In practice, neoliberals can’t let others contemplate too long that their peculiar brand of freedom is not the realization of any political, human, or cultural telos, but rather the positing of autonomous self-governed entities, all coming naturally equipped with some version of “rationality” and motives of ineffable self-interest, striving to improve their lot in life by engaging in market exchange.94 It follows from the human-capital concept that education is a consumer good, not a life-transforming experience. Followers of Foucault are often strongest on the elaborate revision required in cultural concepts of human freedom and morality, although this may be attributed to Foucault’s own sympathies for elements of the neoliberal project.95 Curiously enough, the fact that this version of “freedom” may escape all vernacular referent was noted when an argument broke out within the MPS in the 1970s, with Irving Kristol accusing Milton Friedman and Friedrich Hayek of depending upon a version of “self-realization” as the great empty void at the center of their economic doctrines.96 You can’t realize a Kantian essence that is not there.
Whatever else it betokens in the neoliberal pantheon, it is axiomatic that freedom can only be “negative” for neoliberals (in the sense of Isaiah Berlin), for one very important reason. Freedom cannot be extended from the use of knowledge in society to the use of knowledge about society, because self-examination concerning why one passively accepts local and incomplete knowledge leads to contemplation of how market signals create some forms of knowledge and squelch others. Meditation upon our limitations leads to inquiry into how markets work, and metareflection on our place in larger orders, something that neoliberals warn is beyond our ken. Knowledge then assumes global institutional dimensions, and this undermines the key doctrine of the market as transcendental superior information processor. Conveniently, “freedom” does not extend to principled rejection of the neoliberal insurgency. Neoliberals want to insist that resistance to their program is futile, since it inevitably appeals to a spurious (from their perspective) understanding of freedom.
[8] Neoliberals begin with a presumption that capital has a natural right to flow freely across national boundaries. (The free flow of labor enjoys no similar right.97) Since that entails persistent balance-of-payments problems in a nonautarkic world, neoliberals took the lead in inventing all manner of transnational devices for the economic and political discipline of nation-states.98 They began by attempting to reintroduce what they considered to be pure market discipline (flexible exchange rates, dismantling capital controls) during the destruction of the Bretton Woods system, but over the longer term learned to appreciate that suitably staffed international institutions such as the WTO, the World Bank, the IMF, and other units are better situated to impose neoliberal policies upon recalcitrant nation-states. Initially strident demands to abolish global financial (and other) institutions on the part of early neoliberals such as Friedman and some denizens of the Cato Institute were subsequently tempered by others—such as Anne Krueger, Stanley Fischer, and Kenneth Rogoff—and as these neoliberals came to occupy these institutions, they used them primarily to influence staffing and policy decisions, and thus to displace other internationalist agendas. The role of such transnational organizations was recast to exert “lock-in” of prior neoliberal policies, and therefore to restrict the range of political options of national governments. Sometimes they were also used to displace indigenous “crony capitalists” with a more cosmopolitan breed of cronyism. Thus it is correct to observe an organic connection between such phenomena as the Washington Consensus and the spread of neoliberal hegemony, as Dieter Plehwe argues.99 This also helps address the neoliberal conundrum of how to both hem in and at the same time obscure the strong state identified in point 4, above.
The relevance of the rise of the neoliberal globalized financial regime to the crisis is a matter of great concern to the thought collective and to others (such as Ben Bernanke) who seek to offload responsibility for the crash onto someone else. Because there was no obvious watershed linking policy to theory comparable to Bretton Woods, and the post-1980 infrastructure of international finance grew up piecemeal, the relationship between neoliberalism and the growth of shadow and offshore banking is only beginning to be a subject of interest. Evidence, by construction, is often inaccessible. However, the drive to offshore outsource manufacturing in the advanced economies, which was mutually symbiotic with the frustration of capital controls, was clearly a function of neoliberal doctrines concerning the unbounded benefits of freedom of international trade, combined with neoliberal projects to reengineer the corporation as an arbitrary nexus of contractual obligations, rather than as a repository of production expertise. The MPS member Anne Krueger was brought into dialogue with her fellow member Ronald Coase, and the offspring was the flight of capital to countries such as China, India, and the Cayman Islands. The role of China as beneficiary, but simultaneously as part-time repudiator of the neoliberal globalized financial system, is a question that bedevils all concerned.
While freedom of capital flows have not generally been stressed by neoliberals as salient causes of the crisis, they do manage to unite in opposition to capital controls as one reaction to the crisis.
[9] Neoliberals regard inequality of economic resources and political rights not as an unfortunate by-product of capitalism, but a necessary functional characteristic of their ideal market system. Inequality is not only the natural state of market economies from a neoliberal perspective, but it is actually one of its strongest motor forces for progress. Hence the rich are not parasites, but a boon to mankind. People should be encouraged to envy and emulate the rich. Demands for equality are merely the sour grapes of the losers, or if they are more generous, the atavistic holdovers of old images of justice that must be extirpated from the modern mind-set. As Hayek wrote, “The market order does not bring about any close correspondence between subjective merit or individual needs and rewards.”100 Indeed, this lack of correlation between reward and effort is one of the major inciters of (misguided) demands for justice on the part of the hoi polloi, and the failure of democratic systems to embrace the neoliberal state, as discussed in tenet 5, above. “Social justice” is blind, because it remains forever cut off from the Wisdom of the Market. Thus, the vast worldwide trend toward concentration of income and wealth since the 1990s is the playing out of a neoliberal script to produce a more efficient and vibrant capitalism.
Here again we touch upon the recent crisis. This particular neoliberal precept dictates that the widely noted exacerbation of income inequality in the United States since 1980 cannot possibly have played a role in precipitating the crisis in any way.101 Indeed, attempts by the state to offset or ameliorate the trend toward inequality of wealth—especially through attempts to expand home ownership and consumer credit—become themselves, for neoliberals, major root causes of the crisis.102 This then gets translated into the preferred neoliberal story of the crisis, which attributes culpability to the Democrats by lodging blame for the housing bubble via securitization with Fannie Mae and Freddie Mac (see chapter 5).
[10] Corporations can do no wrong, or at least they are not to be blamed if they do. This is one of the stronger areas of divergence from classical liberalism, with its ingrained suspicion of power concentrated in joint stock companies and monopoly stretching from Adam Smith to Henry Simons. The MPS set out in the 1950s entertaining suspicions of corporate power, with the ordoliberals especially concerned with the promotion of strong antitrust capacity on the part of the state. But starting with the Chicago law and economics movement, and then progressively spreading to treatments of entrepreneurs and the “markets for innovation,” neoliberals began to argue consistently that not only was monopoly not harmful to the operation of the market, but an epiphenomenon attributable to the misguided activities of the state and powerful interest groups.103 The twentieth-century socialist contention that capitalism bore within itself the seeds of its own arteriosclerosis (if not self-destruction) was baldly denied. By the 1970s
, antitrust policies were generally repudiated in the United States, as neoliberals took the curious anomaly in American case law treating corporations as legal individuals and tended to inflate it into a philosophical axiom.104 Indeed, if anything negative was ever said about the large corporation, it was that separation of ownership from control might conceivably pose a problem, but this was easily rectified by giving CEOs appropriate “incentives” (massive stock options, golden handshakes, latitude beyond any oversight) and instituting marketlike evaluation systems within the corporate bureaucracy, rectifying “agency problems.”105 Thus the modern “reengineering of the corporation” (reduced vertical integration, outsourcing supply chains, outrageous recompense for top officers) is itself an artifact of the neoliberal reconceptualization of the corporation.
This literature had a bearing on the crisis, since it was used to argue against aspersions cast that many financial firms were “Too Big to Bail,” and that the upper echelons in those firms were garnishing dangerously high compensation packages. Nothing succeeds like market success, and any recourse to countervailing power must be squelched.
[11] The market (suitably reengineered and promoted) can always provide solutions to problems seemingly caused by the market in the first place. This is the ultimate destination of the constructivist orientation within neoliberalism. Any problem, economic or otherwise, has a market solution, given sufficient ingenuity: pollution is abated by the trading of “emissions permits”; inadequate public education is rectified by “vouchers”; auctions can adequately structure exclusionary communication channels;106 poverty-stricken sick people lacking access to health care can be incentivized to serve as guinea pigs for privatized clinical drug trials; poverty in underdeveloped nations can be ameliorated by “microloans”; terrorism by disgruntled disenfranchised foreigners can be offset by a “futures market in terrorist acts.”107 Suitably engineered boutique markets were touted as a superior method to solve all sorts of problems previously thought to be better organized by governments: everything from scheduling space shots to regulating the flow through airports and national parks. Economists made money by selling their nominal expertise in setting up these new markets, rarely admitting up front that they were simply acting as middlemen introducing intermediate steps toward future full privatization of the entity in question. Economists also proposed to fix the crisis by instituting new markets, as we shall discover in chapter 5.
The fascinating aspect of all this is how this precept was deployed in what seemed its most unpropitious circumstance, the erstwhile general failure of financial markets in the global economic crisis. One perspective on the issue is to recall that, in the popular Hayekian account, the marketplace is deemed to be a superior information processor, so therefore all human knowledge can be used to its fullest only if it is comprehensively owned and priced. This was deployed in a myriad of ways to suggest what might seem a string of strident non sequiturs: for instance, some neoliberals actually maintained that the solution to perceived problems in derivatives and securitization was redoubled “innovation” in derivatives and securitization, and not their curtailment.108 Another variant on the Hayekian credo was to insist that the best people to clean up the crisis were the same bankers and financiers who created it in the first place, since they clearly embodied the best understanding of the shape of the crisis. The revolving door between the U.S. Treasury and Goldman Sachs was evidence that the market system worked, and not of ingrained corruption and conflicts of interest.
[12] The neoliberal program ends up vastly expanding incarceration and the carceral sphere in the name of getting the government off our backs. Members of the Mont Pèlerin Society were fond of Benjamin Constant’s adage: “The government, beyond its proper sphere ought not to have any power; within its sphere, it cannot have enough of it.” Although this might seem specious from the perspective of a libertarian, it is central to understanding the fact that neoliberal policies lead to unchecked expansion of the penal sector, as has happened in the United States. As Bernard Harcourt has explained in detail, however much tenet 11 might seem to suggest that crime be treated as just another market process, the NTC has moved from the treatment of crime as exogenously defined within a society by its historical evolution, to a definition of crime as inefficient attempts to circumvent the market. The implication is that intensified state power in the police sphere (and a huge expansion of prisoners incarcerated) is fully complementary with the neoliberal conception of freedom. In the opinion of the MPS member Richard Posner, “The function of criminal sanction in a capitalist market economy, then, is to prevent individuals from bypassing the efficient market.”109
This precept has some bearing on the unwillingness to pursue criminal prosecution against many of the major players in the global crisis. In this neoliberal perspective, there is also a natural stratification in what classes of law are applicable to different scofflaws: “the criminal law is designed primarily for the nonaffluent; the affluent are kept in line, for the most part, by tort law.”110 In other words, economic competition imposes natural order on the rich, because they have so much to lose. The poor need to be kept in line by a strong state, because they have so little to lose. Hence, the spectacle of (as yet) no major financial figure outside of Bernie Madoff and Raj Rajnarathan going to jail because of the crisis, while thousands of families behind on their mortgages are turfed out into the street by the constabulary, is a direct consequence of this neoliberal precept.
[13] The neoliberals have struggled from the outset to have their political/economic theories do dual service as a moral code. First and foremost, it would appear that the thought collective worshipped at the altar of a deity without restraints: “individual freedom, which it is most appropriate to regard as a moral principle of political action. Like all moral principles, it demands that it be accepted as a value in itself.” However, Hayek in his original address to the first MPS meeting said, “I am convinced that unless the breach between true liberal and religious convictions can be healed, there is no hope for a revival of liberal forces.” The very first MPS meeting reflected that wish, and held a session called “Liberalism and Christianity”; but it revealed only the antagonisms that percolated just below the surface. As a consequence, the neoliberals were often tone-deaf when it came to the transcendental, conflating it with their epistemic doctrines concerning human frailty: “we must preserve that indispensable matrix of the uncontrolled and non-rational which is the only environment wherein reason can grow and operate effectively.”111
The more sophisticated neoliberals understood this was rather thin gruel for many of their allies on the right; so from time to time, they sought to link neoliberalism to a specific religion, although they only ventured to do this sotto voce in their in-house publications:
All that we can say is that the values we hold are the product of freedom, that in particular the Christian values had to assert themselves through men who successfully resisted coercion by government, and that it is to the desire to be able to follow one’s own moral convictions that we owe the modern safeguards of individual freedom. Perhaps we can add to this that only societies which hold moral values essentially similar to our own have survived as free societies, while in others freedom has perished.112
Other MPS figures such as Buchanan entertained the notion that a certain specific type of moral order would support a neoliberal state, or that morals could reduce the costs of rent-seeking losers throwing monkey wrenches into government.113 It took a lot of effort, and a fair bit of pussyfooting around the danger of alienating the partisans of one denomination (often in some other part of the world) by coquetting with different denominations or versions of religion, but the project of intellectual accommodation with the religious right and the theocons within the neoliberal framework has been an ongoing project at the MPS, although one fraught with contradictions that have dogged the liberal project since the Enlightenment.114
These thirteen more or less echt-commandments
gathered here characterize the rough shape of the program eventually arrived at by the Neoliberal Thought Collective. In this summary, I have sought to highlight the stark divergence from both classical liberalism and libertarianism; further, the individual tenets will also serve as touchstones for our account of the intellectual history of the global economic crisis in subsequent chapters. Yet, having strained to discern unity in what sometimes appears a free-for-all, we should now confront the contrary proposition—that neoliberalism, in some fundamental conceptual sense, does not hang together in actual practice.
Neoliberalism, the Crisis, and the Double Truth Doctrine
All political movements of whatever stripe frequently find themselves in the position of needing to deny something they have affirmed in the past. If politics were the realm of consistency, and consistency the bugaboo of small minds, then zealots would indeed inherit the earth. Acknowledging that, there seems to be nonetheless something a little unusual going on in the Neoliberal Thought Collective, and I think it can be understood, if not entirely justified, by recourse to the doctrine of “double truth.”
Just to be clear about the nature of what will be asserted, I am not referring here to the Platonic doctrine of the “noble lie,” nor the Latin Averroist precepts concerning the tensions between philosophic reason and faith. Neither is it the “doublethink” of Orewellian provenance, which has more to do with the state twisting the meaning of words. It may have some relationship to the thought of Leo Strauss—the hermeneutic awareness that “all philosophers . . . must take into account the political situation of philosophy, that is, what can be said and what must be kept under wraps,” as the Cambridge Companion to Leo Strauss puts it—but exploring the possible Chicago connections between his writings and the neoliberals would be too much of a distraction, given all the other topics we must cover.115 What I shall refer to here is the proposition that an intellectual thought collective might actually concede that, as a corollary of its developed understanding of politics, it would be necessary to maintain an exoteric version of its doctrine for the masses—because that would be safer for the world and more beneficial for ordinary society—but simultaneously hold fast to an esoteric doctrine for a small closed elite, envisioned as the keepers of the flame of the collective’s wisdom. Furthermore, whereas both the exoteric and esoteric versions would deal with many similar themes and issues, the exoteric version might appear on its face to contradict the esoteric version in various particulars. It will be necessary to explore the possibility that these seeming contradictions are not cynical in the modality one often encounters in career politicians, but rather grow organically out of the structural positions that motivate the thought collective.
Never Let a Serious Crisis Go to Waste Page 9
