Never Let a Serious Crisis Go to Waste

by Philip Mirowski

  While we shall indict orthodox neoclassical economics from time to time as having a less-than-sure grasp on phenomena it seeks to portray, it must be said that neoliberal orthodox economists have closely shadowed the phenomenal fragmentation of the everyday self in their theoretical lucubrations. Starting with the MPS member Gary Becker’s Human Capital (1964), these economists have decentered the supposedly rock-solid Homo economicus as avidly as the Internet has decentered the coherence of Homo sapiens. Since 1870, there had been a long history of identification of the integrity of the individual with the invariance of the so-called utility function (with many detours into various notions of consilience of this formalism with neoclassical economists’ imperfect understanding of various psychological theories, all of which we can thankfully avoid here); but with the advent of Becker’s human-capital theory, it became permissible to blur the boundaries of the “individual” by incorporating all manner of variables representing other “people” into the utility function, and more pertinent, to begin manipulating variables representing “embodied” personal attributes also within this rapidly ballooning utility function. Once the original integrity of the utility function was breached, then effectively anything became fair game as occasion for legitimate agent self-alteration; and voilà, the agent in formal economics submitted to fragmentation as intense as that experienced by the denizen of Late Neoliberalism. Economics ceased to be concerned with conventional economic questions, and claimed purview over any and all attempts of the agent at self-fashioning: drug addiction, marriage, divorce, suicide, gender bending, religion, theology, abortion, changes in preferences, and eventually, the names one chooses to designate oneself.45

  Curiously enough, just as the fragmented personality in everyday neoliberalism experiences some difficulty in specifying who or what remains at the helm of agency, elaborations upon and extrapolations of the Incredibly Promiscuous Utility Function eventually led formal economic theory to unrestrained Bedlam.46 Homo economicus was not so much “atomistic” as atomized in the mathematics. The conceptual problem with human capital was that the purely plastic self could hardly be asserted to exhibit self-identity. To solve some technical problems, economists began to write down models with “multiple selves” collated into a single mega-utility function. This, in turn, led to Sissyphyssian task of shoring up whatever was left of the concepts of “agency” and “preference.” For some, identity came from imposition of further variables of “self-confidence” and self-reputation read through the eyes of others—neoliberal prescriptions par excellence (see Benabou and Tirole). Another economist we shall encounter later in our survey of crisis theories, George Akerlof, purported to concoct a neoclassical theory of identity by stuffing the utility function with even more arbitrary variables. This version of the “individual” seeks to reduce anxiety-creating cognitive dissonance induced by the behavior of others whose actions don’t conform to the social categories assigned to them—it smacked of nothing more than teen angst blown up to grand levels of utilitarian generalization, an infantilization of Homo economicus. When agents are endlessly desperate to refashion themselves into some imaginary entity they anticipate that others want them to be, the supposed consumer sovereignty the market so assiduously pampers has begun to deliquesce. It is a mug’s game to trumpet the virtues of a market that gives people what they want, if people are portrayed as desperate to transform themselves into the type of person who wants what the market provides.47 There were of course many other versions within the economic orthodoxy of the fragmentation of Homo economicus.48 One might have expected that this constituted the revenge of social psychology on the profession, were it not that neoclassical economics had been so tone-deaf on the subject for so long. But economists were bereft of the capacity to entertain the notion that their own local obsessions were an epiphenomenon of a larger social transformation.

  The ceremonial “economics of identity” was the investiture of the central ethos of everyday neoliberalism into the heart of the neoclassical agent.

  B) There Is No Class but the Middle. There Is No Life Without Risk.

  Another critical aspect of defining selfhood is the suitable availability of a repertoire of categories to limn the components of the self. Bending to the persistent reductionist trend of Western thought, the social scientist might seek to resolve the whole individual into its constitutive parts, or at minimum, into some set of classifications that provide the boundaries between one self and the next. Certain categories might be transient, and others more permanent; but nevertheless, the existence of such a menu of components would provide an ontology of selfhood, a polestar to guide the way through attributions of normality, pathology, and onset of Alzheimer’s. In some societies the categories might assume the form of castes or “blood”; in others, they might be structured by the notion of an occupation as apprenticeship; in yet others, they might be deployed as psychological theories of “types.”

  A striking characteristic of the neoliberal approach to selfhood is the intransigent renunciation of most forms of classification of people, and abjuration of the resolution of the self into rigid components. One (older, classical liberal) version of this renunciation is the postulate that all humans are essentially alike, or should be treated as such, displaying equality in fundamental constitution and capacities, but this most emphatically is not the strategy adopted by the NTC. “Equality” of any sort releases a bugbear for the neoliberals, the wormhole to the slippery chute to serfdom. Instead, the neoliberal self is regarded as so exquisitely supple, mobile, and plastic that imposition of any categorization is deemed imperious and elitist. Every dedicated follower of fashion has been enjoined to plead, “But you don’t know me.” To pigeonhole that self with what are deemed to be premature categories is denounced as a basic violation of “freedom.” However awkward the image, you are most yourself when you are putty in your own hands. Since only the market can bestow upon people what they reputedly want, all fixed skills or virtues or psychological orientations that can guarantee predestination and salvation are peremptorily banished.

  The neoliberal contempt for human categories has become well ensconced in everyday life in the last three decades. Whatever their predicament, whatever their station in life, everyone is encouraged to think they, too, can be Metis, unperturbed (or ignorant) that their fate is to be consumed by Zeus. Time and again, the supposed success of some teen idol or hedge fund manager or sports star is said to illustrate the tired platitude that “you can be anything that you want to be, if you want it bad enough.” This presumes a self that can incorporate any attribute, take up any challenge, transcend any limitation, and embody any quality. There are few neoliberal tropes more cynical, or incantations more convenient. This catechism of permanent metamorphosis has spawned a number of cultural devices that structure everyday neoliberalism. Here we will merely touch upon two: the modern disappearance of economic class as a serious taxonomy, and the hollowing out of the notion of “risk” when elevated to a general imperative of agency.

  One major cultural development over the last three decades is that the only permissible mention of “class” in the economic sense has been the utterly superfluous habit of treating oneself and others as solidly “middle class.” In the late 1990s, in Britain, New Labour proclaimed “We’re all middle class now” on the grounds of the evaporation of industrial jobs. In this, they were parroting their putative Tory opponent: “Class is a Communist concept,” Margaret Thatcher told Newsweek in 1992. “It groups people together and sets them against each other.” In America, every sociological generalization in the mainstream press pontificates on “the middle class,” conveying the sense that any other class is negligible in significance. The rich and the poor have become so evanescent as mental categories that they are rarely ever accorded the right to occupy space in the real world. The rich are continually quoted as not feeling “really” rich, while the poor are cued to deny that they are poor, to avoid opprobrium. If they confess to poverty,
they are examined for personal failings, rather than class membership. This is patent evidence of a creeping linguistic neoliberalism. The suppression of the obvious point that every “middle” needs two substantial extremes to be legitimate is an artifact of the neoliberal doctrine that there is no such thing as social class, and most decidedly, “economic” classes (working class, upper class, proletariat) do not exist. The only class in which one can safely profess membership is the “middle class,” or the class of no class. But this all-inclusive category is nervously duplicitous, because it really consists of the denial of all personal categories. No one should be definitively tagged with class membership, since every individual is supposedly poised on the brink of becoming someone else.49

  The abolition of class has been a font of political dividend for the neoliberals, since it has frustrated all attempts to mobilize politics on a class basis. Indeed, one might argue that the defeat and decimation of unions has been intimately involved with the dissipation of class identities. As Owen Jones put it: “A blue-uniformed male factory worker with a union card in his pocket might have been an appropriate symbol for the working class of the 1950s. A low-paid, part-time, female shelf-stacker would certainly not be unrepresentative of the same class today.”50 The extinction of political entities like unions, ethnic clubs, and party affiliations leaves the vast bulk of the working population bereft of communal identities. The mainstream media may sneer at “chavs” or “trailer trash,” but never as a functional economic category; rather they serve as a narrative placeholder for people who refuse to remake themselves into someone the market would validate. In this manner, revolts such as the August 2011 English riots were preemptively leached of their political significance, in favor of interpretation as the inchoate tantrums of the undisciplined self. As David Cameron bombinated in Parliament in the 2011 riots’ aftermath, “This is not about poverty, it is all about culture.” Serried ranks of experts chimed in with the sentiment. Consequently, poverty is first personalized, and then criminalized in neoliberal everyday life.

  The neoliberal dismissal of effective social categories has had other consequences. For instance, during the 2008–10 crisis, the Obama administration encountered great difficulty in rolling back regressive tax cuts of the previous administration, because it had equally invested in the ludicrous language of “not raising the taxes of the middle class.” They became bogged down in a game of guessing where the upper tax boundary of that elusive middle class might be found: $100,000, $200,000, $250,000, $1 million? This was occurring when the median household income in the United States (2009) was $51,221 and the average per capita annual money income was $27,041; the public discourse was consequently conducted in a pristine fact-free zone.51 Or in another instance, all social insurance schemes that are necessarily based upon membership in economic classes are undermined by the abolition of class as a voluntary category of self-identity. Pension and Social Security schemes can be personalized and then privatized only when the target population has been stripped of all notions of justice as rooted in class solidarity; once the authority begins to recast its provision of an insurance scheme as a “personal investment,” and retreats to justification of such schemes as “getting back what you (alone) put in,” then the neoliberals have won half the battle.

  The denial of legitimacy of personal categories has also had profound implications for the construction of the keyword “risk” in neoliberalism. The connotations of the term “risk” are treacherous in the modern world. Should one approach risk as an actuarial concept, then the ability to sort individuals into stable categories and identities is the indispensable prerequisite for the application of probability algorithms to what would otherwise be merely the idiosyncratic and incommensurate life trajectories of historical personalities. Classical approaches to risk parlayed stable categories into prudential outcomes. Yet, because of the first commandment of the plasticity of the individual, this is increasingly not how everyday neoliberalism understands risk.

  It is commonplace to observe that “risk” is a state of being that the Neoliberal Thought Collective revels in, second only to their prime directive of “freedom.” Embracing risk and taking chances is the putative mark of the entrepreneur, the only solid evidence that the agent has been actively engaged in pursuit of self-advantage, as opposed to passively accepting the lot that has been bequeathed him by others. Risk is the archetypal second stage of Aristotelian narratives of the self, leading to the catharsis of validation (or tragedy). But here is the point where “risk” suffers vernacular slippage, since it is not portrayed as actuarial risk, reducible to probabilities and expected values, but rather bald impetuous abandon in the face of an intrinsically unknowable future. Neoliberals, recall, insist upon the thoroughgoing ignorance of everyone in the face of the all-knowing market. Therefore, for them, accepting risk is not the fine balancing of probabilities, the planning for foreseen exigencies and the exercise of prudential restraint; rather, it is wanton ecstasy: the utter subjection of the self to the market by offering oneself up to powers greater than we can ever fully comprehend. It is, quite literally, an irrational leap of faith, with the parallels to religious traditions intentional.

  This is one reason that participation in neoliberal life necessitates acting as an entrepreneur of the self: unreserved embrace of (this version of) risk is postulated to be the primary method of changing your identity to live life to the fullest. Contemporary entrepreneurial autobiographies almost always start out with some variation on: “I am not sure what it is about entrepreneurs that makes us risk-taking thrill seekers, but every entrepreneur I know is an adrenaline junkie. We kite board, heli ski, race cars, and keep finding new creative ways to challenge ourselves.” Alternatively, anyone who participates in the welfare state is just a dull drone, lost in a vegetative state. They are debased because they expect the state to shield them from risk, when in fact, they should be reveling in the opportunity to remake themselves. “Scientists” then chime in to reiterate that success accrues to those who grasp rashly and imperiously for self-gratification:

  The risk-taking, novelty seeking, and obsessive personality traits often found in addicts can be harnessed to make them very effective in the workplace. For many leaders, it’s not the case that they succeed in spite of their addiction; rather, the same brain wiring and chemistry that makes them addicts also confer on them behavioral traits that serve them well.52

  A denizen of modern neoliberal society has not demonstrated real flexibility of personal identity until they have prostrated themselves before the capricious god of risk. Freedom without the uninhibited embrace of risk cannot be experienced as anything other than static mechanical “choice.” Any machine can accomplish that. Salvation through the market comes not from solidarity with any delusional social class or occupational category, but instead bold assertion of individuality through capitulation to a life of risk. The heady elixir of distilled risk is hawked as the drug of choice of the modern neoliberal self: just say yes. This, of course, has almost nothing to do with the actual economic history of capitalist business: it is entirely a cultural construct.

  Risk is the premier device for combining a supposed instrumentally rational approach to action with a post-hoc moralization of any market outcome whatsoever, and as such, has become central to neoliberal narratives of the crisis. Whenever the market appears to break down, it really boils down to a mistaken apprehension of “risk” on the part of most participants, which in some sense could have been avoided. (This is the cultural importance of such best-sellers as Michael Lewis’s Big Short.) Taking a risk means that, in the final analysis, you have brought the failure upon yourself; political organization to punish the perpetrators is rendered nugatory. In these periods of cognitive recalibration, the insight that technical models of risk must always fail is treated as some sort of grand epiphany, when in fact it is simply one aspect of the tautology that will always be accessed in a neoliberal world to reduce the experience of calamity to pers
onal moral failure.

  As long as it can be shown that risks could have been better managed—by diversification, better models, better rules, better institutions, better professionals—the loss is morally justified. The retrospective argument that risk could have been better managed becomes the moral justification for the losses of everyone involved . . . the risk management discourse enables us to simultaneously celebrate the indeterminacy of outcomes and to retrospectively moralize these outcomes; to deny a singular causality before an outcome materializes and to attribute a moral causality after an outcome materializes.53

  Hence the modern culture of risk is the very embodiment of the neoliberal commandment: there is no such thing as commutative justice, and consequently, the participant must simply acquiesce in the verdict of the market. The discourse of risk, which seems to be forward-looking, in fact stands as the post-hoc justification of any outcome whatsoever. “It cleanses the epistemic foundations of the risk order from the shortfalls of performativity, redefining past terminology and categorizations, and realigning past calculations with the world that had in a sense out-performed them.”54

  Before his participation in the MPS, Frank Knight sought to make the stance toward risk the key to economic life in his Risk, Uncertainty and Profit (1921). His separation between calculable expected values and true unknowns, while famous, was never able to be incorporated in any substantial way into formal neoclassical economics. By the same token, Knight pointed to risk as the ultimate source of profit, which languished unexplained in full Walrasian general equilibrium theory. (His terminology also never caught on; Knight identified risk with probabilistic calculation, whereas modern neoliberals tend to use it more as the existential state of unknowable loss.) What was missing from his work was this later abrogation of all categories of personhood in the NTC, which perforce undermined all partition-based definition of probabilities for entrepreneurial individuals, effectively collapsing all “risk” into primal “uncertainty.” In this, as in other areas, the modern collective ended up repudiating Knight. This curious neoliberal inversion of classical connotations of risk will surface during many postmortems of the crisis discussed in later chapters.