For some on the left, this betokened evidence of relative decline of the MPS from its postwar heyday, or perhaps the participants had been just caught unawares, like most professional economists. Nevertheless, three years on, it now looks as though the neoliberals have come through the crisis unscathed. Far from the economic crisis constituting the invigorating jolt of the 1930s redux for the Neoliberal Thought Collective, early returns seemed instead to have ratified their intransigence, repetitiveness, and lack of imagination. Now it confirms that they were right to stick to their guns, because, contrary to every expectation, nothing much has been changed by the crisis. But the neoliberals have not won by default—that would be a sorry interpretation of events. Neoliberals don’t let a serious crisis go to waste. Instead, the thought collective subsequently made a number of moves that cemented their triumph. This book aims to document the strategies, and survey their successes. Many of these activities involved the economics profession.
Ranging from the White Mountains to Mont Pèlerin, economists have proven exceedingly shopworn and hackneyed in their responses to the crisis. This opinion has congealed into conventional wisdom. However, this coagulation has had an asymmetrical effect upon the two ends of the political spectrum. Monotonous repetition seems to have fortified the right admirably well in weathering the crisis, whereas by contrast, it has delegitimated the left to an even greater degree than its rather parlous status during the decade of the Great Bubble. Beyond the tendering of excuses, there hovers the open question of to what extent the unexpected resurgence of the right after the crisis has grown out of the stock of neoliberal cultural infrastructure built up over the period from 1980 till 2008, and conversely, to what extent the left has been the author of its own rout. This phenomenon, I will suggest, needs to be examined much more closely.
Nothing substantial has been altered in the infrastructure of the global financial system from its state before the crisis.12 Government “reforms” have proven superficial at best in both Europe and the United States. Further post-2008 evidence of debilities, such as the “flash crash” of May 2010, the epic failure of the BATS IPO in March 2012, and the Knight Capital meltdown in August 2012 passed without serious concerted response, even though they suggest that market malfunctions run deeper than the conventional fixation over mortgage securitization and banking fraud. The coincidence of employment stagnation and persistent inflation has resurfaced for the first time in three decades, although the responsible agencies persist in obscuring the evidence. Bubbles have returned with astounding rapidity in commodities speculation (especially in oil) and in initial public offerings (such as LinkedIn and Fusion-io). The predominant focus upon government austerity programs as the central response to the crisis demonstrates that public discourse has degenerated to an analytical level that one would have recognized in the early 1930s. The MPS apparently has not suffered the ignominy of dramatic falsification of its cherished economic ideas; rather, it has been its opponents situated on the “level-headed left” that have collapsed instead. Given the palpable absence of innovative neoliberal analyses, one is hard-pressed not to suspect that one major source of weakness inheres in what passes for interventionist economic doctrine among the professional economic orthodoxy. But perhaps the debility runs even deeper than that.
Where There’s Smoke, There’s Toast
There subsists a surfeit of books and articles dedicated to covering the crisis. Many people who rushed to read them in 2009–10 have ended up feeling less informed than before they started. Furthermore, as if that weren’t bad enough, no one volunteers to relive a nightmare; what they want is to be rousted back to the comforts of consciousness. The latter-day appeal of these crisis books seems to have become limited to those who harbor a penchant for crunch porn. By 2012, it seems most people had begun to tune out most serious discussions, and flee the tsunami of l’esprit de l’escalier.
There was a short interlude when editorial cartoonists and TV comedians tried to turn the whole thing into a joke, portraying how buffoon bankers bemoaned that the restive public just could not understand that they were the only ones who could clean up the godawful mess they had made, and proved petulant and unrepentant when Uncle Sam unloaded truckloads of money to pay them to do just that. As usual, reality outpaced satire when the former CEO of AIG, Hank Greenberg, brought suit against the U.S. government for not bailing out AIG at a sufficiently munificent rate.13
Bitter comic mordancy can be ripping fun; but a nagging voice whispers: isn’t it just too easy to make fun of the Invisible Hand? Isn’t there something lazy about Stephen Colbert and Jon Stewart? Is the right response to the nightmare of crisis fatigue to laugh it off? What if the people who helped bring on the crisis were quite literally laughing all the way to the bank as the financial system approached the precipice? Gales of merriment apparently rocked the meetings of the Federal Reserve Open Market Committee, as revealed by a tabulation of all the recorded instances of stipulated “[laughter]” in meetings transcripts from 2001 to 2006, reproduced in Figure 1.1.14
Figure 1.1: Hilarity at the Federal Reserve
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Source: Federal Reserve FOMC Transcripts, Graph created by Daily Stag Hunt
Sometimes the best response to crisis fatigue is not an injunction to recover your flagging sense of humor, or to aspire to the status of he who laughs last. Levity might not be a universal nostrum.
The filmmaker Adam Curtis has written in disgust, “Despite the disasters we are [still] trapped in the economists’ world.”15 Yet it will become necessary for us to differentiate the world of the economists and the world of the neoliberals. This conflation is an affliction of many on the left. A major sticking point here is that neoliberals themselves generally do not believe in the comic-book version of laissez-faire sometimes promoted by the economists. They may profess it to the masses; they may even propound it in Economics 101; but it does not characterize their sophisticated internal discussions, and is belied by their political activities.
Moreover, advocacy of economic inequality can lead to parallel advocacy of epistemic inequality: this is something we will probe in depth in chapter 2. Readers of Foucault and his followers are familiar with the idea that neoliberalism involves a reconstruction of the ontology of what it means to be a person in modern society; where some Foucauldians have fallen down, I propose, is that they have neglected to plumb the symmetrical ontological transformation of what it means for a “market” to even exist.
Maureen Tkacik caught a glimpse of what is disturbing about the plenitude of Monday-morning quarterbacking:
What was easy to convey was that something about the past ten years had been unsustainable. But the truth—that an entire ideology had been unsustainable—is one that we have not yet grasped. And that is why so many journalists, economists, intellectuals and financiers now scramble to churn out books that for the most part read like the memoirs of people trying to make themselves feel less stupid. The current financial system was constructed to make us all feel stupid, and in the process of building it the architects allowed themselves to become stupid as well.16
The crisis has not only wrought the economic insult mutely suffered by so many; it has also inflicted a breakdown in confidence that we can adequately comprehend the system within which we are now entrammeled. It has been de rigueur to denounce the antics of groups like the Tea Party, Golden Dawn, the True Finns, and the Front National; but can the left really claim it has been all that more sober, thoughtful, and incisive since 2007? The problem I grope toward in this volume is: How can people dismayed at the unexpected fortification of the Neoliberal Ascendancy feel less stupid? What would a useful intellectual history of the crisis and its aftermath look like?
Everyone seems to champion their own personal favorite candidate for Nostradamus of the Crisis—and I will deal with this whole vexed issue of “prediction” in chapter 5—but here I want to consider those on the nominal left who long ago discarded th
e Marxist eschatology of the Collapse of Capitalism and the Transition to Socialism, only now to retreat to a position of unabashed professions of ignorance. To pick on one journalist at random (I will deal with the economists later), I here point at Ezra Klein:
“Inside Job” is perhaps strongest in detailing the conflicts of interest that various people had when it came to the financial sector, but the reason those ties were “conflicts” was that they also had substantial reasons—fame, fortune, acclaim, job security, etc.—to get it right.
And ultimately, that’s what makes the financial crisis so scary. The complexity of the system far exceeded the capacity of the participants, experts and watchdogs. Even after the crisis happened, it was devilishly hard to understand what was going on. Some people managed to connect the right dots, in the right ways and at the right times, but not so many, and not through such reproducible methods, that it’s clear how we can make their success the norm. But it is clear that our key systems are going to continue growing more complex, and we’re not getting any smarter.17
The fact that some representatives of the “level-headed left” have felt compelled to attack the popular documentary Inside Job is itself a token of just how dire things have gotten in the interim; even more telling is the way in which fundamental neoliberal precepts concerning epistemology and the sociology of knowledge are baldly taken as presuppositions. After the crisis, professional explainers from all over the map were throwing up their hands and pleading that the economy was just too complex to understand. Better to treat the Great Recession like an Act of God, and simply move on. This is a cultural debility that predated the crisis but has worked wonders in immobilizing responses to the debacle. As described in chapters 2 and 3, and anatomized in chapter 6, the neoliberals have developed a sophisticated position with regard to knowledge and ignorance; getting a grip on how they manage to deploy ignorance as a political tool will go some distance in dispelling the onus of having been transparently duped. It may also suggest that the time has come for the left to reinvent its own plausible sociology of knowledge.
The first step toward a history and sociology of knowledge about the crisis is to acknowledge that the intellectual response has occurred on a range of different levels, with counters situated at each level sometimes diverging in content and timescale, but eventually achieving rendezvous and resonating in such a manner as to stymie any political responses not controlled by the banks and financial sector. One must be nimble to manage these variant levels. There is the level of the culture at large, where entrenched neoliberal images of human flourishing had to confront the palpable onset of collapse of a whole way of life. There is the level of public elite wisdom, momentarily blindsided, in tandem with the Mont Pèlerin Society, which found itself enjoined to improvise new understandings of the outpouring of academic chatter concerning the world turned upside down. There is (I will insist) a general Neoliberal Playbook as to how to strategically respond to really big crises. And then there was the economics profession. While not the only priesthood brandishing the key to something they diffidently called “the economy,” it turned out that academic economists have played a critical role in the aftermath to the crisis, in a manner I believe has been poorly appreciated by both insiders and the general public. The neoliberal resurgence after the crisis has been heavily reliant upon the interplay of contemporary orthodox economists with the other levels of cultural response and elite generalist knowledge, even though no one tradition could be reduced to any other. Neoclassical economics was not intrinsically neoliberal over its entire one-and-a-half-century history; but it sure looks like they are working in tandem now. That is why this volume, in chapters 4 and 5, devotes a fair proportion of attention to what economists have said and done after 2007.
When considering the relationship of formal economic knowledge to social movements, it has become commonplace for pundits to quote the dictum of John Maynard Keynes in the General Theory: “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”18 However stylish was Keynes’s prose, the rudimentary sociology of knowledge propounded therein has turned out badly flawed. Far from ectoplasmic missives from the late lamented, a simulacrum of a genteel Edwardian séance, the injection of economic ideas into quotidian politics has been conducted in ways both more concrete and yet more convoluted than is suggested by this rather tendentious bit of economists’ self-flattery.
Economic doctrines rise to dominance because they have been built up from compelling intellectual trends located elsewhere in the culture, and often, in other sciences; and, in turn, depend upon promoters and funders to impress their importance upon other economists, and thenceforward the larger world. Ideas may be retailed, but they are not simply marketed, whatever the neoliberals insist otherwise. As with history, men make ideas, but not as straightforwardly as they please. Ideas have a nasty habit of transubstantiating as they wend their way throughout the space of discourse; sometimes proponents do greater harm to their integrity than do their opponents. Other times, people seem congenitally incapable of grasping what has been proffered them; and creative misunderstanding drives thought in well-worn grooves. In a riot of Dubious Signifiers, the Big Lie is king; but that does not preclude the fact that the juddering call and response strewn around it can be regularly bent to political ends. Furthermore, whenever basic notions are treated as colorless and transparent, the more they can serve as political ramparts to channel history in only one direction. When doctrines persist against all odds, say, in a worldwide economic crisis; when knowledge and power converge in stasis, then surely there is something that demands explication.
Do Zombies Dream of Eternal Rest?
In the throes of the red-misted nightmare, it looks as if the crisis, otherwise so virulent and corrosive, didn’t manage to kill even one spurious economic notion. This is not exactly news. John Quiggin has entertainingly dubbed the phenomenon Zombie Economics, and deserves kudos for stressing this point. Incongruously, Friedrich Hayek’s Road to Serfdom has returned to best-seller lists after a long hiatus. Even Ayn Rand has apparently enjoyed a new lease on (undead) life. One can readily agree with Colin Crouch: “What remains of Neoliberalism after the financial crisis? The answer must be ‘virtually everything.’”19 Similarly, a glut of crisis books has been pouring from every possible digital delivery system of publishers. They fall from the presses, not stillborn, but clone-dead. The cynic might say: Leave it to academics to turn a pervasive human disaster into another unsustainable growth industry. What could be the purpose of yet another jokey variation on the metaphor of the “Invisible Hand” on the cover of some text that purports to convince us that a very few select events or principles (usually a prime number) constitute the Rosetta Stone for decoding recent events? The distance from self-help books (Six Things Momma Taught Me to Succeed When Good People Do Bad Things) to crisis prescription books (Dunk That Invisible Hand in Talcum Powder and Snap on the Handcuffs) and get-rich-quick books (Who’s Afraid of the Big Black Swan?) narrows precipitously in the modern marketplace of ideas.
Rest assured this will not be another of those books “about the crisis,” in the sense of purveying yet one more play-by-play account of who did what to whom. Indeed, some of the best-detailed accounts of the economic history of the contraction of 2007–9 are freely available online; the problem seems to be, rather, that no one cares enough anymore to expend the effort to read them.20 There is even a superb film that lays out the basic sequence of breakdown in an admirably clear way for a general audience: I refer to the movie Inside Job (2011). It even comes with an equally insightful follow-up book (Charles Ferguson’s Predator Nation). In an ideal world, as a service to tyros, there would be a YouTube link to it right here in the text. Of course, the film is weak on intercalated structural causes, elides nonfinancial consideration
s, and tends to fall down on international developments; and it has that bad American habit of needing to finger the stick-figure “bad guys.” Of course, such son et lumière pageants are no replacement for detailed indispensable sources of financial defalcations, quantifornication, legal sabotage, and twisted crisis particulars. But there is something else: while the film stands as an unprecedented indictment of the economics profession, it rather incongruously gives ideas a wide berth. It is skeptical of economists, but discordantly, takes no position on economics. This book therefore seeks to supplement it along a crucial dimension: it explores the economic crisis as a social disaster, but simultaneously a tumult of intellectual disarray. If the references hadn’t been so egregiously obscure, I toyed with the prospect of calling the book The Goad to Neoliberal Serfdom. Avoiding that gaffe, it may nevertheless transpire that we can recognize our predicament as a conceptual debacle, and perhaps then, in retrospect, the crisis will not go down in history as such a pathetic waste.
Beyond that, I will endeavor to make use of the crisis as a pretext and a probe into the ways in which neoliberal ideas have come to thwart and paralyze their opponents on the left. The ongoing crisis is a political watershed; keeping that conviction front and center turns out to be much more difficult than one might initially think. And by “the left,” I do not mean those benighted few, those Revenants of the Economic Rapture, who were certain that only complete and utter breakdown of capitalism would pave the way for a transition to the political ascendancy of the proletariat. History has already been unkind to them. I aspire to a different, more general audience. The Great Contraction has completely wrong-footed people who used to be called “socialists” or “progressives,” confounding every expectation that they had finally achieved some small measure of vindication for their understanding of the economy. It ushered in a mongrel regime leaving them baffled and bewildered, such that one frequently heard them wonder out loud whether there was any left left.21 It is those people who have taken it as a fundamental premise that current market structures can and should be subordinate to political projects for collective human improvement whom I seek to address here. Such like-minded compatriots are legion, but I fear their understanding of markets and societies has fallen into dire intellectual desuetude.
Never Let a Serious Crisis Go to Waste Page 2
