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[Nov 05, 2011] Steve Keen Harvard Starts its Own PAECON Against Mankiw

Neoclassicals are hacks who "electively pick research to suite their agendas"-- and this includes ignoring critical literature generated even when it comes from leading lights within neoclassical economics.
"Most critics of neoliberalism think it is fundamentally a dishonest economic philosophy – a mask. It's just apologetics for malefactors of great wealth that dare not speak its apologies."
November 3, 2011 | naked capitalism

aletheia33:

here is the full text of the economics 10 walkout students' letter to mankiw: ______________________________

Wednesday November 2, 2011

Dear Professor Mankiw-

Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.

As Harvard undergraduates, we enrolled in Economics 10 hoping to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from Economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific-and limited-view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics. There is no justification for presenting Adam Smith's economic theories as more fundamental or basic than, for example, Keynesian theory.

Care in presenting an unbiased perspective on economics is particularly important for an introductory course of 700 students that nominally provides a sound foundation for further study in economics. Many Harvard students do not have the ability to opt out of Economics 10. This class is required for Economics and Environmental Science and Public Policy concentrators, while Social Studies concentrators must take an introductory economics course-and the only other eligible class, Professor Steven Margolin's class Critical Perspectives on Economics, is only offered every other year (and not this year). Many other students simply desire an analytic understanding of economics as part of a quality liberal arts education. Furthermore, Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand. Students should not be expected to avoid this class-or the whole discipline of economics-as a method of expressing discontent.

Harvard graduates play major roles in the financial institutions and in shaping public policy around the world. If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this.

We are walking out today to join a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement. Since the biased nature of Economics 10 contributes to and symbolizes the increasing economic inequality in America, we are walking out of your class today both to protest your inadequate discussion of basic economic theory and to lend our support to a movement that is changing American discourse on economic injustice. Professor Mankiw, we ask that you take our concerns and our walk-out seriously.

Sincerely,

Concerned students of Economics 10

Richard Kline:

So Memory, exactly. Mankiw's synthesis is political propaganda designed to socialize candidates for the ruling class in what their acceptable worldview is to be, nothing more. Analysis would interfere with that, as would contrast-and-compare exercises; thus, both are omitted. What Mankiw is doing is political indoctrination, his snuffling remark in his response to the walk out that "I leave my politics at the door"when teaching notwithstanding. Maybe he does-since all he shows _is_ a political perspective, he can leave 'I' statements out and simply point, disingenuously, at this syllabus. -And it wouldn't matter who was teaching this class, no; the function is exactly the same. Kind of like catechism, really . . . .

Lloyd Blankstein:

Mankiw is world famous economist. Steve Keen is only a nameless blogger, who teaches economics in his spare time. I want to stay on the side of the titans – Mankiw, Summers, Krugman, Greenspan, Bernanke. The only purpose of economics is to justify and legalize theft. If Steve Keen cannot do that, he is a BAD economist. Why listen to him?

monte_cristo:

I studied 101 economics in 1981, I seem to recall. The analytic component was easy, it's like arithmetic, maths, logic, you know we have the axioms and we proceed. The 'descriptive component' .. basically unions versus management I choked on. I had a sweet lecturer. He actually held to a marxist analysis: roi/s the logic etc etc. It made a lot more sense than the required 'understanding' that the course required.

Right at this moment I find myself in awesome agreement with the Harvard protesters. Mankiw is my opinion (and who am I(?)) is just a semi-second rate academic that rode the wave with his text book. Nearly any fool can do it given the auspicious historical circumstances. That doesn't make it right, in fact it just makes him cheap, opportunistic, and confused.

Just to expand this criticism I have an interest in clinical psychology. Any idiot that believed Freud after he sold himself out when his m/c//r/c audience kicked up when he told them that their childrens problems were the result of their abuse needs to be hanging their heads in shame, as should have Freud. Freud was brilliant but a disgrace to himself. It is a beautiful analog this moment. You either get this or you don't. My message is "Screw the rich." Analogue: Screw the abusers.

Skippy:

@Brito,

I'm still waiting for your reply, how do you model trustworthiness, see below:

http://ageconsearch.umn.edu/handle/104522

Look, if the model can not describe the human condition, then all you are building is a behavioral template, which you then_shove down_upon_humanity. All Mankiw is doing is reinforcing his worldview cough neoliberal see:

David Harvey notes that the system of embedded liberalism began to break down towards the end of the 1960s. The 1970s were defined by an increased accumulation of capital, unemployment, inflation (or stagflation as it was dubbed), and a variety of fiscal crises. He notes that "the embedded liberalism that had delivered high rates of growth to at least the advanced capitalist countries after 1945 was clearly exhausted and no longer working."[10]

A number of theories concerning new systems began to develop, which led to extensive debate between those who advocated "social democracy and central planning on the one hand" and those "concerned with liberating corporate and business power and re-establishing market freedoms" on the other. Harvey notes that, by 1980, the latter group had emerged as the leader, advocating and creating a global economic system that would become known as neoliberalism.[11]

----

Skippy…Humanity is the horse pulling the cart. Neoliberalism is nothing more than a glazed apathetic leash to ones own chosen addictions (see economic menu), to justify egregious wealth and power concentration.

I find this state deeply wrong. And like Mr. Kline pointed out, one day you_may_wake up and can't pull your head out of the bucket, drowning in recognition of past deeds or even worse, look in the mirror and see Dick Cheney and be OK with it.

http://video.google.com/videoplay?docid=-925270800873130790

Steve Keen:

"Steve Keen is a hack who selectively picks research to suite his agenda".

Cute Brito! From my reading of economics, most neoclassicals are themselves hacks who "electively pick research to suite their agendas"–and this includes ignoring critical literature generated even when it comes from leading lights within neoclassical economics.

Here's a few "selectively picked research papers"on IS-LM and DSGE modelling that I'd like to see you prove are wrong and should be ignored:

Hicks, J.R., (1980). 'IS-LM: an explanation', Journal of Post Keynesian Economics, 3 (2): 139–54:

"I accordingly conclude that the only way in which IS-LM analysis usefully survives – as anything more than a classroom gadget, to be superseded, later on, by something better – is in application to a particular kind of causal analysis, where the use of equilibrium methods, even a drastic use of equilibrium methods, is not inappropriate"

Solow, R. M. (2001). From Neoclassical Growth Theory to New Classical Macroeconomics. Advances in Macroeconomic Theory. J. H. Drèze. New York, Palgrave.

[N]ow … if you pick up an article today with the words 'business cycle' in the title, there is a fairly high probability that its basic theoretical orientation will be what is called 'real business cycle theory' and the underlying model will be … a slightly dressed up version of the neoclasssical growth model. The question I want to circle around is: how did that happen? (Solow 2001, p. 19)

Solow, R. M. (2003). Dumb and Dumber in Macroeconomics. Festschrift for Joe Stiglitz. Columbia University.

. The preferred model has a single representative consumer optimizing over infinite time with perfect foresight or rational expectations, in an environment that realizes the resulting plans more or less flawlessly through perfectly competitive forward-looking markets for goods and labor, and perfectly flexible prices and wages. How could anyone expect a sensible short-to-medium-run macroeconomics to come out of that set-up? My impression is that this approach (which seems now to be the mainstream, and certainly dominates the journals, if not the workaday world of macroeconomics) has had no empirical success; but that is not the point here. I start from the presumption that we want macroeconomics to account for the occasional aggregative pathologies that beset modern capitalist economies, like recessions, intervals of stagnation, inflation, "stagflation,"not to mention negative pathologies like unusually good times. A model that rules out pathologies by definition is unlikely to help. (Solow 2003, p. 1)

Solow, R. M. (2007). "The last 50 years in growth theory and the next 10."Oxford Review of Economic Policy 23(1): 3–14.

the main argument for this modeling strategy has been a more aesthetic one: its virtue is said to be that it is compatible with general equilibrium theory, and thus it is superior to ad hoc descriptive models that are not related to 'deep' structural parameters. The preferred nickname for this class of models is 'DSGE' (dynamic stochastic general equilibrium). I think that this argument is fundamentally misconceived… The cover story about 'microfoundations' can in no way justify recourse to the narrow representative-agent construct…

The nature of the sleight-of-hand involved here can be made plain by an analogy. I tell you that I eat nothing but cabbage. You ask me why, and I reply portentously: I am a vegetarian! But vegetarianism is reason for a meatless diet; it cannot justify my extreme and unappetizing choice. Even in growth theory (let alone in short-run macroeconomics), reasonable 'microfoundations' do not demand implausibility; indeed, they should exclude implausibility. (Solow 2007, p. 8)

Lefty :

You hate the word neoliberal because of how much of a failure neoliberal policies have been. Yes, there is some disagreements amongst neoliberal economists, but there are many, many commonalities as well. Same goes with words like socialism. There is, or was, social democracy in Western Europe that was different than the socialism of the Nordic countries, which was different than Yugoslavian socialism which was different than Cuban socialism which was different than Maoist China.

They were all different, sometimes radically different, but shared certain characteristics which made them "socialist". You are running away from performance of neoliberal economics, not the label.

"further exposing how completely untrue your lies are about economists being rigidly right wing"

I have a degree in economics, which I mentioned. I am taking classes this fall. Never once had a non-neoclassical teacher. Not once. I wish I had a Yves Smith or a Steve Keen teaching me. I had to work hard to find economists like them. I DID hear lots of hostility to unions, regulation, non-market based solutions to environmental issues. Lots of pretending things about perfectly competitive markets, perfect information, all information being encoded in prices, preferences of all market participants being identical. Was taught how great "free trade"was by teachers who obviously never read Ricardo, never read the assumptions Ricardo articulated in defense of free trade that are radically different than the world we live in today. Again, neoclassical economics HAS dominated the profession and we know the types of ideas and theories neoclassical professors regurgitate.

One last time, the heads of institutions like the ECB, IMF, the US Treasury, the World Bank, the BIS, they all were taught this type of economics. They all have roughly the same ideas, even after their policies have caused economic collapse. I see no evidence they've learned any lessons at all. They're willing to force countries to socialize the losses of their financial puppet masters in order to save their pet theories. Sorry, but its your type of mentality that makes me embarrassed to tell people close to me that I am an economist in training.

They, understandably, are skeptical. Many of my friends are politically astute and progressive, or whatever the term is. They ask, "aren't you economists ruining Europe?"

"Didn't you economists deindustrialize the country, financialize the economy, cause wealth inequality to explode, private and governmental debt to balloon?". Yep, and I have to explain that there are many schools of thought in economics and…by that point they have heard enough. They respect me, but not what I am studying. Economics wasn't always such a joke. It used to have meaning, it was a powerful tool to make the world a better place.

Neoclassical economists have ruined a wonderful field of study and they've caused lots of harm to people the world over. Go to bed!

Philip Pilkington:

"Nevertheless, economists are constantly disagreeing with each other, it is not a rigid cult, get over it."

Here's the deal, buddy. The accusation we make is this: a training in mainstream economics narrows a person's perspectives so much that they simply cannot see outside the counterfactual and empirically unjustifiable claims the whole discipline (barring a small few) make.

You're caught up in this too. That's why what you think of as dissent is, to the rest of us, just pointless nonsense.

You say Marxism. There are different strains but most believe in the labour theory of value. If I debunk the LTV the WHOLE OF MARXISM GOES WITH IT.

Likewise for neoclassical economics. There may be different currents, but if I debunk, say, equilibrium analysis when applied to complex systems constantly subject to entropy THE WHOLE OF NEOCLASSICAL ANALYSIS GOES WITH IT.

You're already trapped, I'm afraid. You've swallowed the party line and you'll never see beyond it. When people raise critiques you'll react as you did above ("But dur-hur, then my ideas about inflation [which are derived from the same system of knowledge being criticised] don't work… therefore you must be wrong"). Do you see the trappings here? It's like a cult.

If I said to an evangelical that evolution is true, they'd respond by saying something like this ("But then my theory of creation doesn't work… therefore you must be wrong"). It's the same thing. Your 'education' has trapped you in a closed, self-referential system of knowledge. This is what the Harvard students protested. AND THEY ARE DAMN RIGHT.

Lefty:

"I don't want to get into a debate about some boring discussion on some technical crap"

I do. I am saying that the assumptions that get mentioned continuously throughout an undergraduate and graduate education have no basis in reality. If you can't prove they do then what exactly are you arguing?

"I'm absolutely certain that you look at certain models and reject the ones that do not fit into your ideology and come up with pseudo-scientific ad hoc justifications for doing so, I simply have no interest in that."

Except when you're the one doing it. You dismissed Dr. Keen's work out of hand. You haven't shown that you have even a passing knowledge of what he's written. I DO have an ideology, as do you. I can at least admit it. I read those I disagree with however and try to keep an open mind. Neoclassical economics is very ideologically rigid and you know it. We both also know how non-neoclassical economists are treated by economics schools, and it has nothing to do with the soundness of their ideas.

"when it can almost always be shown empirically that it's actually a result from massive levels of corruption and corporate capture, leading to policies certainly counter to what not only modern economics would suggest but even common sense."

All of the empirical evidence shows this, huh? The US, New Zealand, Australia, most countries in Europe, they've all moved to the right on economic policy in recent decades. They have privatized services & resources, lowered individual and corporate taxes, deregulated finance, liberalized trade. Left wing, right wing, centrist parties have implemented these policies. Higher, moderate and middle income countries. All are in horrible shape as a result, and it is because of "corruption". the ECB's massive policy failures? All the empirical evidence shows this? Same with with most countries in Latin America. Have many countries in the region seen growth increase, inequality decrease, access to basic services vastly improve, happiness with democracy increase (take a look at latinobarometro polls during and after neoliberal governments took power), because they tackled corruption? Is it just a coincidence that they have largely turned their backs on neoliberal economic policies?

"just because you knowledge of postgraduate economics does not mean you will be able to solve the worlds problems"

Never said that, wasn't my point. Economists, once again, almost without exception, have studied neoclassical economics. It has been their jobs to craft economic policy. Not to solve the world's problems, to craft economic policy. Their policies have been miserable failures, for decades. In the developed, developing and underdeveloped world. Their job has been to draw up and implement economic policy and they have done a horrible job. We can pretend that something other than neoclassical and neoliberal economics is to blame if you'd like.

Neoliberalism and OWS by John Holbo

Real neoliberals were primarily a political group, promoting "market liberalism" by any means necessary. "Neo-liberals were always wrong, and their grand bargain never occurs. There are no higher taxes on the wealthy. There is no regulation that mean any real help to consumers or God forbid, workers. And let's face it. The neo-libs hate unions almost as much as Sam Walton did. "
October 22, 2011 | Crooked Timber

Tim Worstall

Standard whine: neoliberal seems to have two different current meanings.

Hayek/Friedman etc style and Yglesias/DeLong style. The latter seemingly being a recent and American neologism.

/whine.

"Were neoliberals wrong all along, or is it the case that, like 'pure' communism, neoliberalism has never really been tried? (We never tried to conjoin market liberalization with appropriately fair and equitable taxation and regulation schemes, so we don't know that it wouldn't work.)"

Using the US meaning of neoliberalism a good argument could be made that the Nordics are doing just that. Seems to work out OK. A reasonable description of what they're doing is classical liberalism (ie, UK style neoliberal) with a decent dose of govt spending on top.

As Lane Kenworthy has pointed out, the Swedish tax system is less progressive than the US (or UK) one. For it raises a lot through a regressive VAT, but that's what raises the cash to do all the spending.

And as Scott Sumner delights in pointing out, underneath the tax system (and even including parts of the tax system, like the taxation of corporates and capital) the Nordics are generally more neoliberal (classically so, UK style neoliberal) than the US.

Henri Vieuxtemps:

Neoliberalism is not just some idea; it's an idea that clearly and directly benefits the establishment. And so one shouldn't take think~tank~invented/useful~idiot~amplified 'sure, there will be winners and losers, but don't worry: the losers will be well~compensated' bullshit seriously.

John Quiggin

Promise this is the last time on terminology: "Liberal"has different meanings in US and elsewhere, and differences in "neoliberal"follow from this. As long as we understand which is meant, no problem.

Coming to the bigger issue, the "correct line"coming out of the globalization debates was, something "For progressive globalization, against neoliberal (non-US sense) globalization". That meant switching the focus from old-style protectionism to a bunch of measures that aimed to challenge the global dominance of capital, which is very much what #OWS is about. Examples

■"No Logo"style pressure on corporations like Nike and Apple regarding working conditions, including those of their subcontractors ■Inclusion of labor conditions in trade negotiations (the point being to demand some form of "best practice", including things like union rights, not to exclude imports from low-wage countries) ■Restrictions on global capital, of which the Tobin tax is at least symbolically, the number one demand I also don't want to restart previous threads, but clearly #OWS has learned a tactical (or maybe strategic, I'm never sure about this distinction either) lesson from the anti-globalization protests of the last decade – smashing windows is fun, and gets quick headlines, but marginalizes you in the long run.

wilfred

"We never tried to conjoin market liberalization with appropriately fair and equitable taxation and regulation schemes, so we don't know that it wouldn't work."

It's interesting that this is placed parenthetically, as if the thought had not entered into anyone's mind at the time.

Does this means that we still don't know if it wouldn't work. What does 'work' even mean in this context. Clearly the previous situation worked quite well for a small group of people and practically obliterated a large group of people. The political fact is that neoliberalism was pitched as the next great thing in political economy.

Well, here we are.

Barry:

Wilfred is right – and I add that I never noticed any of the neoliberals even trying; they consigned it to the 'far future, when the state withers away, and True Communism emerges'.

John, the entire right-wing movement (including movement libertarianism) makes much much more sense when viewed through the paradigm of 'redistribute wealth upwards'. And we've seen what the GOP does when stripped of the usual luxuries, and put backwards onto their core – they went for removing as much money from the 90-odd percent as possible, while happily subsidizing the top 1%. And over the decades, the right has eagerly and successfully attacked entitlements, while keeping and extending crony capitalism. When they start acting like people who actually believe their propaganda, I'll believe it. Until then, their propaganda is just designed to set up the victims, and to salve the conscience of those 'useful idiot' liberals who look upon evil works, and come up with bullsh*t to cover for those works.

You put out a sweet review of Frum's 'Dead Right' several years ago, and have now seen those views put into actual operation. You and he both figured that those views were not politically achievable – yet the right has achieved most of them.

Are you willing to accept the evidence in front of you?

I'm getting a bit personal, John, but this has become your trademark, coming up with reasons to not accept the evidence of evil.

Cranky Observer:

> This is [A-list political analyst]'s point. He considers himself a neoliberal > and sees, correctly, I think, that anyone committed to that market-oriented > outlook is more or less committed to sympathy for the core grievances > expressed by the OWS protesters. Neoliberalism was always in favor of > markets as means, not ends. Neoliberalism was never – or was never > supposed to be – the view that being in favor of trade liberalizaton > means market fundamentalism in everything. Neoliberalism says market > liberalization should go hand in hand with progressive taxation and > appropriate regulation so the pains that buy the gains are mitigated > and borne equitably.

As far as those who are not [Charles Peters-type] neoliberals can see, the neoliberal manifesto consisted of these steps:

1) Cave in to the libertarian wing of the Republican Party on taxes, regulations, tariffs, privatization, and worship markets as a god 2) Beat down liberals and "the left"on behalf of Republicans, big business, and big money and reorient the Democratic Party to the service of those groups 3) Talk a lot about the possibility of redistributing from winners to losers and a big progressive tax rate system 4) ???? 5) Pie paradise on Earth!

The problem is that the modern neoliberals, particularly the 2nd generation who are a large percentage of today's A-list bloggers, simply refuse to discuss the little problems that have occurred in steps 3 and 4 in their program. And they absolutely refuse to acknowledge that if steps 3 and 4 are politically impossible that maybe, just maybe, starting with steps 1 and 2 was not and is not today a good idea.

Cranky

tomslee

I agree with half of Rich Puchalsky's kinetic theory of movements.

The idea that the pronouncements of (armchair?) theorists are more representative of a movement than the actions of people actually moving (involved in demonstrations) seems very odd. And more than one window has been broken.

But the difference between static occupations and kinetic marches makes sense to me. Plus, police with video footage can more easily track down static occupiers than they can marchers who have long-since travelled back to where they came from.

Antonio Conselheiro

We've had some debates on Crooked Timber of late about what 'neoliberalism' means. I've not participated because, honestly, term's more trouble than it's worth, worrying what it means.

Nobody should claim to understand neoliberalism or claim that neoliberalism is impossible to understand without first reading Mirowski (ed.) The Road From Mont Pelerin.

We can now, if we like, refight old battles. Were neoliberals wrong all along, or is it the case that, like 'pure' communism, neoliberalism has never really been tried?

Can we at least note that the non-conservative neo-liberals, like the liberal neocons, were useful idiots who have now ceased to exist since there's really nothing for them to do any more? They got the conservative part of what they were trying for and the liberal part of what they were trying for has been a dead letter since as early as NAFTA. The new-liberals' left opposition has been defeated, destroyed, and humiliated, and if the neoliberals aren't feeling so good themselves either, why should anyone care?

Maybe Yglesias has finally decided that drum circles and giant puppets aren't absolutely the most horrible thing in the world, after all, but his work is done and he's of no further importance. He never knew what his job was, but he did it. The reality that his efforts contributed to producing has little resemblance to the one he claimed he was aiming for, but that's the way it goes with emergence.

It's time to say that the dog is dead.

David Kaib:

For the record, I think a lot of the globalization critics did not describe themselves as either anti-globalization or anti-trade. They described themselves (accurately, in my opinion) as supporting global justice.

They critiqued trade polices they argued were destructive to the earth as well as to the bulk of the people in both the 'developed' and 'developing' worlds. They argued that these polices were being developed in secret in the interests of the already too powerful. Isolationism and protectionism are largely epithets hurled at those who question the orthodoxy, rather than useful description of actual political positions.

Also, ditto what Rich said about window smashing. This is not an unimportant point. The idea that these protestors were violent and engaged in routine property destruction was the main justification for the army of police in riot gear that was assembled in response to these protests. Of course, it was the idea that regular people were trying to have a say in some of the more important aspects of how they were governed that scared the governors back then (which has obvious parallels to today).

Antonio Conselheiro:

Standard whine: neoliberal seems to have two different current meanings.

Hayek/Friedman etc style and Yglesias/DeLong style. The latter seemingly being a recent and American neologism.

Mirowski et al describe the real, Hayek Friedman neoliberals. American liberal neoliberals were a transient phenomenon which no longer has any meaning to exist.

The neoliberals believed that Greenspan, the Randian, was a neutral technocrat who could be trusted to use his unchecked, accountability-free power for the good. After the disaster he had contributed to head taken place, he said the equivalent of "Oh, gee, I guess I should have done a few things differently"and went on to enjoy his retirement and cheerlead the Republican dismantlers of the welfare state.

So economically, in some sense, he lost, but politically he won. And according to Mirowski, the original, real neoliberals were primarily a political group, promoting "market liberalism" by any means necessary.

Antonio Conselheiro 10.22.11 at 2:29 pm

Non-violence is not a moral good or an obligation. No one is saying that the police or the military or the Israelis should be non-violent. It's a tactic imposed on weak and unpopular political groups which are basically begging for mercy.

Martin Luther King and Gandhi were fine, but they didn't change the world, delegitimize all violence everywhere forever, and bring us to a world where all disputes are settled within the law by peaceful discussion. They just dealt with the situations they found themselves in.

Breaking windows is a bad tactic these days, and not the transformational revolutionary act people wish it was, but it's not wrong because the world has renounced violence. It's just a tactic that the weak and unpopular are barred from using. Police on drug raids break lots of windows.

A different question: OWS is actually popular, but in most of the US you couldn't tell that from what you see and hear out in public. The center right and right domination of the mass media means that majorities think that they're minorities.

William Timberman:

My problem with the Yglesias/Delong tendency - I refuse to call such a graceless socio-economic collage a style - is that it literally has no sense of how the other half lives, and not much interest in whether it does or doesn't. Being very smart fellows, of course, they'll never, ever wind up walking behind a plough, although you may find them reading Greek to the idiot sons of the plutocracy from time to time.

Cahal

'Which brings up another line entirely. Which income inequality? In country or global? Trade, the globalisation thing, has been doing pretty well at reducing global inequality even if it could (and people better at all this than I argue that it does) increase in country inequality.'

Slow down! Poverty in the developing world, outside of China (who are incredibly protectionist) has increased over the past few decades, particularly in Africa:

http://www.stwr.org/globalization/world-bank-poverty-figures-what-do-they-mean.html

Gene O'Grady:

Mr. Timberman is basically correct (although unlike Duncan Foley neither DeLong nor Yglesias know Greek), but the problem is not so much their not knowing how the other half (or 99%) live as their not respecting the work the 99% (or the other half) do.

Which gets to the original point that redistribution to people whose world of work has been destroyed is pointless, insulting, and will never happen.

Antonio Conselheiro :

Violence did eventually help delegitimize white supremacy, but the violence in question was hundred and hundreds of murders and a few towns burned to the ground, and it took 50-100 years before anyone noticed. In the same way, one broken window delegitimized a left movement overnight.

Of course, about a third of the US Senate supported the murders, so it wan't exactly real "violence"violence, if you know what I mean.

Mitchell Freedman:

Neo-liberals were always wrong, and their grand bargain never occurs. There are no higher taxes on the wealthy. There is no regulation that mean any real help to consumers or God forbid, workers. And let's face it. The neo-libs hate unions almost as much as Sam Walton did.

The economic lefties who said, essentially, we need to make what we buy and buy what we make, were and are spot on. And let's not fall for the canard that we are hurting Third World folks with a protectionist policy. The way for the US to start not hurting Third World people is not bombing them. And the next step would be to support policies in those nations which are in regions where all are exploited. The idea would be for those nations to band together economically where their people can build what they buy and buy what they build where people are on the same economic plane.

It has never made sense to me why we keep pushing down the income and stability of our workers. This current economic mess is a result of the Reagan-Bush I-Clinton-Bush II consistency in attacking the middle class with their neo-liberal and conservative economic policies. And as Dean Baker notes, there is no "free"trade. The trade deals protect patents, which is a rent inuring to the top 10%. And they protect us lawyers, doctors, etc. from having to compete with people from foreign lands who will work cheaper than we are working.

The thing that also amazes me is how most Americans consistently poll against these trade deals, which codified the very trends that have undermined the middle class in the US, and beggar peasants in Third World nations.

Yet, the monied interests prevail…and John says, "Oh, can't we all get along?" with "we" meaning the neo-libs like Obama, Clinton, Biden, Pelosi, Reid, et al. and folks like me. In case John hasn't noticed, Obama has ignored even semi-trade agreement supporters like Reich and Krugman, let alone Rich Trumka of the AFL-CIO and Lori Wallach of Public Citizen, who Obama, Pelosi, Reid, Biden and Clinton simply hate.

Really, John, they hate folks like them, and they really hate folks like me. That's what David Frum was saying when he said the Democratic Party leaders hate their base.

And yet you ask "Why can't we get along?"Sorry, John. Maybe you can sneak into a cocktail party in DC and ask those tone deaf political leaders who do the bidding of corporate and financier America why they hate us. They hate us, of course, because, like John, the evidence shows they were wrong and we were correct.

Harold:

"The idea that these protestors were violent and engaged in routine property destruction was the main justification for the army of police in riot gear that was assembled in response to these protests. Of course, it was the idea that regular people were trying to have a say in some of the more important aspects of how they were governed that scared the governors back then (which has obvious parallels to today)."

Don't forget that riot gear , surveillance equipment, security consulting domestically and abroad, etc., etc., are boom-time make-work industries for the crony capitalists, revolving door military, mercenaries, and 1% wannabes.

It's perhaps the most prosperous going, right now. Any excuse for grabbing those big security bucks.

John:

I just read your review of Frums "Dead Right", Mr Holbo. Very funny stuff indeed. I know these are more serious times but any chance anyone might critique Mark Steyns new production with the same rigour?

I really dont want to read it myself, (it appears the US is doomed as too many people are going to Harvard, joining NGOs/dreaming up ways of regulating capitalism to death, starting work too late in life, 35 apparently, and retiring to early, 44, and not doing enough amateur carpentry in their spare time. Of course all of this would be bad enough without an unstoppable Muslim takeover that political correctness prevents us from tackling) The mans clearly insane

Antonio Conselheiro:

"They hate us, of course, because, like John, the evidence shows they were wrong and we were correct."

Mostly they hated us because we're their defeated victims but aren't completely dead yet.

Robert:

I think the point was that not only is Duncan Foley a better economist than Brad DeLong, he is also better on classical Greece.

Antonio Conselheiro

Marc, very few of us are absolute pacifists. (My argument with them is a different one.) Most of us support police violence, military violence, and violence in self-defense, up to and including homicide in all three cases. Homicide, not murder. We do not condemn homicide by the legitimate authorities.

Pretty much any insurgent movement (good or bad) that's ever come along, including the successful ones that eventually became legitimate, has used homicide at some point. That's a normal part of history. There's a transition when murder and other illegitimate revolutionary violence, if successful, are reclassified as legitimate violence. Ireland and Israel are cases in point, as well as most Latin American regimes and most third world regimes.

The argument isn't about violence but legitimacy and about prudence.

Whenever this kind of thing comes up, a lot of people briefly adopt absolute pacifism, the way you put on a disposable raincoat during a sudden shower. Then they return to normality, which is 5% of the GDP spent on death-dealing.

I agree that weak movements should avoid violence. I agree that in Heaven there will be no violence. I just disagree with the way non-violence raincoat is briefly put on whenever a dissident movement arises, and with the way broken windows are conflated with murder.

bob mcmanus:

They're desperate, either to get Obama re-elected or to make a feint to the left so they can blame the Left for Obama's loss in 2012.

They will betray us. This is about the only truth.

Cahal:

'And as Scott Sumner delights in pointing out, underneath the tax system (and even including parts of the tax system, like the taxation of corporates and capital) the Nordics are generally more neoliberal (classically so, UK style neoliberal) than the US.'

This is a massive myth. The UK and US are the least regulated countries in the developed world, and the Nordic ones are somewhere in the middle:

http://flipchartfairytales.files.wordpress.com/2011/06/oecd-regulation-index.png?w=640&h=352

Heritage simply bias their results so the countries with the highest 'economic freedom' indexes also have the highest growth.

Corporate tax is also slightly higher in most Scandinavian countries (and effective tax rates will be even lower in the UK/US due tax havens).

elm

Here's the meaningful part of Yglesias's comment:

some of the solutions offered by some protestors are unsound. This is all the more reason that liberals with confidence in liberal solutions should show up and try to persuade people to champion a more sustainable set of economic policies.

The Occupy Wall Street protestors must be co-opted and serious people (like, for example, Matt Yglesias) should be put in charge of implementing their own solutions.

Rich Puchalsky

"The Occupy Wall Street protestors must be co-opted and serious people (like, for example, Matt Yglesias) should be put in charge of implementing their own solutions."

To be fair, that's pretty much the position of every existing tendency with regard to OWS. My blog post plus comments here has a good sample.

Everyone who is actually going to try to do this is in OWS or one of its regional groups already, so that kind of "we should show up and educate them"thing is becoming more and more dated.

David Kaib

Harold @25,

A very good point. The uses of military hardware for domestic purposes, for responding to protestors, immigrants / borders, urban drug use, etc., is big business.

shah8

The OWS movement is inherently incapable of offering any sort of sustainable policies. I find it weird to expect sustainable policies, and I certainly would not "advise"such a movement about potentially better policy goals.

It's just a phenomenon. That doesn't mean that there aren't important things underlying it, or that it can't be important in its own fashion. However, it's a signal/symbol and not an action per se, and its importance has to do with that.

Charles Wheeler

"Neoliberalism was never – or was never supposed to be – the view that being in favor of trade liberalizaton means market fundamentalism in everything. Neoliberalism says market liberalization should go hand in hand with progressive taxation and appropriate regulation so the pains that buy the gains are mitigated and borne equitably."

Well, they've certainly had me fooled all this time. There was I thinking 'neoliberalism' meant privatisation, small government, more regressive taxation to float all the boats, slashing state spending on healthcare, education and pensions, increased inequality, lower social mobility, sink or swim economics.

How silly.

john c. halasz 10.22.11 at 6:24 pm

@9:

"In country" inequality has been rising "globally".

geo 10.22.11 at 6:27 pm

Yglesias has (quite rightly) taken a lot of criticism in this and previous CT threads, but my hat's off to him for his TNR symposium comment. Though their presence and influence is now fortunately on the wane, those smug bastards at the New Republic have done considerable damage over the years, and it's nice to have someone they respect tell them so, however politely.

bert 10.22.11 at 6:40 pm

Talking of broad appeal, it's not just Mitt Romney making nice:

Kozlowski says he shares the outrage over corporate greed expressed by the Occupy Wall Street protesters, many of whom wonder why the recent financial crisis didn't send as many executives to prison as the scandals of a decade ago. "I understand their frustration," Mr. Kozlowski said in an interview in a visitors' room here at the Mid-State Correctional Facility.

http://dealbreaker.com/2011/10/guy-who-used-company-funds-to-throw-wife-birthday-party-featuring-vodka-pissing-ice-sculptures-morally-offended-by-corporate-greed/

Colin Danby 10.22.11 at 7:54 pm

One of OWS' strongest insights is that finance is not played by neoliberal rules: losses are nationalized.

And this pattern is not unrelated to a rising Gini coefficient, because the part of wealth that is thereby protected is relatively concentrated. This connection has been made by none other than Tyler Cowen: http://www.the-american-interest.com/article.cfm?piece=907 (start at about the middle).

Krugman has also recently restated an obvious point: financial institutions that are likely to need bailouts in bad times should be regulated in good times-and this means regulation covering the whole balance sheet, not just fine-tuning capital requirements.

One of the many meanings/uses of "neoliberal"was in the push for financial liberalization in the 80s and 90s: both domestic deregulation and lifting of restrictions on cross-border finance. Larger financial mkts would better allocate finance. Of course this meant comprehensively forgetting the politics of bailouts. For me the canonical critique is Carlos Diaz Alejandro's 1985 paper: http://www.econ.uchile.cl/uploads/documento/27d99b44b4a2c5d46679ee694d81b18a2289a728.pdf

In any case the questions in the final paragraph of the initial post seem to me rather too broad. I would rather think through different kinds of markets than have to opt for one or another fundamentalism re "markets."

Brad DeLong:

Tim Worstall whines:

"Standard whine: neoliberal seems to have two different current meanings. Hayek/Friedman etc style and Yglesias/DeLong style. The latter seemingly being a recent and American neologism. /whine."

Manfred Steger and Ravi Roy's "Neoliberalism: A Very Short Introduction" calls Bill Clinton and Tony Blair "second wave neoliberals".

David Harvey's "Brief History of Neoliberalism"is, if I recall correctly, rather strident in its claims that their ain't a dime's worth of difference between Reagan and Thatcher on the one hand and Clinton and Blair on the other.

It's not an American neologism. It's not recent either-people have been calling me a "neoliberal" since at least 1993…

Brad DeLong

Ben Alpers 10.22.11 at 9:29 pm

@51: The U.S. neologism is indeed not very new (it's from the early 1980s), but it has a distinctly different meaning from Steger, Roy, and Harvey's usage. As someone pointed out upthread, the core difference is that while the early 1980s U.S. "neoliberalism"was proposed as a variation on what Americans mean by liberalism (i.e. the mildly social democratic legacy of the New Deal and Great Society), "neoliberalism" in the sense that nearly everyone else uses it is a variation of liberalism in the European sense.

Things are further complicated by the following factors:

1) Neoliberals (in the American sense) sought to move the Democratic Party to the right, especially on economic issues.

Though they adopted the self-descriptor "neoliberal" as a parallel construction to "neoconservative," the policies they proposed were also often neoliberal in the more usual, international sense (which is, incidentally, largely used as a pejorative, unlike the U.S. term in its heyday).

2) The U.S. term "neoliberal" had virtually disappeared from public discourse by the early 1990s. It was replaced by terms like "third way" (another term with competing meanings) and "New Democrat."

3) Meanwhile, the more internationally usual usage of "neoliberal" began to enter U.S. public discourse in the 1990s. Unsurprisingly, in the US context, "neoliberal" in the international sense was most effectively applied polemically against people who, a decade earlier, would have called themselves "neoliberal" in the U.S. sense, as these were actors who nominally presented themselves as being on the left, but in fact were not.

Though the vast majority of American conservatives are as neoliberal (in the international sense) as, e.g. Bill Clinton, saying so is less polemically interesting.

Ben Alpers 10.22.11 at 9:34 pm

Just to clarify my last point: calling political actors who present themselves as liberals (in the American sense) "neoliberal" (in the international sense) is, in effect, denying that they are liberals in the U.S. sense at all. The folks who coined the American term "neoliberal"in the 1980s (and a much smaller and more recent group of people like Matt Yglesias who seem to be trying to revive the term to describe themselves), on the other hand, use it precisely in order to continue to lay claim to the legacy of American liberalism, while largely embracing the policies associated with liberalism in the European sense.

Watson Ladd 10.22.11 at 9:41 pm

Salient, the proof that a business benefits society is its customers and its employees. You aren't proposing a world in which human efforts meet human needs as part of a global division, but a return to the 1950's.

Mandos 10.22.11 at 9:59 pm

I would like to second, third, and nth Mitchell Freedman at 24. That is the key point about this situation. Economists of a "utilitarian consequentialist" bent of mind would like us to treat the outcomes/allocation of resources as the moral object, and the means of distribution (trade, prices) as morally neutral.

Then they can propose astonishingly absurd things like "the winners can compensate the losers".

This -- promising post hoc rectification of unsustainable situations--is the overall pattern of prescriptions from mainstream economics, and the only real response is to demand prior restraints on inequality: by restraining trade, capital flows, etc.

Barry 10.22.11 at 10:27 pm

"It's not an American neologism. It's not recent either-people have been calling me a "neoliberal"since at least 1993…"

Brad DeLong

IIRC, you've been calling yourself that for a while, to the point of having a blog post where you marked your neoliberal beliefs to market.

John Quiggin 10.22.11 at 11:03 pm

I agree with Rich that the window-smashing was in reality Some Guy with a Sign. I also think OWS has done a much better job getting that point across than was done 10 years ago. Of course, people like Patrick Howley have helped in that task – the presumption now is that it's not even Some Guy with a Sign but a conscious agent provocateur.

bob mcmanus 10.22.11 at 11:07 pm

Whatevah, alpers

David Atkins at Digby's place has a great history of the fight between assets and wages since the 70s. "It has to do with a battle between the forces trying to raise wages, and the forces trying to raise assets. "Keys off Schumer's terrific plan to offer visas to foreigners who buy the foreclosed houses of the outsourced and downsized Americans, who can then just die.

Assets vs. wages. Capital vs labor. Which side are you on. This is not complicated.

I'm wise to the lies of the company spies.

bob mcmanus 10.22.11 at 11:20 pm

halasz at 37 in the "Wealth and Recession" thread also does the asset-inflation class war thing. I know which side he is on. I know which side his opponents are on,

"…and we get in the main the contradictory policy response of attempting to restore the status quo ante, through reflating asset prices with extraordinary monetary policy, while imposing fiscal austerity."…jch

NGDP targetting has pretty much outed itself over at Nick Rowe's place this week. I knew from day one that Sumner was about asset inflation at the expense of wages, employment, and gov't services. I just didn't have the cops to explain it.

Rowe actually came out with the accusation of "envy"to anyone who would stand in the way of Chuck Norris.

MSM economists haven't given a damn about wages and human beings for thirty years, and they aren't starting now.

Antonio Conselheiro 10.22.11 at 11:48 pm

49: Efficiency is an aspect of prudence. The main but but seldom-expressed objection to violence at demonstrations is not "Violence Is Wrong"but the recognition of the state monopoly of legitimate violence. If a cop shoots a demonstrator it's unfortunate but he gets the benefit of the doubt, but if a demonstrator shoots a cop it's monstrous. And this can be reasonable, though your attitude toward police violence is an index of your authoritarianism. And as the state's legitimacy becomes more doubtful, the demonstrators' violence becomes more legitimate.

The momentary devotion to Gandhi of loyal citizens facing violent demonstrations is at best the commonsense acceptance of the status quo monopoly of violence, if it isn't a concern troll attempt to delegitimize the demonstration.

I'm sure that scholastic casuists had an explanation of why government violence is OK, while the same act by a private citizen would be immoral and wrong, but non-violence should be left out of it.

Another index of authoritarianism is the degree to which the heinousness of small violent acts is multiplied when it's perceived that they are directed against the state power. Small-time vandalism isn't even a felony in most places, but many feel that one demonstrator's (or provocateur's) vandalism can delegitimize a whole movement. But that's just an index of authoritarianism again, and a litmus test for your relative acceptance of the status quo.

People should prepare their response to the first violence, because it will come sooner or later. My own opinion is that we've entered the zone where delegitimization starts to become reasonable, but few agree with me on this or anything else. Sometime things do change, though.

mpowell 10.23.11 at 12:52 am

NGDP targetting has pretty much outed itself over at Nick Rowe's place this week. I knew from day one that Sumner was about asset inflation at the expense of wages, employment, and gov't services. I just didn't have the cops to explain it. Rowe actually came out with the accusation of "envy"to anyone who would stand in the way of Chuck Norris.

Not that your opinion really matters Bob, but if this is the kind of attitude you're going to bring to the subject the only way you are going to help shift the status quo to the left is if there is an opportunity for violent revolution. Maybe this is what you're hoping for, but there are an awful lot of problems with that outlook. In the meanwhile, I'm not going to confuse people like Sumner for what they are. And that is someone who is unlikely to be a big supporter of the 99%, but is an advocate for sane monetary management in a legitimate effort to improve economic growth on behalf of everyone. I don't know what you think you've discovered about him recently but bringing down unemployment is almost certainly a necessary precondition to improving worker incomes.

I also find it quite remarkable that Yglesias comes in for so much criticism regarding the neoliberal agenda. Liberalism lost control of the Democratic party at least before Yglesias was in college. I don't see how he's responsible for it. Regarding actual policy proposals on the table in the United States, I don't remember him taking the 'wrong' view except on Iraq and ed reform. The former I'd ascribe to naivete and the latter pigheadedness. The folks at TNR will not waste any time undermining a legitimate effort to recapture the Democratic party or the national discourse for the left, but I don't have any reason to believe Yglesias would join them, this article being exhibit A.

John Holbo 10.23.11 at 1:57 am

Refighting the battles of the past it is then!

Most critics of neoliberalism think it is fundamentally a dishonest economic philosophy – a mask. It's just apologetics for malefactors of great wealth that dare not speak its apologies.

This is a really really important concern. If you have a philosophy that lots of people will pretend to espouse, for strategic and merely rhetorical purposes, then it's a bit hard to believe that philosophy when anyone espouses it. The bad drives out the good.

Nevertheless, it's mistaken (I think so) to explain, for example, Matt Y's or Brad DeLong's neoliberalism as cunning or even just knee-jerk defense of the interests of the 1%, wrapped up in faux concern for the 99%. Nor is it the case that they are just Gertrude Himmelfarb-lite, or any of that.

The hermeneutics of suspicion is an important tool, and it is unquestionably your best entertainment value. Even so …

OWS might be regarded as a kind of litmus test, then. Not definitive or anything. My point was that neoliberal, as it has been espoused over the years, ought to be sympathetic to the grievances of OWS. If neoliberals at TNR aren't sympathetic to those grievances, I would conclude that, for them, neoliberalism was a mask something more like market fundamentalism. And if neoliberals like Matt Y and Brad DeLong are sympathetic, that just goes to show that they actually believe in neoliberalism, in the sense that they are sincerely committed to its stated normative goals.

All this is consistent with saying that neoliberalism is still a strategic catastrophe, because you always get the liberalism first – that is, the market stuff – and then you never get the 'neo'. Because the process of getting the liberalization stuff erodes the progressive base that could demand the 'neo'. And the paranoid point applies here, too: if neoliberalism requires sincere neoliberals, in positions of power, to implement it, and – in the nature of things – most neoliberals are really just apologists for malefactors of great wealth, wearing a mask (or holding a copy of TNR in front of their faces) then you've got a problem. I'm increasingly sympathetic to that point of view. But again, this is Matt's point, too.

John Quiggin 10.23.11 at 2:15 am

"If a cop shoots a demonstrator it's unfortunate but he gets the benefit of the doubt, but if a demonstrator shoots a cop it's monstrous. "

Right now, I think Deputy Inspector Anthony Bologna is wishing that rule still applied the way it usually does. For that matter, I don't think there is likely to be a Bull Connor Memorial in the Mall any time soon.

But your point about the presumption is valid. If a demonstrator throws a punch, and a cop uses a baton and pepper spray, it won't matter who hit who first – the cop will, as you say, get the benefit of the doubt. The tactical implications are pretty obvious.

.66 jjllss33 10.23.11 at 2:17 am

We are rapidly approaching, for obvious reasons, the point at which fifty percent of the work force (including foreign workers) will be able to produce all that society can reasonably consume. The inevitable result is high unemployment forever,

Is there an obvious and easy solution? No. Perhaps some form of job sharing (see the German Kurzarbeit program) can contribute to a solution. But we need to prepare now for this scary but inevitable future.

john c. halasz 10.23.11 at 3:21 am

@62:

I'm not denying that, say, Red China, is on average much better off with rising inequality, but also a large growth rate, vs. earlier when things were far more equal, but everyone was dirt-poor, obviously. (Red China's Gini is now around 47, just a hair more than the U.S. at 46.7).

And some countries, such as Brazil, have seen declining inequality, with its Gini falling from 62 to 56, real "progress", which was no doubt felt by the popular classes, which is why Lulu retired from office with an 80% approval rating, though it's still a very high level of inequality. However, the U.S. and the E.U. together are 50% of world output, at least measured in $ terms, with Japan maybe another 5-6%, etc., so rising inequality in developed countries/economies plays a large role in the overall picture, whereas the only thing that is required for "between-country"inequality to diminish is that growth rates in "developing"countries/economies exceed those of developed ones, which is easily the case, since the latter are starting from a much lower level, playing catch-up, and are not at the technical production possibility frontier.

So it's not prima facie clear how much the declining "global" inter-country inequality really counter-balances the "global"rise in intra-country inequality, as a justification, nor an explanation. What does seem clear is that the old "Kuznets curve", whereby developing nations experience rising inequality, as developing, modernizing sectors race ahead of traditional sectors, whereas, as development/modernization takes hold across sectors, inequality should decline, is holding up. Which should be cause for some re-thinking of both theory and evidence.

William Timberman 10.23.11 at 4:23 am

JH @ 64

From where I stand on the left, the difficulty with both the angelic and demonic strains of neoliberalism is only incidental, and only incidentally a matter of economics. Both strains define what's gone wrong with modernity as a management problem. Concerning our present crisis, DeLong freely admits that we thought we had it under control, and I was surprised to find that we didn't. Sometimes he feels a little bolder and goes so far as to claim that we know what to do, but not how to make anybody do it. Implicitly in such statements, and more explicitly in others, he advances the two-part thesis that a) once we figure out the politics, we'll be home free, and b) we don't need any help doing that from people who are both too stupid and too ignorant to run the machinery of the economy, and by extension the machinery of civilization itself. That, in case anyone fails to get it, means most of us. Democracy, in other words, is not only not indispensable, it's mostly a pain in the ass.

To which I reply, even if it's all true what you say, Matt and Brad, it's deeply unsatisfying. If what we've got is the best you technocrats can do, we don't really care whether you want our help or not, you're going to get it. We suppose we should be sorry for the inconvenience, but maybe we'll wait to apologize until we see how well we do.

Dr. Hilarius 10.23.11 at 6:04 am

David Kaib @ 15 makes an important point. The portrayal of anti-WTO activists by the MSM as isolationist cranks was completely wrong while being very effective in marginalizing WTO critics. In Seattle, a few broken windows and one (and only one) fire in a dumpster was all it took for shift the focus off of economic and environmental violence worldwide. This was, in turn, a repeat of the vilification of anti-Vietnam protests: "don't you people know that violence never solved anything?"The OWS people must be violent, otherwise why so many cops around them?

Contrast the above with the Tea Party folks showing up at Obama events with open-carry firearms. No response from the cops, Secret Service or right-wing lawn order types other than tepid recitations about 2nd Amendment rights. And this was in an atmosphere of public jokes about killing Obama. This old leftist was actually surprised, recalling acquaintances getting Secret Service visits for clearly farcical statements. The Panthers public displays of arms was all it took to get them killed in their beds.

Liberals, neo, neo-classical, or otherwise, have become little more than token opposition to the the 1%, a fig leaf on naked economic exploitation.

Chris Bertram 10.23.11 at 6:58 am

Here's that Saez graph set for the real income gains of the 1990s:

http://www.stateofworkingamerica.org/pages/interactive#/?start=1990&end=2000

Sandwichman 10.23.11 at 7:37 am

OWS has already changed the conversation. The cat is out of the bag. As my articulate new friend, Jay Smooth, says in his fantastic video, "I looove the way OWS manipulates the news media cornballs into outing themselves as cornballs."

http://youtu.be/i9zkQcLi4Yo

That's the dynamic now. Does something have something to say for themselves or are they another cornball competing in the news media game show to see who can build the biggest straw man?

Everyone knows the Wall Street/Washington three-card monte game is rigged. Why does anyone want to waste my time telling me OWS should do this or it should be like that or it won't be effective unless it…

OWS has already changed the conversation. The cat is out of the bag. End of story.

Sandwichman 10.23.11 at 7:56 am

So from 1993 to 2001, the richest 10% got 63% of the growth in real income.

Mandos 10.23.11 at 8:30 am

But the point, Brad, is that neoliberal policies (in the sense of what was wrought under Clinton) are self-undermining, even when they "succeed," leaving aside rather quaint arguments about Nader.

Henri Vieuxtemps 10.23.11 at 9:07 am

Yeah, if only Gore got elected, the top 1% would've been in trouble now. And the 99% swum in luxury. Lol. So, it is the case of "neoliberalism has never really been tried". Really, there are only two possibilities here: utterly idiotic or outright disingenuous.

Harold 10.23.11 at 12:56 pm

Clinton and Gore, with their policies of demonizing welfare and the federal workforce, represent neo-liberalism par excellence. They threw the poor under the bus. They did some good-I'm not sure what.

john c. halasz 10.23.11 at 1:12 pm

@86:

"Given that we've two global phenomena going on here, it seems a little odd to blame either of them on domestic policies in any one country."

A fine piece of sophistry, directed at what no one claimed. There are not two entirely separate "global"phenomena, but rather an overall pattern of global income distribution in which an analytic distinction was made, which, after all, suggests some connection between the two. And no one is blaming them on "domestic policies in any one country", since they are correlated with MNC and Wall St. Hi-Fi sponsored globalization and financialization, which, by definition, span the globe and influence domestic policies and international co-ordinations across numerous countries. Though some countries are more equal than others, in being associated with the promotion of these globe-spanning organizations.

john c. halasz 10.23.11 at 1:54 pm

@89:

Yes, there are various data sources with differing measures and Gini estimates alone can vary widely. I did recently eyeball a chart,- (sorry, no link),- listing Ginis for a large number of countries and their 20-year change, and Ginis declined for just a very few countries and rose for the large majority, sometimes modestly, sometime by a lot.

As to those Nordic Ginis, pre-tax they are actually quite high and are sharply reduced after-tax. I'd suspect that some of that pre-tax income leaks out through, er, international trade exposure and shows up elsewhere.

Peter Dorman:

Back to the original post-although the thread has been fascinating.

Here is my take on neoliberalism: In the parts of the world (just about all of it except the US) where liberalism meant support for limited government, civil liberties, cosmopolitanism, anti-militarism and free markets, neoliberalism means support for free markets, period. A neoliberal is willing to use repression and war to impose free markets on the unwilling. This would horrify traditional liberals.

In the US, where liberalism refers to activist government in the tradition of FDR and Dewey, neoliberalism refers to a reformulation that embraces markets and rejects the ethical critique of profit-seeking.

US neoliberals want free trade, outsourcing of government functions (e.g. charter schools or even vouchers), market-friendly environmental policies, etc. On the financial crisis front, a neoliberal like Geithner probably stays awake at night thinking of new ways the government can make financial stability profitable.

I am not casting judgment here, just describing. For what it's worth, over the years I have moved a bit toward some aspects of neoliberalism, but mostly not.

The alter-globalization movement definitely had the "wrong"issue at the wrong time. Trade liberalization was a core commitment of US neoliberals, and they were armed with a theory that said that (a) unrestricted trade is in the collective interest of every society, (b) nevertheless some interest groups would lose out, and therefore© those who understand (a) and (b) must either defeat the "losers", buy them out or both. Most economists to this day think that (a) has the status of a mathematical truth, even though this is not at all the case.

On top of this, the liberalization of developing countries in the 80s as a condition of life support in the post 1982 period and the entry of the ex-Communist world into the capitalist world market in the 1990s dramatically raised the stakes for trade and capital liberalization. The purpose of trade and investment treaties like NAFTA was to make as permanent as possible the liberalization temporarily achieved through pressure. Backsliding would have severely restricted profit-making opportunities. Between the intellectual and political-economic arguments, there was no space at all for opposition to the trade agenda short of outright rebellion.

The OWS situation is similar and different. Impinging on the freedom of investors to pursue the highest returns possible under the broadest public guarantees possible is also very dicey from a political-economic standpoint. The 1% has a lot of money and a lot of power. OTOH, the intellectual argument is clearly not there in this case. The global justice crowd could be attacked as "protectionists"(which some of them were), and it was difficult to explain why that was misleading, but the corresponding epithet, "populists", is not very epithetical (to coin a word), nor does it point to a ready-made frame in the sense of the free-trade-versus-protectionism trope.

On top of which, the views of elites of all sorts have been called into question by the economic morass, even to the extent of engendering some self-doubt at the very top of the economic pyramid.

It's a more favorable moment.

Sandwichman:

Brad DeLong @ 75:

We neoliberals-in-power got an awful lot of real wage gains and considerable gains in employment back in the 1990s. If the proof of the pudding is in the eating, that was pretty tasty "neo", IMHO at least…

And here is what that pudding looks like (drumroll): http://anticap.files.wordpress.com/2011/10/top.jpg

Will there be cake with that pudding or just pie-in-the-sky?

A Brief History of Neoliberalism by David Harvey

Amazon.com

Izaak VanGaalen (San Francisco, CA USA), June 15, 2006

A Critical Look at the Post-Keynesian Era

The term neoliberalism is usually heard in the pejorative sense, often coming from Latin American leaders such as Hugo Chavez and Evo Morales. The term refers to an international economic policy that has been predominant in policy-making circles and university economics departments since the 1970's. The four faces on the cover of this book (Reagan, Deng, Pinochet, and Thatcher) are considered by David Harvey the primemovers of this economic philosophy. Reagnomics, Thatcherism, Deng's capitalism with Chinese characteristics, and Pinochet's free market policies marked the beginning of new era of global capitalism.

Neoliberlism as a philosophy holds that free markets, free trade, and the free flow of capital is the most efficient way to produce the greatest social, political, and economic good. It argues for reduced taxation, reduced regulation, and minimal government involvement in the economy. This includes the privitization of health and retirement benefits, the dismantling of trade unions, and the general opening up of the economy to foreign competition. Supporters of neoliberlism present this as an ideal system. Detractors, such as Harvey, see it as a power grab by economic elites and a race to the bottom for the rest.

In this short, but very well researched book, Harvey charts the capital flows of the last thiry years. In the 1970's, there was the breakdown of the Bretton Woods system, with its fixed exchange rates, tariff barriers, and capital controls. It gave way to floating currencies and high trading volumes. Capital started searching the globe for comparative advantage. Proponents claimed that this routed out corruption and inefficiencies, while opponents saw instability and exploitation.

Indeed, Harvey produces ample statistics showing how the rich got richer and the poor stagnated. More surprisingly, he points out that the aggregate economic growth during the years of Keynesian management (the decades between World War II and the 1970's) was greater than during the neoliberal era (the 1970's to the present). The neoliberal era benefitted mainly the wealthy. In the US, the richest 1% now control 15% of the wealth as opposed to 8% at the end of World War II.

When Reagan and Thatcher came to power in the late 1970's and early 1980's they used their control of the IMF and World Bank to impose neoliberal policies on the developing world - especially Latin American countries. In the case of Chile, Pinochet - after violently ousting the Allende government - instituted free market policies as prescribed by the Chicago school, and was relatively successful. Other Latin American countries were not so successful, and it created a backlash of populist nationalisms in the form of Hugo Chavez in Venezuela and Evo Morales in Bolivia.

The section on China is one of the best in the book: "Neoliberalism with Chinese Characteristics". Harvey points out that China is not a pure neoliberal state. There is still heavy state intervention in the economy and management of the currency. And as a further criticiem of neoliberalism, he reminds us that China has produced some of the highest growth rates - 9 to 10 percent annually. On the downside, the gap between the rich and poor is growing, and because their currency is held artificially low they are building dangerous overcapacity.

Neither does the US, for that matter, operate according to neoliberal principles. Even as it is urging other countries to maintain minimal goverment and balanced budgets, it is running huge deficits and issuing ever more t-bills to cover its excess spending.

With China and the US - two linchpins in the world economy - not playing according to the rules of the game a crisis is bound to happen. One country is totally geared toward producing and exporting, while the other is content with importing, consuming, and creating more debt. Harvey believes that the global economic readjustment that is going to take place will be painful and possibly violent.

Harvey's excellent little book illustrates, once again, that the perfect market, presupposed by neoliberalism and classical liberalism, does not exist. Unfortunately, he does not offer any remedies to rectify the current situation, nor does he offer an alternative system. Nevertheless, this book is very insightful. Help other customers find the most helpful reviews Was this review helpful to you? Yes No Report abuse | Permalink Comment Comments (8)

Malvin (Frederick, MD USA) :

Deconstructing neoliberalism's peculiar definition of 'freedom', September 28, 2006

"A Brief History of Neoliberalism" by David Harvey is a concise and razor-sharp deconstruction of the neoliberal movement. Mr. Harvey convincingly demonstrates that neoliberalism is an ideology that has been wielded to enshrine elite privilege at the expense of people and the environment. Assiduously researched and cogently argued, Mr. Harvey offers a jargon-free and readable text that helps readers gain a greater understanding about the political economy of our neoliberal world and what this might hold for us in the future.

Mr. Harvey explains that neoliberal propaganda has succeeded in fixating the public on a peculiar definition of 'freedom' that has served to conceal a project of upper class wealth accumulation. In practice, the neoliberal state assumes a protective role for capital while it sheds as much responsibility for the citizenry as possible. Mr. Harvey details how neoliberal theory is ignored whenever it comes time to bail out corporate interests from bad decision making while the safety net for the working class has been gradually eviscerated. The author effectively intersperses the text with graphs to illustrate how thirty years of neoliberalist policies has resulted in rising inequality, slower economic growth, higher incomes among the upper class, and other measures that serve to convincingly support and prove his thesis.

Mr. Harvey's history of how neoliberalism has gained ascendancy mostly treads through familiar ground but also highlights some key events that are sometimes overlooked by others. For example, Mr. Harvey relates the well-known stories of how the Chilean coup in 1973 opened the door for Augusto Pinochet to implement the first national experiment in neoliberalism, followed by Margaret Thatcher in Great Britain in 1979 and Ronald Reagan in the U.S. in 1980. However, we also gain greater appreciation about the importance of the New York City bankruptcy in the 1970s. We learn how the city's financial crisis allowed for the imposition of neoliberal reforms in a manner that would prove to be a familiar template around the world: the rollback of labor rights, the privatization of public assets, cuts in public services, and increased policing, surveillance and political repression of a markedly polarized population.

Mr. Harvey surveys neoliberalism around the world to discover connections and to analyze its effects. He finds that the U.S. economy has benefited immensely from its ability to extract tribute from other nations, including the U.S. financial community's probable engineering of crises in developing nations in order to scoop up devalued assets on the cheap. The author discusses how economic restructuring programs imposed on poor countries has benefited U.S. and other foreign investors while it has bolstered or created a small but powerful class of wealthy individuals in Mexico, South Korea, Sweden and elsewhere. In China, Mr. Harvey remarks about the ease with which neoliberalism has found a home in an authoritarian state where the political elite have amassed their fortunes by exploiting a defenseless working class. The author is particularly concerned about the symbiotic relationship that has developed between the U.S. and China and muses about the potentially catastrophic financial situation that the two countries' mounting debts might pose for each other and the world economy.

In the final chapter, Mr. Harvey writes passionately about the need to continue building diverse democracy movements within the U.S. that are dedicated to social and economic justice. Although it is true that Mr. Harvey does not detail precisely what must be done, his thorough dissection of neoliberal ideology empowers us to effectively challenge those who hide behind false rhetorical devices in service to privilege. And for that, we should be grateful.

I give this outstanding book the highest possible rating and strongly recommend it to all.

E. David Swan (South Euclid, Ohio USA): Freedom for some, crumbs for others, February 19, 2007

On the first anniversary of 9/11 President Bush made a speech saying, `Freedom is the Almighty's gift to every man and woman in this world... as the greatest power on earth we have an obligation to help the spread of freedom.' Spreading freedom is the primary function of neoliberalization but as George Lakoff stated in `Whose Freedom?' freedom can be a very subjective term. The freedom of neoliberalism is the glory of unfettered, free market economics and the rights of corporations and financial institutions over individuals and governments. It's the freedom to fully exploit resources and workers.

From its founding America's wealthy have feared democracy recognizing that the majority, being poor and middle class, could vote to redistribute wealth and reduce the control held by the elites. After World War II, the middle class in the United States grew dramatically somewhat flattening the countries power base. As a reaction to this dispersal of power the early 1970's saw the formation of groups like The Business Roundtable, an organization of CEO's who were `committed to an aggressive pursuit of political power for the corporation'. As the author writes, `neoliberalization was from the very beginning a project to achieve the restoration of class power'. The neoliberal plan was to dissolve all forms of social solidarity in favor of individualism, private property, personal responsibility and family values. It fell on well funded think tanks like The Heritage Foundation to sell neoliberalism to the general public using political-philosophical arguments.

At the same time a group of economists were working on economic theories that developed into the `Washington Consensus'. These followers of Hayek and Friedman just happened to create economic blueprints for growth that matched up exactly with the goals of the wealthy business elites. The plans were based on the superiority of the marketplace in making wise decisions but also assumed perfect information and a level playing field for competition. As the author writes, `...eminent economic theorists [...] argue that all would be well with the world if only everyone behaved according to the precepts of their textbooks' The neoliberal economists have become so focused on growth that they seem to take a decidedly amoral approach to human suffering. Above all countries needed to focus on privatization and low taxes and definitely avoid deficit spending. What has happened is a widening of the gap between the wealthy and poor. The author suggests that rather than an unfortunate byproduct of neoliberalism or a temporary situation this is the intended result.

The great irony is that the U.S., the world's number one proponent of neoliberalism, generally finds itself breaking the rules. With high deficit spending and massive subsidizing particularly in consumerism and defense spending the United States has generally taken a `do as I say, not as I do' stance. With the amount of political appointee/lobbyists shuttling back and forth between business and government Adam Smith's `Invisible Hand' looks more and more like a crushing fist.

This was not the book I expected. This is a devastating critique of neoliberalism. I didn't agree with everything the author wrote and there are most definitely many positives that have come from globalization but the corporatization of the world has the potential to by an enormous threat. Global Warming has to be the poster child for neoliberal extremism with short term economic growth trumping the welfare of the entire world. David Harvey has a decidedly liberal stance but he backs up his views with sobering facts. Despite being a book on economics I found it extremely readable and recommend it wholeheartedly.

Swans and Zombies Neoliberalism's Permanent Contradiction by Joshua Clover

April 6, 2011

It wasn't a black swan.

The term was coined by Nassim Taleb, a former hedge-fund manager turned author of bestselling books on finance, and it served as a popular description of the 2008 financial crisis. It refers to an event of such peculiarity that it cannot be predicted or related to preceding developments. All swans are white until they aren't. Taleb's characterization had that charisma of the paradoxical analysis that says this can't be analyzed. At best you can expect the unexpected.

As months have passed and molten panic has cooled to the rocky facts of a global slowdown, this idea has been quietly abandoned. There are still a few ideologues who think the crisis was caused by the Community Reinvestment Act or by a claque of particularly invidious bankers; that it was just a few ill-advised or morally dubious decisions made by lenders, borrowers or speculators sometime in the 2000s that brought the economy to a halt. It is now high time-and highly possible-to move toward a more thorough understanding, and it is in this direction that much of the thinking and writing about the crisis has been going.

In lieu of the black swan theory, the following things have become clear. The crisis wasn't financial but economic. The supposed failure of liquidity was, in fact, insolvency; it was a long time coming; finally there was not enough actual value (as opposed to paper profits) in the circuits to sustain the economic order. This wasn't a momentary event; we are in the fourth year of an unfolding sequence that is itself the climax of a lengthier reorientation of politics, economics and social relations commonly known as neoliberalism.

Scarcely existing before 1980, the term "neoliberalism"became commonplace between the fall of the Berlin Wall and the fall of Lehman Brothers. It is surely tossed about more than understood. This much is something like common knowledge: neoliberalism's roots are in the classical liberalism of Adam Smith and John Stuart Mill, and the idea that a government exists to assure the individual liberty and economic opportunity of its people. Its parents are Margaret Thatcher and Ronald Reagan; thus, its birth is often dated to around 1979. It is inseparable from the idea of globalization, but it seems to emanate from the United States. Its ideological field contains both Republicans and Democrats; more confusing, it includes liberals and conservatives, and even-especially-neocons. It is the triumph of the liberal idea at a planetary scale. In Thatcher's famously implacable pronouncement, "There is no alternative."

And yet, lacking a serious challenge globally and going from electoral victory to victory in its home countries, neoliberalism has nonetheless managed to overcome itself. Or at least to weaken so dramatically as to seem vulnerable, if not its own worst enemy. The question of what next-whether we should be imagining an alternative to the complex of political and economic relations or pursuing a restoration-must be rather high on our agenda.

* * *

This is the question of John Quiggin's Zombie Economics, albeit phrased differently. The book offers itself as a compendium of economic ideas from the past several decades that should have been slain by the force of overwhelming counterevidence-ideas that, nonetheless, still walk among us, neither living nor dead. Quiggin, an Australian economist, dodges the term "neoliberalism"(as well as Reaganism, Thatcherism, et al.) because of concerns about ideological overtones: "The most neutral term I can find for the set of ideas described by these pejoratives is market liberalism."Why he would pursue such politesse in the midst of what will reveal itself as a decisive taking of ideological sides is not entirely clear.

The book is a survey of key concepts, and thus a nice companion to the more narrative (if less combative) The Myth of the Rational Market, Justin Fox's comprehensive intellectual history from 2009. Quiggin offers five undead ideas, from general conceptions to somewhat technical theories. These are the "Great Moderation,"the idea that we may live amid the gentle swells of the business cycle but have tamed excessive risk and overcome the tendency toward dizzying bubbles and disastrous busts; the "Efficient Markets Hypothesis,"which suggests the price is always right-that the market, as an aggregate of what everybody knows and intends, is itself the best information about value, and gets more perfect the more it grows and the less it is regulated; "Dynamic Stochastic General Equilibrium,"an array of concepts revolving around monetary mechanisms to match supply and demand, designed to mitigate inflation before unemployment; "Trickle-Down Economics,"the proposition that economic intervention should always help profit-making enterprises, said profits then purportedly flowing naturally toward wage workers and other poor people; and "Privatization,"which is more of a worldview than an idea and should by this juncture need no parenthetical gloss, being a first principle of capitalism.

The book is a cogent and readable debunking of these ideas-or at least of the market fundamentalism holding that they are true at all times and in all situations. Each idea gets a chapter, and each chapter follows a zombie Bildung wherein the idea is born; comes of age as a core concept of market liberalism; is dealt what should be a fatal blow by later developments, the culmination of which is the reality machine that Quiggin calls "the Global Financial Crisis"; and then rises from the grave, out but not down. Quiggin measures the ideas against the empirical data and finds them lacking: "The prevailing emphasis on mathematical and logical rigor has given economics an internal consistency that is missing in other social sciences. But there is little value in being consistently wrong."Quiggin also revisits some of the logic on its own terms, showing where it was always dubious and threadbare. Somewhat more provocatively, he insinuates that such ideas might have taken on the force of facts not because they described the world or made it better but because they served the interests of the mighty (see "Trickle-Down,"above; see also William Kristol and Robert Kagan's ill-fated Project for the New American Century).

Quiggin may believe he takes the side of truth against flimflammery (don't we all?). In truth, he is engaged in a partisan war of position, pillorying neoliberalism in favor of the preceding Keynesian compromise, with its allowance of regulation, capital controls and social-democratic programs. Though he admits "that Golden Age ended in the chaos and failure of the 1970s,"he concludes rightly that the current failure is "at least as bad."Older and wiser, we ought to prefer "a return to successful Keynesian policies that take account of the errors of the past."Though he occasionally promises "radical new directions in macroeconomics,"none are forthcoming.

Something rankles about Quiggin's plainspoken conclusion, despite the able history of ideas and the enjoyable skewering of some disingenuous beliefs. His book doesn't seem to take its lovely, lurid starting point as anything more than a hook. There is a rich tradition of zombies as figures of capitalism, perhaps most gloriously in George Romero's film Dawn of the Dead. Lumbering automatons stripped down to the most ingrained habits, his living dead recall nothing but ceaseless consumption. They can only return to the mall's torpid palace of commodities: they are blank, mindless, their arms outstretched for sustenance. The disease that has captured them is not a local phenomenon; as with countless other versions of the allegory, it is everywhere. Dawn of the Dead was made in 1978 and cannot be adduced either to the Keynesian or neoliberal era; it is not a withering critique of one importunate variant of modern economics but a total allegory.

Quiggin misses this. Indeed, it verges on intellectual malpractice that the fifteen pages of references running up through 2010 do not include Chris Harman's 2009 book, Zombie Capitalism: Global Crisis and the Relevance of Marx. It is not Harman's provocative text but the specter it represents that Quiggin must suppress: the possibility that the zombie arises from capitalism itself. Such scope is foreclosed. The entirety of Quiggin's historical presentation reduces to an alternation between two recent and closely related modes, which have together prevailed for less time than my mother has been alive. It is a glaring omission to leave unexplored the fact that the conditions under which Keynesianism thrived-a historically high rate of profit, driven by an unchallenged imperial leader-no longer obtain, and do not seem on the verge of returning, for reasons that have very little to do with the stinginess of Obama's stimulus or the dearth of WPA-inspired work programs. Those are ways of treating the symptoms; they are far from a diagnosis, much less a cure. In such circumstances, a reversion to Keynesianism is somewhere between a tactical retreat and wishful thinking writ large. But the intrinsic flaw of the book is that Quiggin is unwilling to apply his analytic frame to the larger picture, to wonder whether his most basic assumptions might themselves be due at the boneyard.

The Crisis of Neoliberalism confronts the same situation as Zombie Economics, and its authors surely share much of the same skepticism regarding the intellectual landscape. Amplifying the glimpses found in Quiggin, French economists Gérard Duménil and Dominique Lévy proceed from the somewhat heterodox proposition that ruling ideas arise not from their persuasive power or inner logic but from the interest of ruling groups. Quiggin's limits present themselves clearly in his choice to go after these ideas rather than their political foundations; it's a bit like attacking a lemon tree by plucking its fruit.

Duménil and Lévy move directly to the social and political history that led us to this turn, the underlying situation in which such intellectually bankrupt ideas could prevail. And what might become of a world that can no longer sustain such beliefs. As they say, "the stakes are high."

Though elements of their analysis proceed (in their words) "à la Marx,"the book is scarcely what one might thereby expect-that is, the opposite of Quiggin's unreflective apologia for capitalism's premises. There is barely a trace of schadenfreude at neoliberalism's misfortunes, much less a flare of revolutionary fire; the Marxism is largely a matter of fidelity to the idea of social class and the significance of class struggle. The authors are less polemical than Paul Krugman or Joseph Stiglitz, though like them Duménil and Lévy tend toward the empirical. The book makes sincere use of charts and graphs, though not more than the thoughtful reader will appreciate. Moreover, the pair have previously made the case that global capital was actually doing better than many of the left's crisis mavens would admit. In brief, they argued that if one filtered out certain capital-intensive industries (railroads, mining and the like), the economy had succeeded in recovering to boom levels of profitability sometime in the '80s, largely through the artifice of depressing real wages and lowering corporate taxes. The neoliberal program, they concluded, had worked.

But worked for whom? The two argue (like David Harvey in his clarion A Brief History of Neoliberalism) that neoliberalism is not a collection of theories meant to improve the economy. Instead, it should be understood as a class strategy designed to redistribute wealth upward toward an increasingly narrow fraction of folks. This transfer is undertaken, they argue, with near indifference to what happens below some platinum plateau-even as the failures and contradictions of the economic system inevitably drive the entire structure toward disaster.

Duménil and Lévy offer two provocative and interlocking schemas. They decline the bluntest of Marxist oppositions, which supposes a world divided only between owners and workers. But they equally abjure the endless proliferation of categories and distinctions, the slippery slope of micro-differences that leads to the paradoxical homily of conventional American thought: that individuals are just that, and thereby classless-and that everybody is middle-class. One might well see in this the shadow of Thatcher's other hyperbolic dictum of neoliberalism: "There is no such thing as society. There are only individuals and families."

Duménil and Lévy are having none of that. Instead, they proffer the simplest possible formulation that allows for both the existence of class interest and the dynamics peculiar to the current epoch. With the modern increase in size and complexity of enterprises, a managerial class came into being to run the show on behalf of owners. This new cohort is distinct from modernity's legion of clerical staff, who are grouped with production workers into what the authors call (after the French tradition) the "popular classes."

The new managerial class rests between that stratum and the capitalist class proper, and therein lies the tale. For Duménil and Lévy, the century is a story of shifting alliances. In the century's first third, this tripartite formation comes into being under the auspices of a new breed of monopoly barons. In the period following the Great Depression came an alliance between the managerial and popular classes; this "compromise to the left"is the enabling condition for the Keynesian era, the Long Boom and eventually the cluster of political and economic failures that defined the 1970s. The last third of the century can thus be called "the neoliberal compromise"-a "compromise to the right"between the managerial and ownership classes, with its own restoration of capital's power (hence the title of their previous book, Capital Resurgent) at the expense of the popular classes.

The book's other seductively lucid schema concerns the history of structural crises, which follow an alternating pattern. The authors count four in the "long twentieth century": the first "great depression"in the 1890s, the Great Depression, the 1970s collapse and the current morass. The first and third they identify as crises of profitability; the second and fourth, crises of "financial hegemony."In these periods the profit rate is relatively stable, but the unchecked power of the upper echelons allows for unsustainable demands. They are gilded ages, perhaps; yet every such age gilds not the lily but the tulip: they are built out of bubbles. With the wealthy unwilling and the poor unable to support the mountain of social debt, the bubble eventually pops. This is, for our authors, the nature of the present crisis, and it is from here we must seek a way forward.

Duménil and Lévy see a series of branching possibilities, none of them brilliant. In line with Quiggin, they can imagine a New New Deal with Keynesian characteristics, as well as a short-term restoration of the neoliberal regime under the fig leaf of a couple of regulatory concessions. This latter is a fair description of what we have seen so far; there have been only the most timorous signs of the consequential social and labor militancy that might force a renewal of the New Deal.

On balance, their vision remains one of American hegemony, if their more sophisticated historical model allows them more nuanced forecasts than Quiggin's Manichaeanism. For them a less likely, but not impossible, outcome is a real lurch to the far right, of the sort presaged by the Tea Party and its ilk-wherein ascendant economic distress opens a path for a craven and belligerent nationalism. But their most suggestive scenario is a renewed compromise to the center-right. This time, however, the managerial classes will not be a supplement to higher powers but will be the leading faction. This "neomanagerial capitalism"would be empowered to contain the volatilizing influence of the lords of finance without yielding economic ground to the popular classes.

* * *

This is a somewhat gnomic conclusion. Certainly, it is appropriately sober and takes the book's preceding logic seriously. It follows a clear and elegant trajectory leading from the pair's model of the long twentieth century and from the underlying nature of its crises and class dynamics. Yet certain things about it are obscure. It is not entirely clear how such a development would, in the immediate future, restore the solvency of the West (and recent indications are that China may be resting on a bubble). At a concrete level, then, the management in question would be something on the order of a super-powerful central bank maintaining rigorous control over a zero-growth economy that is mortally sensitive to the slightest imbalance. It is hard to see this coming to pass without dramatic changes to the ideological landscape, and it is hard, in turn, to imagine such a revolution just to achieve centrally managed capitalism. Surely revolution would have better things to do.

A further analytical conundrum arises in Duménil and Lévy's rigid distinction between kinds of crises, treating each as a discrete event concluding its own sequence. This risks reproducing Taleb's error at a more subtle level: in their accounting, each crisis-punctuated era becomes a singularity-not quite unexpected but unthinkable beyond its own particulars, a three- or four-decade swan.

It might make more sense to see each of the periods as overlapping in a complex and extended chain. From this perspective, each crisis would end one era and start the next, and each era would thus link together a pair of crises into one sequence. This would allow us to consider the past two dramatic failures as part of an ongoing story: to see the 1970s decline in profits and the current crisis of financial hegemony as facts that together form a unity. Neoliberalism is less a new era, in such a view, than the specific outcome of the earlier bust.

It would not be terribly unfaithful to Duménil and Lévy's thesis to suggest that neoliberalism is less an economic system or social order than global capital's management style for a situation of lower profits. In this sense we might recognize the birth of neoliberalism not in the ideologies of Thatcher and Reagan but in the California tax revolts of 1978: what played at being a moral jihad of suburban homeowners was simply part of an intensifying competition for a smaller pool of profits. Similarly, New York City's 1975 brush with bankruptcy was a struggle between municipal government and Wall Street over insufficient revenues; the utter triumph of the latter was the shape of things to come.

But the seeming restoration of profit by the financial sector proved illusory. The neoliberal strategy of opening new markets to sell more widgets, and internalizing more cheap labor into the growing empire of capital, arrived both at diminishing returns and at the limits of the globe. One could say that the '70s crisis was a wound to the economy; the following decades provided a series of wrappings, poultices and painkillers. The blowout of 2008 was akin to their sudden removal-beneath which the old wound had only deepened and abscessed. Real profit was not restored, even if the profit rate briefly danced on air; it was a temporary fix to a permanent contradiction.

The current catastrophe is a rare creature, to be sure. But it is not a black swan; it is a zombie. It is the last crisis come calling, and the one before that and before that again-not just returned but fortified by the intervening years and the deferral of a reckoning. This crisis that keeps returning, now dressed in finery, now in rags, is evidently not a monster sprung from one particular deviation. Global crisis is, increasingly, the unnatural natural state of modern capital. It will not be laid to rest by fiddling with the alignment of parts, much less returning to a previous mode-these parts, these modes, are what set it shambling forward, hungry, blindly grasping, in the first place.

[Review] The Blinding March of Neoliberalism by Philip S. Golub

Material Reviewed:

David Harvey, A Brief History of Neoliberalism, (New York: Oxford University Press, 2005)

In his seminal account of the collapse of the 19th century liberal European order, the rise of fascism and the outbreak of general war, Karl Polanyi traced the ultimate source of the "self-destruction of (European) civilization"to the ravages produced by the institutionalized utopia of a "self adjusting market"[i]. Anchored in a metaphysical construct (the "invisible hand") detached from the anthropological realities of social life, the self-adjusting market became the dominant paradigm of market societies that commodified labor, land and money. Over the course of the century, the market became "the only organizing power in the economic sphere"and the dominant institution of society. Whereas economic activity had forever been "a function of the social in which it was contained", it became a law unto itself, severed from its social foundations, "subordinating the substance of society itself to the laws of the market."

This process of universal commodification, Polanyi argued, "could not endure for any length in time without annihilating the human and natural substance of society". Indeed, most European societies ultimately took measures to protect themselves from the corrosive effects of the self adjusting market by opting in the late 19th and early 20th centuries for strong mercantilist states that pursued narrow national goals and strove for imperial monopoly at each others' expense. Mid-century transnational capitalist cooperation, embodied by pan-European networks of haute finance whose functional role was to "avert general wars", gave way to ruthless national power politics: despite the high degree of European economic integration at the turn of the century, the webs of capitalist interdependence were swept away in the rising nationalist wave.

The outcome was "a social transformation of planetary range, topped by wars of an unprecedented type in which a score of states crashed (and new empires emerged) out of a sea of blood". Fascism, a deadly pathological "solution to the impasse reached by liberal capitalism… a reform of market economy achieved at the price of the extirpation of all democratic institutions", was the predominant but not the only "solution"to the impasse of market societies: Soviet socialism in one country and Roosevelt's New Deal were synchronous alternative pathways out of universal commodification. Both emerged strengthened from the war.

In the West, social states with varying levels of protection and state intervention, reflecting different national pathways and traditions, were created and/or consolidated around a new growth regime and a new international institutional order. At the national level, the "Keynesian welfare state"appeared to resolve two of the central contradictions of capitalism: cyclical uncontrolled slides into depression and unrestrained class warfare. At the national level, the compromise between capital and labor, mediated by the state, helped to mute the competitive pressures of the market by promoting relative social fairness: throughout the industrialized West, income and wealth inequalities were significantly reduced. In Europe, this helped to contain potential challenges to liberalism from mass based Communist parties. At the international level, the institutional architecture created at Bretton Woods created a stable international regulatory framework for the capitalist political economy. In David Harvey's words, "the restructuring of state forms and of international relations after the Second World War was designed to prevent a return of the catastrophic conditions that had so threatened the capitalist order in the 30's."

As the core state in the post-war capitalist order, the United States was the driving agent of the restructuring process. It sustained the international institutions it had helped to create, and supported the establishment of (liberal) interventionist welfare states in Europe and (authoritarian or semi-authoritarian) developmental states in East Asia. This mixed-economy policy, contrary to the US's pre-war liberal credo, was not driven by altruism but by self interest: the US hegemonic project during the Cold War required a belt of stable hence prosperous subordinate states ringing the Soviet Union and the Peoples' Republic of China[ii]. This could not be achieved through the markets alone. The Marshall Plan embodied the US's interventionist management of the capitalist world economy. In the US itself the Rooseveltian welfare state took on a minimal form but it nonetheless became a major component of the postwar US state and the American political economy. Apart from a few isolated followers of the Austrian school (Friedrich von Hayek, Ludwig von Mises) Keynesianism was hegemonic economic policy: government intervention and counter-cyclical policies to stimulate demand and support the unemployed had become the orthodoxy, even within the conservative camp. "We are all Keynesians now", said Richard Nixon in 1971. Ironically, that statement was uttered the year the Bretton-Woods system began to unravel, ushering in the monetarist counter-revolution of the 80's and contemporary neo-liberal hegemony.

The proximate causes of the breakdown of the Keynesian paradigm are well known. Facing inflationary pressures due to the war in Vietnam, declining productivity, intensifying trade competition from Europe and Japan, and hence rising foreign claims to redeem dollars with gold, the US unilaterally tore down the fixed but adjustable exchange rate regime set up at Bretton Woods. The convertibility of the dollar to gold, the pillar of the post-war international monetary system, was ended. John Connolly, Nixon's Treasury Secretary, put matters bluntly: "it's our currency but it's your problem", delicately adding: "foreigners are out to screw us and it is our job to screw them first". Two years later generalized floating exchange rates reintroduced pre-war international monetary anarchy. Meanwhile, on the domestic front, prolonged "stagflation"and mass unemployment challenged counter-cyclical macro-economic policies. Inflation that had been building up since the early years of Vietnam peaked at 13.58% in 1980. In 1979, the Federal Reserve launched the global monetarist backlash by implementing highly restrictive monetary policies. Monetarism had a series of profound domestic and global effects: it forced drastic industrial restructuring and decisively shifted the balance of forces between labor and capital. By favoring rentier capitalism it restored and expanded the power of the increasingly autonomous financial sphere.

Globally, as Giovanni Arrighi points out[iii], the prolonged US rates rise restored the US's declining world hegemony by redirecting capital flows back to the US and disciplined the periphery into submission (the Latin American debt crisis of 1982). The neo liberal reconfiguration that followed was not the work of an "invisible hand". Though structural transformations played an underlying role, notably the decline of the "rust belt"industries, the neo liberal mutation would not have been possible without coercive state intervention: In the early 80's, the leaders of the "conservative revolution"in the US and UK joined forces to lock in the transformation by crushing organized labor. Ronald Reagan suppressed the air controllers' strike in the US and Margaret Thatcher waged a vicious and ultimately victorious war against the miners in the UK[iv]. Neo liberalism was thus a "political project"mobilizing the repressive powers of the state to "restore the power of economic elites."

This narrative goes some way to explaining the macro mechanisms of the paradigm shift. But it does not tell us why neo-liberalism, a contemporary globalized variant of the "self regulating market"of the 19th century, subsequently gained near universal hegemony. That is the central question of David Harvey's latest, intellectually stimulating, book. As a doctrine and a practice, neoliberalism was designed, writes Harvey, to "liberate corporate and business power (and) re-establish market freedoms"that had been contained by the social state, that is to restore "the conditions for the resumption of active capital accumulation". The restoration, theorized by a tightly knit group of ideologues in the UK and US, and legitimized by a discourse deeply embedded in the American mind on individual freedom and autonomy, had four major components:

These components, writes Harvey, were fused in the "Washington Consensus of the mid-1990's which "defined the US and UK models of neoliberalism as the answer to global problems". Those models called for limitless market freedom. "Shareholder value"became the war cry of the business class during the 90's, culminating in the later part of the decade with shameless displays of wealth, crony capitalism and corruption. Today, one of its most obscene expressions is the unrestrained enthusiasm of the financial markets whenever mass layoffs occur.

The last frontier of the free market project was opened with the collapse of the Soviet Union in 1991. Liberalization, deregulation and privatization spread worldwide to areas previously outside of market control. Led by an oligarchy of robber barons, Russia underwent "shock therapy"which it has still not fully recovered from. India began its own deregulation and privatization process, though in a far more controlled fashion. China, which had initiated an gradual state-managed policy of agricultural de-collectivization and selective international opening in the late seventies, accelerated the liberal turn in the mid 1980's. After a parenthesis in the late 80's, liberalization was deepened again when Deng toured southern China in 1992.

As anyone who has visited China over the past decade knows, the labor market has been nearly entirely "freed"from regulatory constraint, leading to Darwinian competition between the "old"industrial working class in the declining state sector and the great mass of disenfranchised and unprotected workers flowing from the countryside into the cities. Health care and the best parts of the school system have been privatized. Meanwhile, the dynamic developmental states of northeast Asia and the emerging states of Southeast Asia were subjected to intense western pressure to liberalize their capital accounts and open them to foreign investors. The outcome was the great financial crisis of 1997/1998, caused by overinvestment in short term speculative assets, whose ripple effects nearly engulfed the global financial system. That said, the spread of neoliberalism has not been a uniform process: Harvey is right to point out that neoliberalization proceeded unevenly, with local outcomes depending on the "interplay of internal dynamics and external forces", and the institutional configurations of different societies.

The external forces were the US state, the international institutions dominated by the US, and the transnational companies with a vested interest in unfettered global investment, trade and financial flows. Since the early 80's, successive US governments intervened overtly and covertly to produce outcomes favorable to American business and, more broadly, transnational companies, American or not. Given the permanence of US economic nationalism this may at first sight appear contradictory. Yet as Susan Strange pointed out in the late 1980's, "globalization"did not submerge all states, merely the weaker states of the international system: "all the decisions about the regulation of market operators and intermediaries that used predominantly to be the prerogative of each national government are now shared unevenly between a few governments of the largest and richest countries, of which the US is by far the most important". As a result, transnational firms are less autonomous than many post national theorists have claimed. They were and remain "responsible to policy decisions taken by the US government."[v] Global liberalization affirmed the US's comparative advantages in the FIRE sector (Finance, Insurance, Real Estate). Capital account liberalization allowed the US to reshape national development paths, and to dig deeply into the savings of the rest of the world (at high rates of return).

Simply put, the establishment of a global free capital market was essential for the economic and financial well being of the world's leading debtor. This helps to understand the continuity of US global liberalization policy since the mid 80's. In 1985, Ronald Reagan set out to knock down barriers to trade, foreign investment and the free movement of capital between industrialized countries, especially in Japan. His successor continued this effort though the Enterprise for the Americas Initiative, designed to support free markets and the free movement of capital in the western hemisphere. The policy was globalized under Bill Clinton: "Previous administrations had pushed for financial liberalization principally in Japan, but under President Clinton it became a worldwide effort" directed in particular at the new area of wealth accumulation in East Asia, "seen as a potential gold mine for American banks and brokerages". According to The New York Times, the Clinton White House worked out a plan, coordinated by the Department of Commerce, that "identified 10 rising economic powers from the Pacific to the Atlantic whose economies were to be opened up, and it called upon all government departments, from the CIA, to US Ambassadors abroad"[vi].

During the 90's the power political objectives of the US State and the wealth maximization objectives of market actors coincided to an extraordinary degree. Robert Wade suggested a few years ago that liberalization and the "increasing mobility of information, finance and goods and services frees the American government of constraints while putting everyone else under tighter constraints". This is undoubtedly the case. Yet, as Harvey argues, "the grim reach of US imperial power…by no means constitutes the whole story"of the global slide to neoliberalism. The US did not directly impose liberalization and opening on China, India, or continental Europe for instance. What it did was set the global agenda and create a global context favorable to local forces pursuing their own market objectives. In most emerging countries the small domestic constituencies favoring the liberal turn that were strengthened by internationalization (they are now in retreat in Latin American and South East Asia). This was also obviously the case in continental Europe and Japan where thin but very influential business circles (the European Business Round Table) were empowered by the US's turn to neoliberalism. These constituencies acted to reshape government agendas as part of a growing global elite consensus around common objectives. Indeed, private institutions of global governance became the locus of transnational elite dialogue and convergence around the neoliberal agenda (World Economic Forum), buttressing the global disciplinary function of public institutions such as the IMF.

The continuity of US foreign economic and financial policy over the past two decades does not mean however that there was continuity in other domains. While Harvey is very persuasive in his detailed discussion of the complex mix of factors leading to neoliberal hegemony, he is less so when he argues more speculatively that neo-conservatism (and implicitly the US's imperialist drive since 2000) emerged as an "answer"to the contradictions of the neoliberal state in crisis. While neoliberalism entails forms of social control, surveillance and repression – of governmentality in the Foucauldian sense – that are inherently disciplinary, it does not necessarily follow that neo-conservative authoritarianism is, as Harvey seems to imply, an outcome of a critical moment in neo-liberal rule. Underlying this is the assumption that the US hegemony has been "crumbling"since the 70's and that militarism is a convulsive response to that trend.

In fact, US hegemony which was indeed waning in the 70's and early eighties was restored in the late eighties and the nineties. Under Bill Clinton neoliberalism proceeded without militarization, through the subtle operation of governmentality within and muscular economic "diplomacy"abroad. Though it is neoliberal in the sense that it has done more than any other government to favor the owners of capital (mostly in the energy and national security sectors), the sovereign authoritarian state of George Bush, or what Judith Butler calls the Bush administration's "lawless exercise in state sovereignty", has little to do with its predecessors in all other regards. This is not a minor matter: different forms of exercise of state power under specific hegemonic configurations produce very different outcomes. There is no continuity between the silky discussion on the trading state and interdependence of the 90's and the forward march of neo-imperialism since 2000. Indeed, the US's lawless exercise of power of the past years has deeply split ruling elites within the US, but also globally.

Be that as it may, the outcome of the decades-long reconfiguration of social forces has been an extraordinary increase in social inequality. In the US, income and wealth polarization has reached levels not seen since the twenties, with a tiny fraction of the population concentrating most of the country's income and wealth. According to the Economic Policy Institute, in 2000 "the share of income held by the top 1% by income was the largest since the run-up to the Great Depression. In 1979, the average income for the top 1% was 33.1 times the income of the lowest 20% and 10.1 times the middle fifth. By 2000, the average income of the top 1% was 88.5 times that of the bottom fifth, an increase of 55.4 points."In the US and in continental Europe, average living standards have either stagnated or regressed. Inequality has also risen sharply in Asian societies with historic traditions of relative social equity (Japan, South Korea). Everywhere, large fractions of the population, the "unqualified", have been written off and left to fend for themselves. Apologists of this brutal process of social selection have naturalized the transformation, making it appear an historic necessity. Like all hegemonic narratives, neoliberal theory has cloaked the real world objectives of the reconfiguration behind high sounding ideals: "the genius of neoliberal theory is to provide a benevolent mask full of wonderful-sounding words like freedom, liberty, choice and rights, to hide the grim realities of the restoration or reconstitution of naked class power."

The reconstitution of market societies marked by extreme inequalities is not sustainable in the long run. Polanyi's analysis and warning must be kept in mind. Social backlashes of various types will emerge, indeed are already apparent: right-wing populism and religious conservatism, on the one hand, progressive movements of global social transformation (the World Social Forum) on the other. The growing demand for protection from world market forces is already translating in nationalism (Russia, for instance) or regionalism (Mercosur) in various parts of the world. Ultimately, the content and pathway of change will depend on the balance of forces of the social agencies at work. For the moment, the constituencies favoring social and democratic alternatives to commodification are in retreat in the West. But they are still sufficiently present to influence the course of events. The real test will come in times of crisis. The timing and trigger of fundamental crisis, at systemic level, is of course hard if not impossible to predict (likewise mass mobilizations still elude the grasp of the social sciences). Nonetheless, some of the conditions may be crystallizing now. In particular, the US, the main normative agent in the process of global marketization over the past decades, appears to be losing control: the country's rapidly growing indebtedness and reliance on foreign capital flows creates global financial volatility and generates systemic vulnerabilities. If the trend continues it will severely strain the world financial system.

The US already consumes 75% of world savings to meet its daily financing needs. At some point not yet determined, rising US foreign debt will conflict with the requirements of the US's main financiers. The US will then be forced to adjust. Harvey argues that to free itself from growing external constraints, the US has a polar choice: hyper-inflation or deflation, both of which imply a crisis of the US hegemonic order and hence a fundamental and possibly violent restructuring of the world system. This may be too starkly put: Clearly, under its present leadership the US is heading towards financial disaster (not to speak of the disaster produced by imperial foreign policy in the Gulf). Yet, under wiser management, the US may be able to find a softer middle way out of its present economic and financial dilemma. That pathway would however require the US's acceptance of real interdependence, that is a downsizing of US imperial ambitions and a major change in economic policy…

One needn't agree with Harvey's hypothesis, widely shared in Marxist circles, that neo-conservatism emerged as an authoritarian solution to the instabilities and contradictions of neooliberalism, or his assumptions about structural US decline, to share his intellectual and ethical concern over the neoliberal destruction of society. His Brief History is a valuable conceptual and descriptive history of the great regression of our times. It also a normative statement about what should be. In denouncing universal commodification Harvey rightly suggests that it is urgent that we reinvent and reinvest the meanings of "democratic governance", of "political, economic and cultural equality and justice". With the renaissance of the left, neoliberal hegemony has ended in Latin America. It is being challenged in parts of Asia. What is needed now is a progressive global agenda in a difficult but not hopeless reactionary age.


[i] Karl Polanyi, The Great Transformation, Beacon Press, Boston, 1973 (1944).

[ii] See Bruce Cumings, Parralax Visions (Durham, NC: Duke University Press, 1999).

[iii] Giovanni Arrighi, "The social and political economy of global turbulence", New Left Review, N° 20, March/April, 2003.

[iv] For a Foucauldian reading of this critical turning point see Noelle Burgi, L'Etat britannique contre les syndicates", Kimé, Paris, 1993.

[v] Susan Strange, "Toward a Theory of Transnational Empire", in Ernst_otto Czempiel and James Rosenau, eds, Global Change and Theoretical Challenges

[vi] Nicholas D. Kristof and David Sanger, "How US Wooed Asia to let the Cash In", New York Times, 16 February 1999.

Philip S. Golub is an editor of Le Monde Diplomatique.

Has Neo-Liberalism Failed to Deliver the Goods

Jun 5, 2008 | naked capitalism

From Juan, in response to a comment in italics by reader DownSouth:

The one place I might disagree with you is to the question as to what high oil prices represent. Are they a further manifestation of market fundamentalism run amok? Or are they the antithesis of this, a refusal by non-OECD countries to participate in a market system that demands natural resources and agricultural products on the cheap?

If price of oils was determined by cost of production/supply/demand rather than trade in financial instruments, I would place more weight on 'refusal to participate'. As it's developed since 1987, it strikes me that the producing nations and major integrated oilcos' abilities to move price has been substantially diminished.

Neo-liberal market fundamentalisms include financial opening and deregulation which, in different forms, were applied on a world scale right along with the theft of public goods through privatizations, et cet -- a 'grand' global looting had been unleashed in a (partially directed) effort to overcome systemic crisis.

Here let me repeat something which I wrote elsewhere three months ago:

Between 1965 and 1973, the U.S. manufacturing sector's rate of profit fell by 40%, a decline that worsened with the 1974-5 recession, was hit again by the severe early 80's slump, began recovering in the 1990s but peaked in 1997, falling into 2003 since which there has been some rise but - in all cases over the last decades - never to pre-1965-73 levels.

Andrew Glyn considered the world to have been "suddenly projected from boom to crisis"with the first phase of above.

The failure of political Keynesianism, and then monetarist policies to ressurect rate of profit dovetailed with a 'we don't know what to do so lets try 19th c laissez-faire on a world scale' set of policies demanded by the U.S., given voice by Reagan and Thatcher in her famous statement: 'There Is No Alternative [to a worldwide free market]', or TINA.

Borders to capital flow in all its manifestations had to be everywhere broken; state owned industries had to be privatized; poor fiscal management had to be tightened and almost everywhere on the backs of the working class and poor as needed social services were cut and cut again. Debt payments, no matter how great a percentage of export earnings, had to be made if a government were to expect future access to IMF and World Bank funds.

Neoclassical economists and their theories provided ideological justification; a sort of 'we are all neoliberals now' attitude infected world leaders until, in 1989, John Williamson coined the term 'Washington Consensus', which was very much not the consensus of those most subject to the various 'shock therapies'.

So, how did the world do under this set of misguided fundamentalisms?

"Real global GDP growth averaged 4.9%a year in the Golden Age years from 1950 through 1973, but dropped to 3.4% annually in the unstable period between 1974 and1979. Dissatisfied with the instability, inflation, low profits and falling financial asset prices of the 1970s, advanced country elites pushed hard for a switch to a more business friendly political-economic system; global Neoliberalism was the result. World GDP growth averaged 3.3% a year in the early Neoliberal period of the 1980s, then slowed dramatically to 2.3% from 1990-99 as Neoliberalism strengthened, making the 1990s by far the slowest growth decade of the post war era." (James Crotty)

As would be expected, the post-1973 annual growth rate of world real gross domestic investment fell substantially through 1996.

With the exception of parts of Asia, economic development throughout the world failed to gain traction, chronic excess capacity on one hand and credit fueled financial exuberance on the other.

Given the system's inability to create employment so rapidly as required, a glut of labor and an expanding informal sectors as well. All the 'better' to intensify the international (and domestic) competition among workers, drive and hold wages down so also make consumer credit increasingly important to retention of living standards, no matter that this has been only another transfer to loan capital.

Average weekly earnings, constant 1982 dollars, for all private nonfarm workers in the U.S. peaked in 1972 at $331.59, falling to $257.95 in 1992 until 'recovering' to $277.57 in 2004 and likely having faltered again since then.

It is at least interesting that conditions of surplus labor, lower wages, deficit funding, tech innovations, etc, have not been able to generate another long wave expansionary phase. One might even suspect that finance has been 'pumping' too much from the real and that 'long-felt unease' is related to this.'

The primary contradictions which I've seen developing over the last number of decades have been:

1. The ending of national economies v. what can only be national states, a contradiction between economic mode of organization and national states.

2. Progressive expansion of fictitious capital v. the possibility of satisfying such claims, a 'satisfying' which depends upon a) global creation of surplus value and b) substitution of credit for a relative insufficiency of realized surplus value (profit). This has provided much of the 'advanced' world with what is no more than a superficial prosperity even as it has also helped undermined its real basis. The spectacle of finance hides too much.

3. In combination, the above two have generated greater class, ethnic, international and subnational tensions. The social relations of the world capital system have become quite strained, which is not to say that capitalism is 'doomed' but that its present form has become increasingly untenable and a 'change in state' is almost certainly unavoidable, in fact seems to be underway.

Comments
mat :
why must global GDP growth be maximized in order for a global order to be considered a success? in spite of some well known ongoing wars, global violence has decreased since the 50's while average life expectancy has gone up. if we measure economic orders strictly in economic terms then we miss the purpose of having an economic order in the first place. and isn't it possible that in the 60's average weekly earnings in the US reached unsustainable levels on a relative basis? if we're taking a global perspective of things, have the declines in the US been offset by gains elsewhere in the world, particularly in asia?
DownSouth:
Juan,

First I want to thank you for the link to "OPEC Pricing Power."

http://www.td.com/economics/special/db0608_oil.pdf

I printed it out and read the whole thing and found it to be a most thorough and enlightening analysis.

Now back to neo-liberalism. Carlos Fuentes, in his book A New Time for Mexico, gives a short history and analysis of how neo-liberalism played out in Mexico--of its introduction and slow build in the administration of Miguel de la Madrid (1982-88), its unbridled application under Carlos Salinas Gotiari (1988-1994) and the ensuing crash and financial caos of 1995. In response to your comments, I would like to offer some quotes from Fuentes:

"But foreign investment was concentrated mainly in stocks, bonds, and other short-term instruments: in the volatile and transitory paper economy. Only 15 percent of foreign investment went into the real economy, into the creation of factories, increased employment, and increased production."

"It is worth recalling that the prefix neo is particularly well suited to this doctrine, which already had its chance in Latin America in the last century. Throughout the nineteenth century, Latin America followed the precepts of laissez-faire and the magic of the market, and its nations implemented policies geared toward exporting raw materials while importing capital and manufacutred goods. Powerful economic elites emerged from Mexico to Argentina. The hope was that the wealth accumulated at the top would sooner or later find its way down to the bottom. This did not happen. It has never happened. Instead, the wealth generated at the working base found its way up to the top and stayed there."

"The straitjacket of extreme protectionism, subsidized consumption and production, captive markets, and lack of competitiveness needed to be loosened--and was. But in its stead came a demonization of national states, a delusional faith in the free play of market forces, and the cruel complacency of social Darwinism in lands of extreme hunger and need."

"We now know that the shrinking or absense of the state ensures neither well-being nor order... The Mexican crisis and its Latin American repercussions should oblige us to open our eyes and realize that we are blinded only by seduction, convenience, or hypnotism. Peter Drucker, the apostle of the new economy of information, urges us to forget the neo-liberal illusion that the state must disappear. Modern capatilist societies (or postmodern, in the fashionable phrase) need neither more nor less government but better government.

"Neoliberal governments, in their purest Reaganite or Thatcherite manifestations, generated more expenditure and regulations than ever before in the United States and Great Britain and brought about the largest deficits in those countries' history."

"Financial capital has no national allegiance. It pursues its own interests, not those of the nations it visits."

"Henry Kaufman of the Wall Street Journal notes that the analysists who guide banks, insurance companies, and mutual funds no longer consider the long term. Their professional bias leads them to look myopically only at the short term--at immediate, high-risk profits, which is why this capital is not productive... We are dealing with management funds that are uncontrollable, volatile, and enamored of the short term -- enemies of productive investment..."

"As the Mexican congress debates the financial-aid package organized mainly by the U.S. government, Mexico is pledging to follow an economic policy that is precisely the one that led to the current situation: zero growth in the money supply, cuts in government spending, and more privatization. This is a renewed formula for disaster in a country that needs to stimulate growth even at the risk of inflation, as Brazil has done (though one need not go to the same extremes). Mexico has yet to learn the lesson that economists everywhere else have deduced from the crises perpetrated by the supply-side economics practiced during twelve years of Reagan, Bush and Thatcher: that to restrict money supply and spending during a recession leads to depression, not recovery."

"Mexico's nationalization of the oil industry caused the industrialized democracies to rise up against us; the subsequent boycott obliged Cardenas to sell oil to his logical enemies, the Nazi and Fascist powers... The renegotiation of the petroleum debt...was a decisive moment for the good-neighbor policy of Franklin D. Roosevelt. Beleagured by the interest groups that since 1821 had been demanding war against Mexico, invasion of Mexico, dismemberment of Mexico, suffocation of Mexico, Roosevelt courageously played the card of negotiation."

"Mexico needed--and did not get--policies encouraging investment in activities that would further employment, wages, growth, and savings. Instead, the Salinas reforms provoked a flood of speculative, unregulated capital that did not go into productive areas."

"Never has Mexico received as much foreign investment as it did during the Salinas years: almost $59 billion between January 1989 and September 1994, but of that enormous sum, almost 85 percent was speculative flight capital."

Annonymus:

The breakup of the AT&T monopoly is the perfect example of what good government in action looks like. It did not entail the complete abrogation of regulation as free market revisionists would have us to believe.

One can read about the entire history here...

http://www.ieee.org/portal/cms_docs_iportals/iportals/aboutus/history_center/yurcik.pdf

but the crucial element is this:

"Judge Greene held that as long as the RBOCs have a monopoly in the local loop they will be regulated."

Contrast the way the AT&T breakup was handled in the U.S. to what happened in Mexico with the government's divestiture of the national phone company. In Mexico it was a free market fundamentalist's wet dream. Absolutely no regulation. And as a result, for the same call in the U.S. that you pay 5 cents a minute, we in Mexico pay 25 cents a minute. And the guy who engineered the buyout, Carlos Slim, is now one of the third richest men on the planet. His wealth represents 14% of Mexico's annual GNP, as opposed to that of Bill Gates, which represents less than 1/2 of one percent of U.S. GNP.

Also of great interest is how the free market zealots of the Reagan administration tried to undermine the judicial proceedings against AT&T. The case began under Carter but the decision was not handed down until Regan had occupied the White House:

"The U.S. DOJ versus AT&T antitrust case was filed in October 1974 by Attorney General William Saxbe, an aging former Senator from Ohio... Saxbe filed the hout even consulting with then-President Ford. Within the Department of Justice a succession of antitrust chiefs handled the case until 1981 (Thomas Kauper, John Shenefield, Sanford Litvack, and William Baxter). The Attorney General in 1981 was William French Smith who was recused from the AT&T case because he was a past Board Member of Pacific Telephone. Reagan's designated number-two man at DOJ, Deputy Attorney General Edward Schmults, was also recused because of law firm dealings with AT&T. This made the then newly appointed Antitrust Chief, William Baxter, the top ranking Government official directing the case. William Baxter was an eccentric Stanford University Law Professor who had not addressed a court in session for about 20 years. Baxter considered himself an economist although he had no formal training as such. Baxter's nomination and the disqualification of his superiors created an ironic situation. Baxter had publicly argued that no one company should be able to integrate regulated and unregulated divisions of its business because it could use the 'safe' profits from its regulated side to subsidize the price of unregulated products (a cross-subsidy). Reagan's closest advisors including William
French Smith, Edwin Meese (Counselor), Malcolm Baldridge (Commerce Secretary), and
Casper Weinberger (Defense Secretary) believed unequivocally that the DOJ's case
against AT&T should be dismissed. This created a situation that if AT&T sympathizers in the Reagan inner circle were going to intervene, they would have to quickly go through or around Baxter. Baxter would have none of this and stated before a press conference staged to announce the case, 'The case is perfectly sound…and I intend to litigate it to
the eyeballs.' "

The assault by the Reagan administration against Judge Greene continued after he handed down his judgment, but Greene, against all odds, somehow managed to prevail, and the benefits to everyday Americans are manifold, as this excerpt from a consumer advocate web page illustrates:

"January 1, 2004
It was 20 years ago that AT&T, the once-mighty 'Ma Bell,' was broken up on the order of Judge Harold H. Greene of the U.S. District Court in Washington, D.C."

"Since the break-up, consumers have had a staggering array of choices for local and long-distance phone service, they've been able to buy their own telephones, hook up fax machines, modems and other devices and they've been presented with a multitude of new services, including cellular service, DSL and even Internet and cable-based telephony."

"All this choice is no doubt what Judge Greene, who died four years ago, would have wanted. His ruling, after all, was based on a finding that AT&T had such a stranglehold on all aspects of the telephone business that newcomers like MCI weren't able to compete on a 'level playing field,' a phrase that has since become a standard verse in every lobbyists' litany."

http://www.consumeraffairs.com/news04/att20.html

DownSouth:
......correction......

The correct address for "OPEC Pricing Power" is as follows...

http://www.oxfordenergy.org/pdfs/WPM31.pdf

...not the address I mistakenly gave above.

Swans and Zombies Neoliberalism's Permanent Contradiction Joshua Clover

April 6, 2011 | http://www.thenation.com

It wasn't a black swan.

The term was coined by Nassim Taleb, a former hedge-fund manager turned author of bestselling books on finance, and it served as a popular description of the 2008 financial crisis. It refers to an event of such peculiarity that it cannot be predicted or related to preceding developments. All swans are white until they aren't. Taleb's characterization had that charisma of the paradoxical analysis that says this can't be analyzed. At best you can expect the unexpected.

As months have passed and molten panic has cooled to the rocky facts of a global slowdown, this idea has been quietly abandoned. There are still a few ideologues who think the crisis was caused by the Community Reinvestment Act or by a claque of particularly invidious bankers; that it was just a few ill-advised or morally dubious decisions made by lenders, borrowers or speculators sometime in the 2000s that brought the economy to a halt. It is now high time-and highly possible-to move toward a more thorough understanding, and it is in this direction that much of the thinking and writing about the crisis has been going.

In lieu of the black swan theory, the following things have become clear. The crisis wasn't financial but economic. The supposed failure of liquidity was, in fact, insolvency; it was a long time coming; finally there was not enough actual value (as opposed to paper profits) in the circuits to sustain the economic order. This wasn't a momentary event; we are in the fourth year of an unfolding sequence that is itself the climax of a lengthier reorientation of politics, economics and social relations commonly known as neoliberalism.

Scarcely existing before 1980, the term "neoliberalism"became commonplace between the fall of the Berlin Wall and the fall of Lehman Brothers. It is surely tossed about more than understood. This much is something like common knowledge: neoliberalism's roots are in the classical liberalism of Adam Smith and John Stuart Mill, and the idea that a government exists to assure the individual liberty and economic opportunity of its people. Its parents are Margaret Thatcher and Ronald Reagan; thus, its birth is often dated to around 1979. It is inseparable from the idea of globalization, but it seems to emanate from the United States. Its ideological field contains both Republicans and Democrats; more confusing, it includes liberals and conservatives, and even-especially-neocons. It is the triumph of the liberal idea at a planetary scale. In Thatcher's famously implacable pronouncement, "There is no alternative."

And yet, lacking a serious challenge globally and going from electoral victory to victory in its home countries, neoliberalism has nonetheless managed to overcome itself. Or at least to weaken so dramatically as to seem vulnerable, if not its own worst enemy. The question of what next-whether we should be imagining an alternative to the complex of political and economic relations or pursuing a restoration-must be rather high on our agenda.

* * *

This is the question of John Quiggin's Zombie Economics, albeit phrased differently. The book offers itself as a compendium of economic ideas from the past several decades that should have been slain by the force of overwhelming counterevidence-ideas that, nonetheless, still walk among us, neither living nor dead. Quiggin, an Australian economist, dodges the term "neoliberalism"(as well as Reaganism, Thatcherism, et al.) because of concerns about ideological overtones: "The most neutral term I can find for the set of ideas described by these pejoratives is market liberalism."Why he would pursue such politesse in the midst of what will reveal itself as a decisive taking of ideological sides is not entirely clear.

The book is a survey of key concepts, and thus a nice companion to the more narrative (if less combative) The Myth of the Rational Market, Justin Fox's comprehensive intellectual history from 2009. Quiggin offers five undead ideas, from general conceptions to somewhat technical theories. These are the "Great Moderation,"the idea that we may live amid the gentle swells of the business cycle but have tamed excessive risk and overcome the tendency toward dizzying bubbles and disastrous busts; the "Efficient Markets Hypothesis,"which suggests the price is always right-that the market, as an aggregate of what everybody knows and intends, is itself the best information about value, and gets more perfect the more it grows and the less it is regulated; "Dynamic Stochastic General Equilibrium,"an array of concepts revolving around monetary mechanisms to match supply and demand, designed to mitigate inflation before unemployment; "Trickle-Down Economics,"the proposition that economic intervention should always help profit-making enterprises, said profits then purportedly flowing naturally toward wage workers and other poor people; and "Privatization,"which is more of a worldview than an idea and should by this juncture need no parenthetical gloss, being a first principle of capitalism.

The book is a cogent and readable debunking of these ideas-or at least of the market fundamentalism holding that they are true at all times and in all situations. Each idea gets a chapter, and each chapter follows a zombie Bildung wherein the idea is born; comes of age as a core concept of market liberalism; is dealt what should be a fatal blow by later developments, the culmination of which is the reality machine that Quiggin calls "the Global Financial Crisis"; and then rises from the grave, out but not down. Quiggin measures the ideas against the empirical data and finds them lacking: "The prevailing emphasis on mathematical and logical rigor has given economics an internal consistency that is missing in other social sciences. But there is little value in being consistently wrong."Quiggin also revisits some of the logic on its own terms, showing where it was always dubious and threadbare. Somewhat more provocatively, he insinuates that such ideas might have taken on the force of facts not because they described the world or made it better but because they served the interests of the mighty (see "Trickle-Down,"above; see also William Kristol and Robert Kagan's ill-fated Project for the New American Century).

Quiggin may believe he takes the side of truth against flimflammery (don't we all?). In truth, he is engaged in a partisan war of position, pillorying neoliberalism in favor of the preceding Keynesian compromise, with its allowance of regulation, capital controls and social-democratic programs. Though he admits "that Golden Age ended in the chaos and failure of the 1970s,"he concludes rightly that the current failure is "at least as bad."Older and wiser, we ought to prefer "a return to successful Keynesian policies that take account of the errors of the past."Though he occasionally promises "radical new directions in macroeconomics,"none are forthcoming.

Something rankles about Quiggin's plainspoken conclusion, despite the able history of ideas and the enjoyable skewering of some disingenuous beliefs. His book doesn't seem to take its lovely, lurid starting point as anything more than a hook. There is a rich tradition of zombies as figures of capitalism, perhaps most gloriously in George Romero's film Dawn of the Dead. Lumbering automatons stripped down to the most ingrained habits, his living dead recall nothing but ceaseless consumption. They can only return to the mall's torpid palace of commodities: they are blank, mindless, their arms outstretched for sustenance. The disease that has captured them is not a local phenomenon; as with countless other versions of the allegory, it is everywhere. Dawn of the Dead was made in 1978 and cannot be adduced either to the Keynesian or neoliberal era; it is not a withering critique of one importunate variant of modern economics but a total allegory.

Quiggin misses this. Indeed, it verges on intellectual malpractice that the fifteen pages of references running up through 2010 do not include Chris Harman's 2009 book, Zombie Capitalism: Global Crisis and the Relevance of Marx. It is not Harman's provocative text but the specter it represents that Quiggin must suppress: the possibility that the zombie arises from capitalism itself. Such scope is foreclosed. The entirety of Quiggin's historical presentation reduces to an alternation between two recent and closely related modes, which have together prevailed for less time than my mother has been alive. It is a glaring omission to leave unexplored the fact that the conditions under which Keynesianism thrived-a historically high rate of profit, driven by an unchallenged imperial leader-no longer obtain, and do not seem on the verge of returning, for reasons that have very little to do with the stinginess of Obama's stimulus or the dearth of WPA-inspired work programs. Those are ways of treating the symptoms; they are far from a diagnosis, much less a cure. In such circumstances, a reversion to Keynesianism is somewhere between a tactical retreat and wishful thinking writ large. But the intrinsic flaw of the book is that Quiggin is unwilling to apply his analytic frame to the larger picture, to wonder whether his most basic assumptions might themselves be due at the boneyard.

The Crisis of Neoliberalism confronts the same situation as Zombie Economics, and its authors surely share much of the same skepticism regarding the intellectual landscape. Amplifying the glimpses found in Quiggin, French economists Gérard Duménil and Dominique Lévy proceed from the somewhat heterodox proposition that ruling ideas arise not from their persuasive power or inner logic but from the interest of ruling groups. Quiggin's limits present themselves clearly in his choice to go after these ideas rather than their political foundations; it's a bit like attacking a lemon tree by plucking its fruit.

Duménil and Lévy move directly to the social and political history that led us to this turn, the underlying situation in which such intellectually bankrupt ideas could prevail. And what might become of a world that can no longer sustain such beliefs. As they say, "the stakes are high."

Though elements of their analysis proceed (in their words) "à la Marx,"the book is scarcely what one might thereby expect-that is, the opposite of Quiggin's unreflective apologia for capitalism's premises. There is barely a trace of schadenfreude at neoliberalism's misfortunes, much less a flare of revolutionary fire; the Marxism is largely a matter of fidelity to the idea of social class and the significance of class struggle. The authors are less polemical than Paul Krugman or Joseph Stiglitz, though like them Duménil and Lévy tend toward the empirical. The book makes sincere use of charts and graphs, though not more than the thoughtful reader will appreciate. Moreover, the pair have previously made the case that global capital was actually doing better than many of the left's crisis mavens would admit. In brief, they argued that if one filtered out certain capital-intensive industries (railroads, mining and the like), the economy had succeeded in recovering to boom levels of profitability sometime in the '80s, largely through the artifice of depressing real wages and lowering corporate taxes. The neoliberal program, they concluded, had worked.

But worked for whom? The two argue (like David Harvey in his clarion A Brief History of Neoliberalism) that neoliberalism is not a collection of theories meant to improve the economy. Instead, it should be understood as a class strategy designed to redistribute wealth upward toward an increasingly narrow fraction of folks. This transfer is undertaken, they argue, with near indifference to what happens below some platinum plateau-even as the failures and contradictions of the economic system inevitably drive the entire structure toward disaster.

Duménil and Lévy offer two provocative and interlocking schemas. They decline the bluntest of Marxist oppositions, which supposes a world divided only between owners and workers. But they equally abjure the endless proliferation of categories and distinctions, the slippery slope of micro-differences that leads to the paradoxical homily of conventional American thought: that individuals are just that, and thereby classless-and that everybody is middle-class. One might well see in this the shadow of Thatcher's other hyperbolic dictum of neoliberalism: "There is no such thing as society. There are only individuals and families."

Duménil and Lévy are having none of that. Instead, they proffer the simplest possible formulation that allows for both the existence of class interest and the dynamics peculiar to the current epoch. With the modern increase in size and complexity of enterprises, a managerial class came into being to run the show on behalf of owners. This new cohort is distinct from modernity's legion of clerical staff, who are grouped with production workers into what the authors call (after the French tradition) the "popular classes."

The new managerial class rests between that stratum and the capitalist class proper, and therein lies the tale. For Duménil and Lévy, the century is a story of shifting alliances. In the century's first third, this tripartite formation comes into being under the auspices of a new breed of monopoly barons. In the period following the Great Depression came an alliance between the managerial and popular classes; this "compromise to the left"is the enabling condition for the Keynesian era, the Long Boom and eventually the cluster of political and economic failures that defined the 1970s. The last third of the century can thus be called "the neoliberal compromise"-a "compromise to the right"between the managerial and ownership classes, with its own restoration of capital's power (hence the title of their previous book, Capital Resurgent) at the expense of the popular classes.

The book's other seductively lucid schema concerns the history of structural crises, which follow an alternating pattern. The authors count four in the "long twentieth century": the first "great depression"in the 1890s, the Great Depression, the 1970s collapse and the current morass. The first and third they identify as crises of profitability; the second and fourth, crises of "financial hegemony."In these periods the profit rate is relatively stable, but the unchecked power of the upper echelons allows for unsustainable demands. They are gilded ages, perhaps; yet every such age gilds not the lily but the tulip: they are built out of bubbles. With the wealthy unwilling and the poor unable to support the mountain of social debt, the bubble eventually pops. This is, for our authors, the nature of the present crisis, and it is from here we must seek a way forward.

Duménil and Lévy see a series of branching possibilities, none of them brilliant. In line with Quiggin, they can imagine a New New Deal with Keynesian characteristics, as well as a short-term restoration of the neoliberal regime under the fig leaf of a couple of regulatory concessions. This latter is a fair description of what we have seen so far; there have been only the most timorous signs of the consequential social and labor militancy that might force a renewal of the New Deal.

On balance, their vision remains one of American hegemony, if their more sophisticated historical model allows them more nuanced forecasts than Quiggin's Manichaeanism. For them a less likely, but not impossible, outcome is a real lurch to the far right, of the sort presaged by the Tea Party and its ilk-wherein ascendant economic distress opens a path for a craven and belligerent nationalism. But their most suggestive scenario is a renewed compromise to the center-right. This time, however, the managerial classes will not be a supplement to higher powers but will be the leading faction. This "neomanagerial capitalism"would be empowered to contain the volatilizing influence of the lords of finance without yielding economic ground to the popular classes.

* * *

This is a somewhat gnomic conclusion. Certainly, it is appropriately sober and takes the book's preceding logic seriously. It follows a clear and elegant trajectory leading from the pair's model of the long twentieth century and from the underlying nature of its crises and class dynamics. Yet certain things about it are obscure. It is not entirely clear how such a development would, in the immediate future, restore the solvency of the West (and recent indications are that China may be resting on a bubble). At a concrete level, then, the management in question would be something on the order of a super-powerful central bank maintaining rigorous control over a zero-growth economy that is mortally sensitive to the slightest imbalance. It is hard to see this coming to pass without dramatic changes to the ideological landscape, and it is hard, in turn, to imagine such a revolution just to achieve centrally managed capitalism. Surely revolution would have better things to do.

A further analytical conundrum arises in Duménil and Lévy's rigid distinction between kinds of crises, treating each as a discrete event concluding its own sequence. This risks reproducing Taleb's error at a more subtle level: in their accounting, each crisis-punctuated era becomes a singularity-not quite unexpected but unthinkable beyond its own particulars, a three- or four-decade swan.

It might make more sense to see each of the periods as overlapping in a complex and extended chain. From this perspective, each crisis would end one era and start the next, and each era would thus link together a pair of crises into one sequence. This would allow us to consider the past two dramatic failures as part of an ongoing story: to see the 1970s decline in profits and the current crisis of financial hegemony as facts that together form a unity. Neoliberalism is less a new era, in such a view, than the specific outcome of the earlier bust.

It would not be terribly unfaithful to Duménil and Lévy's thesis to suggest that neoliberalism is less an economic system or social order than global capital's management style for a situation of lower profits. In this sense we might recognize the birth of neoliberalism not in the ideologies of Thatcher and Reagan but in the California tax revolts of 1978: what played at being a moral jihad of suburban homeowners was simply part of an intensifying competition for a smaller pool of profits. Similarly, New York City's 1975 brush with bankruptcy was a struggle between municipal government and Wall Street over insufficient revenues; the utter triumph of the latter was the shape of things to come.

But the seeming restoration of profit by the financial sector proved illusory. The neoliberal strategy of opening new markets to sell more widgets, and internalizing more cheap labor into the growing empire of capital, arrived both at diminishing returns and at the limits of the globe. One could say that the '70s crisis was a wound to the economy; the following decades provided a series of wrappings, poultices and painkillers. The blowout of 2008 was akin to their sudden removal-beneath which the old wound had only deepened and abscessed. Real profit was not restored, even if the profit rate briefly danced on air; it was a temporary fix to a permanent contradiction.

The current catastrophe is a rare creature, to be sure. But it is not a black swan; it is a zombie. It is the last crisis come calling, and the one before that and before that again-not just returned but fortified by the intervening years and the deferral of a reckoning. This crisis that keeps returning, now dressed in finery, now in rags, is evidently not a monster sprung from one particular deviation. Global crisis is, increasingly, the unnatural natural state of modern capital. It will not be laid to rest by fiddling with the alignment of parts, much less returning to a previous mode-these parts, these modes, are what set it shambling forward, hungry, blindly grasping, in the first place.

[Jan 10, 2010] Sins Of The Sons Of Samuelson: More From Atlanta by Barkley Rosser

Jan 10, 2010 | 17 comments

Also in the HES/AEA session I organized in Atlanta was a paper by David Colander and Casey Rothschild entitled, "Sins of the Sons of Samuelson: Vision, Economic Pedagogy, and the Zigzag Wadnerings of Complex Dynamics," available at this link.

They argue that Samuelson was aware of complex dynamics and how math models could simplify insights in Marshall and others that had been expressed only in the "zigzag wanderings" of literary expression. They blame the "sons of Samuelson" for turning the push to math models, certainly led by Samuelson, into a mindless dogma that oversimplified economics and misled many in many different ways.

They proposed how to change intro textbooks to open students' minds to complexity (and Rothschild will be joining Colander as a coauthor in future editions of his popular intro textbook).

Rajiv Sethi has just posted on Samuelson's own interest in nonlinear dynamics, citing my mentioning a paper by Samuelson on Mark Thoma's blog, with Thoma linking to the Sethi piece. Sethi discusses the nonlinear version of Samuelson's multiplier-accelerator model, which appeared in the same year (1939) as his much more famous linear version. Sethi notes that I had brought this up on Thoma's blog only two weeks prior to Samuelson's death.

As a matter of fact I cite that paper by Samuelson in the paper I presented in the session at Atlanta, "Chaos Theory Before Lorenz," available on my website and also having appeared recently in print in a special issue of Nonlinear Dynamics, Psychology, and Life Sciences, honoring the late Edward Lorenz, the MIT climatologist who was reputed to have "discovered chaos on a coffee break" back in 1961. He was the person who coined the term "buttefly effect."

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