Tag Archives: capitalism

After neoliberalism?

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My journey back yesterday from the Royal Economic Society annual conference in Manchester was delayed for ages because some poor soul had thrown themselves under a train along the line. At least I managed to finish [amazon_link id=”0674725654″ target=”_blank” ]The Rise and Fall of Neoliberal Capitalism[/amazon_link] by David Kotz.

[amazon_image id=”B00SR5FNSY” link=”true” target=”_blank” size=”medium” ]The Rise and Fall of Neoliberal Capitalism[/amazon_image]

I’m a bit allergic to the word ‘neoliberal’, probably because it’s so often used as generic and blanket abuse of (among other things) all of economics. I’ve been accused of neoliberalism myself (to which the only sensible response is that the accuser needs to get out more if they think I’m an ideologue…..)

Certainly Kotz signals his own ideological views by using the term as his descriptor of American capitalism, but he does have a far more precise and meaningful definition than is the norm. He defines it as a specific “social structure of accumulation”, a “particular configuration of economic and political institutions, as well as dominant economic theories and ideas.” This is interesting, and I buy the general approach – it’s similar to (for example) Michael Best’s use of the concept of “production systems” in [amazon_link id=”0198297459″ target=”_blank” ]The New Competitive Advantage[/amazon_link], but ranging wider beyond the economic institutions of production.

Kotz sees the 1950s and 60s as a golden age of ‘regulated capitalism’ with strong unions and well-paid jobs for (male) breadwinners. He accepts that it had its own crisis, with sustained declines in profitability through the 1970s. Hence the scope for the arrival of ‘neoliberal capitalism’ from 1979/81 with Thatcher and Reagan.

Much of the book describes the development of the ‘neoliberal’ system after that turning point in terms of the broad outlines of the US economy – profit rates and shares, declining union membership, stagnant median real wages, the rise in household indebtedness etc. It does not cover globalisation to any great extent, which seems an important omission, nor does it mention technology or environmental sustainability at all, so the prism is quite narrow. Deindustrialisation is described more in terms of an attack on organised labour than the consequence of several deeper economic trends. However, the book’s analysis of the 2008 crisis in terms of the preceding financial bubble, and the way consumption was supported by debt, is surely not controversial.

Kotz does mention the role of ideas in economic theory and – more important in the long term – political received wisdom (the theory has moved on, but the policy world view far less so). He describes neoliberal ideology as “very strong” – clear, simple, apparently logical. Daniel Stedman-Jones’s [amazon_link id=”B00RWOZWD2″ target=”_blank” ]Masters of the Universe[/amazon_link] gives a much fuller account of the effort it took to cement the ideology over a number of decades prior to 1979, and highlights how much organisation it will take to change the prevailing world view. For I think this is a question of political and social organisation more than one of economic or political theorising.

Kotz argues here that the US and by extension the western economic system is in a state of crisis that will give way to a new “social structure of accumulation” whose shape is yet to be determined – it could be a revived neoliberal system. It will not be his preferred socialist system without a broad social movement, as at moments of crisis in the past such as 1945.

I would agree with Kotz that the prevailing production system or social structure is in crisis, but would emphasise more the fundamental role of technology and globalization. Not that a class-based perspective isn’t important. He concludes: “The path that will be followed in the years ahead cannot be predicted …. The economic changes – or lack of changes – that lie ahead will be the outcome of struggles among various groups and classes in the coming years, which will occur in the realm of ideas, politics and culture.” And surely the realm of the work place, public space and policy corridors too?

So all in all, I agreed with quite a lot of the analysis here while thinking it an incomplete picture. Still, the book irked me, no doubt because of my allergy to ‘neoliberalism’, along with its slightly plodding style. Reading it did feel a bit like being in a political meeting where you are washed over by a wave of abstract nouns. I know economists are on average pretty clunky writers so one should be used to it, but I did nod off over the book as my train trundled veeeery slowly through the countryside.

I wonder what Professor Kotz would have thought of the arrangement at dinner at the Royal Economic Society conference. There were two options for each course, and staff served each one to alternating places at the table. If you preferred the other, you had to exchange. Perfectly efficient and logical – surely only an economist could have thought of it? I’m tempted to do this every time I invite people round for a meal in future, unless that would be a bit neoliberal.

Instructions at the bottom - side payments not ruled out.

Instructions at the bottom – side payments not ruled out.

Reading on the train

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I’m off in a while to Bath to speak at the Literary Festival about [amazon_link id=”0691156794″ target=”_blank” ]GDP: A Brief But Affectionate History[/amazon_link] – both delighted and mildly surprised at the continuing interest in the subject. To read on the train to and fro, I’m dithering between [amazon_link id=”0674725654″ target=”_blank” ]The Rise and Fall of Neoliberal Capitalism[/amazon_link] by David Kotz and [amazon_link id=”1846684749″ target=”_blank” ]Pinkoes and Traitors[/amazon_link], Jean Seaton’s history of the BBC over the years 1974-1987.

[amazon_image id=”0691156794″ link=”true” target=”_blank” size=”medium” ]GDP: A Brief but Affectionate History[/amazon_image]  [amazon_image id=”0674725654″ link=”true” target=”_blank” size=”medium” ]The Rise and Fall of Neoliberal Capitalism[/amazon_image]  [amazon_image id=”1846684749″ link=”true” target=”_blank” size=”medium” ]Pinkoes and Traitors: The BBC and the nation, 1974 – 1987[/amazon_image]

The former looks like an economic version of the political history of the creation of the “free market” economics described so well in Daniel Stedman-Jones’s excellent book [amazon_link id=”0691161011″ target=”_blank” ]Masters of the Universe[/amazon_link]. At a couple of gatherings of people who are ‘masters of the universe’ recently, it’s clear to me they think the writing is on the wall for the model from which they’ve profited so much. What’s odd about today’s political discourse is that politicians won’t acknowledge (in public) that a big structural change is under way – hence, I guess, the general despair about politics as usual and appeal of populists.

[amazon_image id=”0691151571″ link=”true” target=”_blank” size=”medium” ]Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics[/amazon_image]  [amazon_image id=”B00EDJEVWM” link=”true” target=”_blank” size=”medium” ]Armchair Nation: An intimate history of Britain in front of the TV[/amazon_image]

The Jean Seaton book covers my formative years as a teen and young adult. I loved Joe Moran’s cultural history of British TV, [amazon_link id=”1846683912″ target=”_blank” ]Armchair Nation[/amazon_link], not least for the reminders of the shared culture that shaped me. At the time I was completely unaware of BBC corporate issues, as most people are most of the time. At the end of April I get to the end of my nine year stint as a BBC Trustee, so am in reflective mode and might go for this book first. (After the end of April, I can reverse the opinion-ectomy anyone linked with the BBC has to undergo because there is always some moron who thinks one’s personal views reflect organisational “bias”….)

Moral cultures of capitalism

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Smitten over the past week by a winter bug that has kept me tucked up on the sofa like a delicate Victorian lady, I’ve been reading Tony Judt’s [amazon_link id=”0434023086″ target=”_blank” ]When the Facts Change[/amazon_link]. This posthumously published collection of essays he wrote over 25 years has been edited by his wife Jennifer Homans, author herself of the terrific ballet history, [amazon_link id=”1862079501″ target=”_blank” ]Apollo’s Angels[/amazon_link]. I’ve long been a Judt admirer and this collection – only a few of which I’d read before – lives up to expectations. (And anyway, essays are about the right length for a convalescent.) An untimely and unimaginable death anyway (he suffered from Lou Gehrig’s Disease), the current state of Europe particularly makes one wish such a thoughtful historian of the continent were still alive to comment on Greece and the EU, on the long term effects of the financial crisis on the European ‘project’, on Russia and Ukraine.

[amazon_image id=”0434023086″ link=”true” target=”_blank” size=”medium” ]When the Facts Change: Essays 1995 – 2010[/amazon_image]

Judt’s perspective was political rather than economic but his observations on the economy are always interesting. I liked this observation about globalization triumphalism, written in 2002:

“It is a cardinal tenet of the prophets of globalization that the logic of economic efficiency must sweep all before it (a characteristics 19th century fallacy they share with Marxists). But that was how it seemed at the peak of the last great era of globalization, on the eve of World War I, when many observers likewise foresaw the decline of the nation-state and a coming age of international economic integration.

” What happened, of course, was something rather different.”

He continued:

“The contingencies of domestic politics trumped the ‘laws’ of international economic behaviour, and they may do so again. Capitalism is indeed global in its reach, but its local forms have always been richly variable and they still are. This is because economic practices shape national institutions and legal norms and are shaped by them in their turn; they are deeply embedded in very different national and moral cultures.”

It has taken the centre of gravity in the economics profession a decade to get to the same perspective, and many economists are naturally prone to economic determinism.

Rogues and capitalists

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“The whole life I place before myself is money, money, money and what money can make of life,” says Bella in Dickens’ [amazon_link id=”B00ES25UCY” target=”_blank” ]Our Mutual Friend[/amazon_link]. The Victorian novelists wrote a lot about money, not just Dickens, but Mrs Gaskell (remember the bank failure in [amazon_link id=”0199558302″ target=”_blank” ]Cranford[/amazon_link], the exigencies of factory life in [amazon_link id=”0141199725″ target=”_blank” ]Mary Barton[/amazon_link]), George Gissing ([amazon_link id=”0141199938″ target=”_blank” ]New Grub Street[/amazon_link], [amazon_link id=”1491261005″ target=”_blank” ]The Whirlpool[/amazon_link]), Trollope ([amazon_link id=”1853262552″ target=”_blank” ]The Way We Live Now[/amazon_link]) and, across the Channel, [amazon_link id=”0140440178″ target=”_blank” ]Balzac[/amazon_link] (famously referred to by Thomas [amazon_link id=”B00I2WNYJW” target=”_blank” ]Piketty[/amazon_link]), [amazon_link id=”0140444300″ target=”_blank” ]Hugo[/amazon_link], [amazon_link id=”0199538697″ target=”_blank” ]Zola[/amazon_link].

Bella’s line is quoted in Ian Klaus’s [amazon_link id=”0300181949″ target=”_blank” ]Forging Capitalism: Rogues, Swindlers, Frauds and the Rise of Modern Capitalism[/amazon_link]. An irresistible title. The book gives an account of the essential role played by trust as capitalist markets developed through the century:

“Here is a fundamental point about free market capitalism and trust within it: without social exclusion or extensive processes of verification, trust is hard to come by. Whereas other risks could be hedged or managed through new assets or new types of insurance, the risk of fraud became more prevalent as the market expanded. Simply put, trust was sometimes a market inadequacy but always a market necessity.”

[amazon_image id=”0300181949″ link=”true” target=”_blank” size=”medium” ]Forging Capitalism: Rogues, Swindlers, Frauds and the Rise of Modern Finance (Yale Series in Economic and Financial History)[/amazon_image]

This central argument is illustrated through a series of brilliant stories about both the evolution of new assets and commercial relationships but also about a series of colourful rogues and swindlers. They played on the importance of reputation to pull off their confidence tricks; in a kind of arms race, new methods of verifying information were devised, such as audits, or detailed prospectuses –  and new audacities were developed by the rogue fraternity. We ended with the modern system of ‘a series of overlapping institutions’ authenticating transactions.

The book starts with Adam Smith’s [amazon_link id=”0140432086″ target=”_blank” ]Wealth of Nations[/amazon_link], noting its pairing with the [amazon_link id=”0143105922″ target=”_blank” ]Theory of Moral Sentiments[/amazon_link]. It ends with Friedrich Hayek’s [amazon_link id=”0415253896″ target=”_blank” ]The Road to Serfdom[/amazon_link], a hymn of praise to markets, arguing that it has to be read alongside [amazon_link id=”041540424X” target=”_blank” ]The Constitution of Liberty[/amazon_link]. Klaus writes: “The greatest intellectual salesmen of free market capitalism all supposed the market would be buttressed by morality. You could not possibly unleash the power of the one without the support of the other.” Unfortunately, of course, that’s just what happened in every period of turbulence in capitalism’s history, including our most recent. Now, just as in the early Victorian era, reputation is everything – because morality and institutions have let us down.

[amazon_image id=”0140432086″ link=”true” target=”_blank” size=”medium” ]The Wealth of Nations: Books I-III[/amazon_image]  [amazon_image id=”0143105922″ link=”true” target=”_blank” size=”medium” ]The Theory of Moral Sentiments (Penguin Classics)[/amazon_image]  [amazon_image id=”0415253896″ link=”true” target=”_blank” size=”medium” ]The Road to Serfdom (Routledge Classics)[/amazon_image]  [amazon_image id=”041540424X” link=”true” target=”_blank” size=”medium” ]The Constitution of Liberty (Routledge Classics)[/amazon_image]

One final thought: will new technologies help bridge the gap? Dave Birch’s [amazon_link id=”1907994122″ target=”_blank” ]Identity is the New Money[/amazon_link] suggests the combination of ubiquitous mobile and social media means they might. Social connection, perhaps asset ownership and provenance, can in principle be verified now in a way the Victorians couldn’t have dreamed of.

[amazon_image id=”1907994122″ link=”true” target=”_blank” size=”medium” ]Identity Is the New Money (Perspectives)[/amazon_image]

Monday morning market fundamentalism

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Easing myself into the week with a bit of browsing, this review by Michael McCarthy in The Boston Review of a new book about Karl Polanyi piqued my interest. The book is [amazon_link id=”0674050711″ target=”_blank” ]The Power of Market Fundamentalism: Karl Polanyi’s Critique[/amazon_link] by Fred Block and Margaret Somers.

[amazon_image id=”0674050711″ link=”true” target=”_blank” size=”medium” ]The Power of Market Fundamentalism: Karl Polanyi’s Critique[/amazon_image]

As stated in the review, I wholeheartedly agree with the Polanyi perspective on markets: “Polanyi’s key work, [amazon_link id=”080705643X” target=”_blank” ]The Great Transformation[/amazon_link], demonstrates that markets and states are not separate entities, which each have their own unique and endogenous dynamics, but instead are inescapably intertwined and mutually constitutive.” Yet when I first read[amazon_link id=”080705643X” target=”_blank” ]The Great Transformation[/amazon_link] – some time in the mid-1980s – it irritated me enormously. I can’t remember why, and my brief notes on the book give no clue, but I do remember the emotion. So I’ve hauled it off my bookshelf and will have to re-read it, to find out why and whether it still has the same effect.

The review of the Block and Somers book, alluding to Albert Hirschman’s [amazon_link id=”067476868X” target=”_blank” ]The Rhetoric of Reaction[/amazon_link], makes it sound as though they are in effect arguing that there is a performative aspect to ‘free markets’: “Block and Somers’s unique contribution is to argue that these public narratives about the economy are key drivers of regulatory policy…. markets are not only embedded socially and politically; markets are also embedded in ideas.” Again, something I would agree with. One of the quotations I jotted down in my brief notes from [amazon_link id=”080705643X” target=”_blank” ]The Great Transformation[/amazon_link] is: “The introduction of free markets, far from doing away with the need for control, regulation and intervention, enormously increased their range.”

[amazon_image id=”080705643X” link=”true” target=”_blank” size=”medium” ]The Great Transformation: The Political and Economic Origins of Our Time[/amazon_image]   [amazon_image id=”067476868X” link=”true” target=”_blank” size=”medium” ]The Rhetoric of Reaction: Perversity, Futility, Jeopardy[/amazon_image]