law enforcement as a profit center does. A regime that forces its hand in your pocket for a fee every time you turn around, actively seeks to decrease what you have in your pocket in the first place, and then delivers increasingly crapified services, all with no means of redress within the electoral system, is a regime that, sooner or later, will face a legitimacy crisis.[6]

4. Neoliberalism vs. Neoconservativism

Here (page 81 – 82) Harvey explains how neoconservativism provides one way for the elite to resolve the contradictions listed above.

If the neoliberal state is inherently unstable, then what might replace it? In the US there are signs of a distinctively neoconservative answer to this question.

It is interesting to note how neoliberalization in authoritarian states such as China and Singapore seems to be converging with the increasing authoritarianism evident in neoliberal states such as the US and Britain. Consider, then, how the neoconservative answer to the inherent instability of the neoliberal state has evolved in the US.

[Neoconservatism] proposes distinctive answers to one of the central contradictions of neoliberalism. If ‘there is no such thing as society but only individuals’ as Thatcher initially put it, then the chaos of individual interests can easily end up prevailing over order. The anarchy of the market, of competition, and of unbridled individualism (individual hopes, desires, anxieties, and fears; choices of lifestyle and of sexual habits and orientation; modes of self-expression and behaviours towards others) generates a situation that becomes increasingly ungovernable. It may even lead to a breakdown of all bonds of solidarity and a condition verging on social anarchy and nihilism. In the face of this, some degree of coercion appears necessary to restore order. The neoconservatives therefore emphasize militarization as an antidote to the chaos of individual interests. For this reason, they are far more likely to highlight threats, real or imagined, both at home and abroad, to the integrity and stability of the nation. In the US this entails triggering what Hofstadter refers to as ‘the paranoid style of American politics’ in which the nation is depicted as besieged and threatened by enemies from within and without.

Well, yes. Neoconservativism providing a militarized solution to the problems neoliberalism created for itself. (It could be, however, that neoliberalism has introduced a contradiction there as well; Iraq and much of our latest imperial work was done with mercenaries (because markets); is it really possible for mercenaries to appeal to national sentiment?)

Conclusion

All I can say is that I hope this random walk though A Brief History of Neoliberalism inspires some conversation. Readers, does the “neoliberal” turn as a historical moment make sense to you? How would you date it? Is Harvey’s description of neoliberalism sufficiently nuanced and grounded to apply specifically to our time, while being general enough to suggest historical parallels? Are there any aspects of or turns of phrase in Harvey’s language that you find especially attractive? Are the militarized solutions of the neocons specific to either of the two parties, or accepted by both? Is “the question of the state” on the agenda? Should it be?

NOTES

[1] Harvey published his book in 2005. Here (p 189) he warns of the coming great financial crash of 2007-2008: “Such a mix of indicators elsewhere would almost certainly have necessitated IMF intervention.”

[2] Hence ObamaCare. Because markets.

[3] Carl Schmitt, Political Theology: “Sovereign is he who decides on the exception.”

[4] Had it been, Silicon Valley wouldn’t be awash in so much cash that there’s no place to invest it that yields an adequate return (absent accounting control fraud, as in the housing crisis).

[5] Harvey writes (page 40):

But what exactly is meant here by ‘class’? This is always a somewhat shadowy (some would even say dubious) concept. Neoliberalization has, in any case, entailed its redefinition. This poses a problem. If neoliberalization has been a vehicle for the restoration of class power, then we should be able to identify the class forces behind it and those that have benefited from it. But this is difficult to do when ‘class’ is not a stable social configuration. In some cases ‘traditional’ strata have managed to hang on to a consistent power base (often organized through family and kinship). But in other instances neoliberalization has been accompanied by a reconfiguration of what constitutes an upper class. Margaret Thatcher, for example, attacked some of the entrenched forms of class power in Britain.

Hmm. I would say — without, I grant, proferring a definition of my own — that “dynamic” would be a better word than “shadowy,” and that it’s not reasonable to demand that class be a “stable social configuration.” Even the great division between those who sell their labor and those who bu it isn’t all that stable looked at in detail, when you consider the rise of the precariat, of System D, and so forth, all of which have happened in decades, not centuries. Dynamics like these are what drive the mysterious labor force participation rate, for example.

[6] To be fair, this could be exactly why the elites regarded the New Deal as illegimate.

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One response to “Naked Capitalism on Neo-Liberalism

  1. Deborah Dawson

    I’ve not read the book you’re discussing here, but I am currently reading Harvey’s more recent “Seventeen Contradictions and the End of Capitalism.” I’m finding it slow going, if only because I have no background in economics and it’s like learning a foreign language. That said, once I manage to get through the jargon of economics and understand the concepts on my own terms, I find much of his analysis is just common sense. This is an economic system that depends for its success on maintaining balances between the tension of interests that pull in opposite directions. As soon as one side or the other achieves – and continues to press – a definite advantage, the system must and will self-destruct. What surprises me most is that the proponents of neoliberalism do not realize that they have sown, and are energetically nurturing, the seeds of their own destruction as well as ours.

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