As someone who has looked at the world through a political economic lense for decades, I am restless with the “cultural turn”. Once upon a time, it is said, the bad old vulgarians of the left believed that economic structure—the ownership of capital, the rules under which economies operate and the incentives these things generate—were everything and agency, meaning culture and consciousness, were nothing. The latter was sometimes claimed to be derivative of the form.
Then we had a cultural turn. Now it seems it’s all about consciousness and ideology, of which economic structures are a pale reflection. Neoliberal ideology is said to have seeped its way into the heads of intellectuals, journalists and politicians—perhaps even the public at large—and this explains things like deregulation, privatization and the ubiquity of outsourcing and global value chains. It’s even possible to have 500-page treatises about the failures of capitalism that make no reference at all to the empirical structure of the economy, only modes of thought, as I point out here.
According to this view, the various failings of our society, from the inability to act on climate change to mass incarceration to the imposition of market logic on higher education, all converge as consequences of neoliberal hegemony. But what is neoliberalism? It is usually described as a philosophy, born sometime between the fall of the Hapsburgs (Slobodian) and the postwar convening of the Mont Pèlerin Society (Mirowski et al.), and surely there is truth to these well-documented accounts. But should we understand the past four decades or so as primarily the product of a sea-change in thought, the end result of these precursor currents?
The position I would like to take digs beneath the opposition between structure and agency, the empirical economy and the conceptions people have of it. No doubt the rules and incentives that direct economic life are the product of choice, and therefore consciousness, just as consciousness is strongly influenced by the problems our economic circumstances throw at us and the possible solutions it affords. Shouldn’t there be a coevolutionary process down there somewhere that encompasses both of them?
Identifying such processes is the task of historians, and as we know, understanding the present as history without the benefit of hindsight is an enormous challenge. In my preferred world, this would be the project of political economists, giant armies of them, adequately encouraged and funded. We would see a constant flow of books and articles on the matter, hashing out points of debate. The real world is quite different, alas.
Here is a thought intended to provoke research in this area. How do we understand the timing of the neoliberal turn? In the English-speaking world it took hold a few years before or after 1980, a bit later elsewhere. What transpired to account for this?
A standard narrative is that the Keynesian postwar order cracked up over the crisis of inflation during the mid-1970s. A conservative alternative that trusted markets more and government less was vindicated by events and established its intellectual dominance. After a lag of a few years, policy followed along. One can critique this on matters of detail: economic growth remained stronger during the 70s than it would be thereafter, anti-Keynesians did not have a superior understanding of economic developments, and no intellectual revolution was complete within the space of just a few years. But the deeper problem, it seems to me, is that this attributes vastly exaggerated agency to coteries of intellectuals. Do we really think that the elections of Reagan and Thatcher, for instance, were attributable to a shift in grad school syllabi in economics and related fields?
I propose an alternative hypothesis. From the end of WWII to the collapse of the Bretton Woods monetary system, a large portion of capital was illiquid, its value tied to its existing use. The rich sought to diversify their portfolios, of course, but there were limits. Stock market transactions were beclouded by large information costs, and share ownership tended to be more stable and concentrated. Fortunes were rooted in specific firms and industries. In such a situation there were significant divisions within the capitalist class that attenuated its overall political clout. Industries divided according to policy preferences, and political parties, which were essentially interest group coalitions, attracted different segments of this class. (In the US the Republicans were just as much an interest group coalition as the Democrats, just different interests like small retail business, domestic mining, nonunion manufacturing, etc.) Public policy in this dispensation, whatever its ostensible justification, reflected sectoral influence.
Since the early 1970s capital ownership has become substantially more fungible in every respect. Equity funds of various sorts established themselves as institutional players, allowing individual capitalists to diversify via investment in these funds. Regulatory restrictions on capital movements were dismantled or bypassed. New information technology dramatically reduced (but not eliminated!) the fog of all financial markets. And firms themselves became separable bundles of assets as new technology and business methods allowed for more integrated production across ownership lines. The combined result is a capitalist class with more uniform interests—an interest in a higher profit share of income and greater freedom for capital in every respect. The crisis in real returns to capital during the 1970s, the true economic instigator, galvanized this reorganization of the political economy. (In the US the S&P peaked in 1972 and then lost almost half its inflation-adjusted value by the end of the decade. This is not an artifact of business cycle timing.)
Of course, all understanding of the world is mediated by the way we think about it. The wealthy didn’t say to themselves, “Gee, my assets are taking a hit, so the government needs to change course.” They turned to dissident, conservative thinkers who explained the “failures” of the 70s as the result of too little concern for the engine of growth, which (of course) was understood to be private investment. Market-friendly policy would, it was said, reinvigorate investment and spur economic growth. Keynesianism was seen as having failed because it took investors for granted, taxing and regulating them and competing with them for finance; politicians needed to show respect. It’s understandable why capitalists would interpret their problems in this way.
The other side of the coin was political influence over ideas. Intellectuals who advanced the positions we now call neoliberal were rewarded with research funding, jobs and influence over government policy. When the World Bank and the IMF were remade in the wake of the 1982 debt crisis, this influence was extended internationally. Lending conditionality reproduced in developing countries the same incentives that had shifted the intellectual environment in the core capitalist world.
This hypothesis—and it’s important to be clear that’s what it is—also gives us an explanation for why the 2008 crisis, while it did provoke a lot of reconsideration by intellectuals—did not result in meaningful institutional or policy change: the underlying political economic factors were unaltered. And it implies that further intellectual work, necessary as it is, will not be enough to extricate us from the shackles of neoliberal political constraints. For that we need to contest the power that undergirds them.
Very interesting and crucial questions.
Thouightful puece, Peter D. Teo comments.
One is that the decline n the stock market in the 70s cab at keast partly be blemed on the outbreak of inflation, and this was indeed specifically pointed to by the more conservative free market economists who supported Thatcher and Reagan.
The second is to remind that the term "neoliberal" has a crtain amount of counfusion to it, which goes back to the 1947 MPS conference, but has reemerged since. On the one hand you have clearly hardlining pro-laissez faire economists such as Ludwig von Mises. OTOH, you have a group that while mostly supporting this also moderates this by supporting at least some amount of social safety net. In 1947 this included people like Walter Eucken at MPS who supported the social market economy in West Germany as well as later the centrist Democrats in the US who supported Bill Clinton as well as those supporting Tony Blair in the UK. Many who use the term "neolberal" to describe everything going on ignore this division.
I would say yes, but, to your hypothesis. The apparent failure of government to demonstrate the competency to deal with the growing challenges of the time created an opening for neoliberalism to sprout. What this doesn't explain however is the turn toward (or acceptance of) the neoliberal philosophy by a broad swath of the public for whom neoliberalism was/is obviously not in their interest.
I'd submit that what's missing from your explanation is the exploitation of the prevailing cultural tensions -- particularly those associated with contemporary racial and gender revolutions -- by those seeking to overthrow the communitarian economic-political order that had prevailed since the New Deal/Second World War.
The alliance (in the US, the focus of my comments) of the monied interests, providing the financial resources and seeking the repeal of the social and fiscal policies of the New Deal, and the heavily Southern-based evangelical/religious right, providing the voting bloc and seeking to turn back the progress of minorities and women in achieving more equal social and political rights -- created the powerful political base from which the revisionist onslaught was mounted. Reagan then provided the smiling face to sell the proposition that "government isn't the solution to your problems; government IS the problem" that effectively neutered the one institution capable of regulating the monied interests.
Cinclow: I completely agree that this has been a central part of the political story in the US, and if it were only the US that had gone through this process I probably would have put it at the center, as many analysts do. But I'm thinking internationally: neoliberalism is everywhere. In most countries it adopts the cosmopolitan visage of classical liberalism, but its economic content is about the same. In that sense the US really is exceptional. (Maybe Australia and Canada have similarities in this respect, but England? And what about neoliberalism in the continental EU?)
In any case, resurgent racism and sexism (a la Cory Robin) explain the strength of movements that appeal to them, but what explains their political economic content? Is it simply conjunctural -- that proponents of the welfare state were also (sometimes reluctantly) proponents of greater racial and gender equality? That's an actual question.
An interesting discussion of the roots, differences and similarities between neoliberalism and ordoliberalism. And believe it or not, the many comments raise some interesting points. Only one real gaslighting comment.
I apologize for not proofreading my comments, which I know for Peter D. are old hat, at least the second one.
I always feel I learn from your posts on the political culture, if that is the right term. This is one post that could easily be elaborated into many volumes.
When we are approaching or just past an inflection point in the longer political and economic cycles, there is an opportunity to be unusually aware that such cycles exist and that the reproduction of political and economic structure drive the organization of political economy into such cycles. Collective consciousness and the cultural life of ideas, like individual human consciousness, tends to be a rationalization of the recent past and projection into the distant future: our shared models of the political world we are making and re-making are linear, even though a longer view reveals the cycles that make clear that the political economy is fundamentally non-linear. Any direct examination of the foundations of political economy in accumulation, depletion, congestion, network effects, etc leads to the same insight: not linear. But, what are you going to do? we are not that smart; we need the conservative principle, tomorrow will be like today, but slightly different, ditto for the past.
The political economy and international order put in place during and after WWII had to an unusual degree in history a deliberately chosen architecture. That is an aspect of the longer cycle of politics, punctuated by war and crisis. Neoliberalism originated in a strong ambivalence regarding the deliberation and the naive arrogance as well as egalitarian impulses that accompanied it.
That architecture was linear in its conception and it ran out of road as the non-linear political economy inevitably turned away with the passing of generations and other aspects of reproduction amid accumulation, depletion, et cetera. That underlying reality was stark in Britain, where coal ran out. Bretton Woods ran out of American surplus. The world economy hit his head on the ceiling of global capacity in 1973 -- American oil production was in precipitous decline.
One thing Barkley said should be repeated: neoliberalism has opposing poles quite a distance apart. Neoliberalism is a dialectic between them more than it has been a fixed doctrine. The remarkable power and resistance to outside critique is attributable to the insular nature of that dialectic. The neoliberal right has chosen its interlocutors, the centrist "left" very well, which is an important reason that the non-neoliberal real Left is emerging now from the sojurn in the politics of cultural critique where it went in the 1960's with no knowledge or interest in economics.
It does not take a genius to see that human civilization and the natural ecology can only survive if people somehow manage to produce a rational architecture for political economy deliberately and on an unprecedented scale and level of sophistication. Where we are -- neoliberalism triumphant albeit spent and a Left at peak consciousness -- is exactly the wrong place to be in the political cycle.
Thanks, Bruce. I have thought the WWII period is enormously undervalued as a moment of social thought and system-building. The global capitalist class suffered a tremendous loss of power during the 1930s everywhere, even where it was "saved", but there was no immediate plan for how to restructure on the basis of the new dispensation. I think a lot of that planning took place as the war was waged during the early-mid 40s, so that a system could congeal the elements of experimentation already on the books. This took different forms in different countries, but it was progressive overall in a way that would have been impossible a generation earlier -- and was to become impossible two generations later when the class configuration had shifted once more.
The argument beneath the argument in this post is that the cultural shifts we've gone through, like the rise of neoliberal ideology (or family of ideologies) is incomprehensible without recognition that the power and organizational dynamics of the global system evolved to be incompatible with the previous social democratic regime. I'm fairly sure of that. What I'm less sure of is exactly how that evolution took place and what its main constituents are. Exploring that, it seems to me, is what political economy should be about.
What I'm not happy with is a political environment in which ideas are regarded as prime movers in and of themselves, where "capitalism" becomes a particular bundle of values and predilections and neoliberalism just a more extreme version of the same. It puts the terrain of politics in struggles over consciousness (and therefore the microregulation of individual thought and behavior) rather than over the power to change the rules we live by. Not that consciousness doesn't matter, of course, but if the most powerful determinant of it is how we live and what constraints we have to adapt to, evangelizing people is not the best way to alter that either.
> No doubt the rules and incentives that direct economic life
> are the product of choice, and therefore consciousness
Um, mo. Much choice is to a considerable extent out of awareness ,so it's just invalid to base an economic theory on presumed consciousness.
“The combined result is a capitalist class with more uniform interests—an interest in a higher profit share of income and greater freedom for capital in every respect. ”
There is something in that hypothesis. One manifestation of this trend was that top manager strata “changed sides” and re-allied with capital owners in their quest for supersized profits. I read about this somewhere, but can’t remember the source.
But a more correct hypothesis might be that financial oligarchy never was content with the New Deal and planned the counterrevolution from the Day 1. In a way, the New Deal and first 20 years of the post-war period represented a historical aberration.
That why financial oligarchy financed (essentially hired) academics like Friedman to create the justification for deregulation, which was first and foremost deregulation of the financial industry. If neoliberalism did not include this its chances to get to the mainstream would be zero. But as it contained these crucial elements, it was promoted as the new ideology, which should replace “old thinking.” While I suspect that Friedman was somewhat senile when writing Capitalism and Freedom, nevertheless it was a real manifest of neoliberalism, kind of late reply to the Communist Manifesto,
In other words, the creation of the fifth column in the academy, especially in economic departments was a part of the plan of the return to power of the financial oligarchy.
The only thing that matters is that Friedman and his Monte Perelin friends neoliberal inclinations correlated with the desires of the financial oligarchy. If his ideas did not correlate well, he would die as a semi-forgotten poor professor like Minsky did, not the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel winner (1976), etc.
Neoliberalism was just a very convenient ideology that helped to justify the coup d’état.
While started under Carter, Clinton presidency was the key for the destruction of the New Deal regulatory framework regarding financial institutions.
And the issue is not only with the personal corruption of Bill Clinton.
With the collapse of the USSR restraints that its existence maintained for almost 70 years disappeared, and that resulted in pretty crazy behavior of the US ruling class, which literally lost its head.
As a side note, Clinton (or more correctly Rubin and Summers) adopted a policy of making Russia a vassal by destroying its economy and well-being of its citizens, which backfired later (Google Harvard mafia for more information).
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