The appeals to nature are rather unself-conscious and aboveboard in the writings of the contemporary proponents of financial engineering, such as Robert Litan, Barry Eichengreen, and Robert Shiller.45 Because Shiller had become anointed by the media as the exemplar of an economist who had presciently warned of the housing bubble before it burst, the public has imbibed a seriously mistaken impression of him as some sort of economic maverick of the left. While he diffidently renounces the Efficient Markets Hypothesis, in all other matters Shiller is about as orthodox an economist as one can find nowadays. Shiller has been insisting upon the literal interpretation of finance as a technology for some time now;46 and given the opportunity, he reaches for the physical equivalent in order to render his utopian vision more tangible. Here, for instance, he responds to a question about the banks, not understanding the full implications of the instruments they peddled during the bubble:
That is a problem, and I would say that it’s a problem with technology in general. When someone designs an airplane, if it gets too complicated then the engineers don’t understand what’s happening. This is to do with systems, so if you’re designing an air traffic control system and it’s too complicated, there’s going to be a catastrophe. But on the other hand I’m thinking that modern civilisation with modern computers can create some pretty complicated things. I’m thinking of, for example, the automobile. It’s got more and more complicated over the years and it’s getting harder and harder for the backyard mechanic who wants to fix the car. So you take it out to a dealer who has a computerised diagnostic system and so on. That’s the kind of society we’re living in. We always have to be mindful of some catastrophe that could result from our not understanding the complexity, definitely. But on the other hand I think we’re on a secure trend to more complexity, and computers are an important reason why we are. Life is going to get more and more complex and specialised, that’s pretty inevitable while civilisation advances.47
Thus what we confront in this sphere is very similar to what we encountered in the case of geoengineering: since no one can staunch carbon emissions, we might as well spew sulfur dioxide into the troposphere to attempt to reflect back a little more infrared, and provoke runaway algae blooms in the ocean to soak up a little more CO2. There may be unanticipated feedbacks, and further disruptions, but complexity be damned. Likewise, since no one will ever staunch the roiling financialization of the modern economy, we might as well concoct even more new “financial instruments” and baroque trading procedures to make people feel a bit more that the market is really on their side. Some wet blankets such as Nouriel Roubini, Simon Johnson, and Richard Bookstaber may denounce certain aspects of securitization; but they just don’t understand:
The Occupy Wall Street and Occupy London people say “We are the 99%.” There’s an increasing concern with unequal distribution of wealth, and finance is perceived as the villain in all of this. But I’m thinking it can’t be the villain; finance is a technology that can, if it’s properly applied, help reduce inequality if it’s applied to everyone. So I think that people who are in finance today have a moral obligation to help advance the trend toward democratisation of finance.48
So how will more financial engineering help us out of the hole left by the global crisis? Some say the working-class “democratization” was just feedstock so that Wall Street and the City could securitize ever-expanding volumes of debt (while getting it graded AAA and foisting it off onto gullible money-market funds) as inadequate compensation for the dismantling of the welfare state; but people like Shiller say that the poverty and inequality could actually be mitigated by further financial engineering. The detailed examples provided in above turn out to be a little underwhelming, such as a “social impact bond” that pays a return if a particular social goal is met, or crowdfunding of public investment projects. But, just as with geoengineering, the nitty-gritty specifics are secondary: what really matters is that we learn to outsource our biggest social problems to entrepreneurs, who are the only people capable of using the market to discover really big solutions. In this respect, the promotion of financial engineering is a willfully ideological project.
There are a lot of people who think that I am defending bad behavior. In no way am I defending corrupt behavior and my book contains a plea for inclusiveness, that all people are created equal. The criticism that Karl Marx advanced of capitalism, in a nutshell, he said the capitalists dominate because they own the capital. And the other people, the working class, have no access to capital. But as modern society becomes more inclusive, everyone who becomes knowledgeable about finance can have access to capital. You don’t have to be born rich; we have a mechanism that allocates capital, that’s the financial system at its best use. So what you have to know is: How do I get into that? You have to know how you can, for example, develop a business plan and present it to a venture capitalist, and in the modern economies I think they really don’t care what social class you came from. You could be very working-class and, before you know it, you have millions of pounds to allocate, and that is the way that it’s increasingly working. That is the fundamental flaw in Marx’s thinking. He thought that these social classes were permanent and hopeless. We’re learning that it’s not. We should seek more progress, more democratisation of finance in the future.49
Having trouble with those student loans? Just incorporate yourself, and get some venture capitalist to stake your latest bright idea (should you have one), and maybe you can finance your very own way out of the bind. Certainly that’s what Shiller did, by monetizing his ideas as chief economist of MacroMarkets LLC!50 Readers of chapter 3 will recognize the provenance of this particular moral tale.
Why They Have Won, Preliminary Version
The purpose of this book has been to attempt to answer this question: Why did the neoliberals come through the crisis stronger than ever? Precisely for that reason, we have passed lightly over some other highly contentious collateral issues, such as:
What were the key causes of the crisis?
Have economists of any stripe managed to produce a coherent and plausible narrative of the crisis, at least so far? What role have heterodox economists played in the dispute?
What are the major political weaknesses of the contemporary neoliberal movement?
What is the current topography of the Neoliberal Thought Collective?
What lessons should the left learn from the neoliberals, and which should they abjure?
What would a vital counternarrative to the epistemological commitments of the neoliberals look like?
Is there a coherent alternative framework within which to understand the interaction of the financialization of the economy with larger ebbs and flows of political economy in the global transformations of capitalism?
These are serious inquiries, demanding lavishly documented advocacy and lengthy disputations (and maybe a different species of Mont Pèlerin Society to hash them out?), which should be on the agenda of the left. Of course, there may not be the luxury of decades of time similar to that available to the neoliberals back in the 1940s (with tipping points looming for world climate and corporate domination). However, I do believe the current volume does dispel some commonplace notions that have gotten in the way of that project. The neoliberals have triumphed in the global economic crisis because:
1) Individual neoliberals reacted to cognitive dissonance precisely in the ways that social psychology has suggested they would. Contrary evidence did not dent their worldview.
2) Far from withdrawing from the intellectual agonistic field, after brief disarray they redoubled their efforts to influence and capture the economics profession, which has also benefitted economists in weathering the crisis. The preemption of the breaking up of the financial sector in reaction to its insolvency in almost every country has been the single most important event that has bolstered both the transnational orthodox economist profession and the Neoliberal Thought Collective. Absent the maintenance of the previous leisure c
lass and the further subsidy of the wealthy, the politics of the situation would potentially have been strikingly different. The relationship between the immunity of finance and the imperviousness of change in economic ideas has been direct.
3) Since economists were caught off-guard during the onset of the crisis, both journalists and the general public had initially to fall back on vernacular understandings of the disaster, as well as cultural conceptions of the economy then prevalent. Hence the prior decades of “everyday neoliberalism” that had taken root in the culture provided a bulwark until the active mobilization of the Neoliberal Thought Collective could mount further responses.
4) The thought collective has resorted to industrial-scale manufacture of ignorance about the crisis, based upon the time-tested model of the “tobacco strategy.” The excuses generated by economists for defending their profession were a major component of this activity. This in turn deems that the burgeoning resistance to doing anything substantive about global warming should be paired as symmetric with the burgeoning resistance to doing anything about the global economic crisis, with orthodox economists playing a comparable role in each, for purposes of strategic analysis. Agnotology has proven an effective and cheap short-term strategy to paralyze political action.
5) The neoliberals have developed a relatively novel way to co-opt protest movements, through a combination of top-down hierarchical takeover plus a bottom-up commercialization and privatization of protest activities and recruitment. This is the extension of the practice of “murketing” to political action itself. Pop fascination with the role of social media in protest movements only strengthens this development.
6) Finally, the Neoliberal Thought Collective has displayed an identifiable repeating pattern of full-spectrum policy responses to really pervasive crisis, which consists of short-run denialism (see 4, above), medium-term imposition of state-sponsored markets, and long-term recruitment of entrepreneurs to explore scientific blue-sky projects to transform human relationships to nature. Different components might seemingly appear to emanate from different sectors of the thought collective, and often appear on their face to contradict one another, which helps to inflate characteristically neoliberal responses to fill up the space of public discussion during the crisis, pushing other options to the margins. Furthermore, the different components often operate in tandem (in time, in co-opting opponents) to produce the ultimate result, which is to allow the market to come to its own inscrutable accommodation to the crisis.
Many of the components of the full-spectrum response can only be imposed in those special moments of “emergency” by a strong state, when all standard rule-governed activity is suspended. The neoliberals may preach the rule of law, and sneer in public about the ineptitude of government, but they win by taking advantage of “the exception” to introduce components of their program unencumbered by judicial or democratic accountability. We observe this happened during the global economic crisis, and fully expect to see it again upon onset of further climate catastrophe. It is here that it is most obvious that they take their Schmittian heritage to heart. They know what it means to never let a serious crisis go to waste.
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