DRAFT: How Can We Deal with Zombie Neoliberal Ideas?
Does it require a wooden stake, or fire, to make it so they do not keep coming back again?...
Does it require a wooden stake, or fire, to make it so they do not keep coming back again?…
My bookshelves—at this point, mostly virtual—have been filling up with books whose titles contain phrases like: “Fall of the Neoliberal Order”, ’Ruins of Neoliberalism“, ”What Was Neoliberalism?“, ”Then World After Neoliberalism“, ”The Downfall of Neoliberalism", and so forth.
And yet policies I cannot see as anything other than “neoliberal” continue to surround me. And so do thoughts I cannot see as anything other than “neoliberal”. They continue to shamble forward like a giant zombie hoard, bombarding me from all sides. This week’s entry comes from the London Economist:
Economist: Joe Biden’s global vision is too timid and pessimistic: [Biden’s] hyperactive industrial policy… underestimates America’s strengths and misunderstands how it acquired them…. The main source of America’s strength is creative destruction and open markets in a rules-based global economy…. Biden[’s] state-led, insular economic vision may ultimately erode living standards and American clout…. Europe fears a subsidy race…. The decay of global rules is accelerating the embrace of a transactional approach to foreign policy…
The negative valence attached to “subsidy race” and the positive valence attached to “open markets” in this paragraph are claims that there are no effective Pigovian adjustments of market prices to bring them into accord with societal values and to compensate for positive and negative production spillovers.
“Rules-based global economy” is code for a claim that such adjustments are illegitimate without the unanimous consent o world governments—which can rarely be built up, and when it is takes a decade.
In this context, “creative destruction” is a sotto voce denunciation of hopes by the Democratic Party coalition to reverse the relative decline of the American interior.
And the comparison of the Biden administration to a hyperactive child is not an argument for different policies, but merely a sneer.
I look at this zombie neoliberalism from the Economist, and I think: It has now been 180 years since 1843. Back in 1843 Friedrich Engels wrote that the economists were full of it:
According to the economists, the production costs of a commodity consist of… rent for the… land… to produce the raw material… capital with its profit, and the wages for the labour required…. [But] themental element of invention, of thought, alongside the physical element of sheer labour[?] What has the economist to do with inventiveness? Have not all inventions fallen into his lap without any effort on his part? Has one of them cost him anything? Why then should he bother about them?…. Science is no concern of his. What does it matter to him that he has received its gifts through Berthollet, Davy, Liebig, Watt, Cartwright, etc.?… In a rational order which has gone beyond the division of interests as it is found with the economist, the mental element certainly belongs among the elements of production and will find its place, too, in economics…. A single achievement of science like James Watt’s steam-engine has brought in more for the world in the first fifty years of its existence than the world has spent on the promotion of science since the beginning of time…
Yes, you need the market system and the profit motive as pieces of the societal-calculation mechanism to figure out what to produce, how to produce it most efficiently, and to incentive people to actually carry out the economic plan that the market comes up with, all given the current state of science and technology.
But the mercenary institution of the market cannot push forward science and technology very well, if at all. And if you leave the market alone, you will find that market prices are rarely fully in accord with societal values. Thus we need, in a phrase, industrial policy. This has been obvious for all of the past 180 years.
And yet when we look at the Economist, what do we see?
Anything in there about how the raw prices generated by the market are highly unlikely to be in accord with societal values—especially in this age of global warming, as of the northern hemisphere, the climate marches north at 4 miles a year on average, with a potential to generate extraordinary disruptions for a humanity whose infrastructure and settlement patterns are tuned to what the climate was 50 years ago?
Anything in there about how government has a proper job of not just compensating for the many local Pigovian externalities, but attempting to deal with the second greatest externality of them all—the deviation of the distribution of wealth from anything that anyone would call fair, let alone just?
Anything in there about how governments are the only institutions that can properly fund the fiduciary institution of scientific advance? Anything about how they are the only institutions attempt to deal with the process-technology interface between research and market in which neither scientific prestige nor market profit work well enough as incentivizing mechanisms?
No.
We could probably get the Economist to give some ground if we tried:
If we pressed the Economist, we could probably get it to admit that externalities—local Pigovian, income-distribution, and knowledge—exist, and are substantial.
If we pressed the Economist, it would probably say that the United States lacks the state capacity to carry out an effective industrial policy.
But only some:
If we pressed the Economist, it would probably still firmly claim that in the United States today, at the margin, increases in state action give levers of power to interest groups with weight in politics that greatly outpunches how valuable such groups are in society
If we pressed the Economist, it would probably still firmly claim that Biden’s “hyperactive” industrial policy will succeed in giving such interest groups value-capture power while actually making their contributions to the commonwealth less valuable.
But that is the story we have heard since 1975, when Ronald Reagan ascended the world stage as the leader of a neoliberal movement encapsulated in his laugh line: “The nine most terrifying words in the English Language are: ‘I’m from the government, and I’m here to help’.”
Looking back on the past half century, we have not been well-served by the shibboleth: “the market giveth, the market taketh away: blessed be the name of the market”. That was never a real argument. And the fact that it swept the North Atlantic exactly when the developmental states of the East-Asian Pacific Rim were performing their economic development magery is something future historians will have a hard time understanding.
Brad - As a lay person who is interested in economics I would like to know, "Why is the cost of the fight against inflation always laid at the door of workers?" It seems that raising interest rates causing businesses to retract and lay off workers is the only tool the Fed talks about. People are not just gears in a machine and can't be moved around like inanimate objects. When a person is laid off it can be a life changing experience - one they may never recover from or recover only to be far different due to the experience of a lack of income - loss of status, loss of home, loss of self-respect, etc. Meanwhile upper management never losses a pay check, sometimes stock prices go up because businesses make more money due to paying less workers. The Fed is charged with combating inflation, but also securing full employment. It seems that the second part is second fiddle to the first.
¨If we pressed the Economist, it would probably say that the United States lacks the state capacity to carry out an effective industrial policy. ¨
Other than the military and the pharmaceutical and the medical complexes? And the software industry, and also learning-related complex and AH, ´bail out banks no strings-attached´ thing that an outfit like the economist approves of. (If all in support for the equity & investment industry isn´t an industrial policy I don´t know what is. I could point to the words of Timothy Geithner on that point.)
¨Looking back on the past half century, we have not been well-served by the shibboleth: “the market giveth, the market taketh away: blessed be the name of the market”.¨
Rich people want to believe (and be told) they are rich because God loves them and thus they are entitled to all their money and then some more, maybe even via direct subsidy by the government (which isn´t a ´doomed-to-fail´ industrial policy because REASONS.) Think of it as egomania as an economic precept.
¨In this context, “creative destruction” is a sotto voce denunciation of hopes by the Democratic Party coalition to reverse the relative decline of the American interior.¨
If you think of the anger of the rich during the 60´s (aka the ´Revolt of the Rich') as essentially a drive for status, with money as merely the means to support that status - then that resolves the mystery of the various economic choices. The results don´t matter in economic terms, because the drive is for status. The wealth itself is just a token in the game. Going after unions isn´t about economic efficiency, it´s just social warfare. Austerity isn´t about economic growth it´s about ´more for us and less for you´. It follows that purchasing economists (or actually maybe ´economists´) who will try to push a credo that is an essentially about supporting the glorification the wealthy (or just outright glorifying the wealthy) and who stick to that credo whatever the evidence says is just what you do. (Which I don´t see as functionally a different process from the one that pushed the Protestant religious denominations of the South prior to the Civil War into becoming slaver churches.)
Being four-square in support of the industrial policies of the PRC is just what you do when your ten thousand closet CEO friends see it as a way to make money (and inflict pain of inferior groups at home).
It´s the same thing now as in 2008: we had plenty of test runs of what was done in similar situations in the 1820´s, the 1870´s and the 1930´s, and what worked, but the wealthy wanted X and they got X. CEO types wanted to stick it to unions in 1970´s and forward, so we stuck it to unions, etcetera. The Cold War had been ´too expensive' so we switched to ´let´s make money off of China´ and there you go. Nothing to do with economic policy in any real sense.
At this point it´s just brazen, particularly in the UK.
elm
no kampf but kulturkampf