Neoliberal capitalism is suffering from a sort of erectile dysfunction that not even the Viagra of quantitative easing (QE) is able to cure consistently. Central bank interest rates are stuck at effectively zero, with the slightest hint of an increase causing a curious contradiction: a Pavlovian salivation response by the arbiters of value (link uses NYT token) under the present order and a terrible fear of destroying the growth that already exists.
This is a condition that has developed after the events of 2008, which have not so far been overcome. We are still living the 2008 crisis, and there is no sign that by 2018 we would have overcome it under the present politics. What happened in 2008 is that the theory underlying the revolution that was given its original greatest impetus by Thatcher and Reagan and so on had a fatal fall behind the restaurant, but none of the other dinner guests are willing to note what has befallen, except the ones stuck in the front of the restaurant waiting endlessly for their name to be called.
The salient feature of this theory for present purposes was to stop treating labour as a category needing protection. Instead, the optimal economy was to be found by the price-signal negotiation between the owners of the means of production and the consumers of its products. There is something very seductive about this idea to the technocratically-minded, even after accounting for self-interest: the lessons of the Soviet Union show that competition among human wants cannot be arbitrated from on high, but instead via the dynamic response of producers to the demands of consumers — who will necessarily have unequal influence on what is produced. Instead, guided by a different sort of technological wisdom, the owners of capital would be unleashed to respond to human wants and needs.
In the utopia implied by this basic idea, the problems with this would instead by resolved by mechanisms to align the interests of consumers with those of producers, not by seizing the means of production, but by encouraging the ordinary worker to become part of the ownership class. Hence all the attempts at privatising pensions, financial education schemes, and so on. In order to smooth this transition, finance would be unleashed to create increasingly elaborate hierarchies of investment schemes, which would, in theory, distribute risk so finely that everyone could easily find a combination of investments that were safe, be they people using mortgages to invest in property or the wealthy people giving the mortgages for less wealthy people to find affordable housing. The externalities caused by this and the social consequences of human failure wouldn’t be resolved by market-distorting guarantees regarding employment but at best by a thinly provisioned social safety net.
People of a left-wing bent of mind should not be too hasty to deny the logic of the programme. A crucial neoliberal insight is the importance of the variegated nature of the wants of the consumer. A tendency towards contempt against consumerism has partly, in my opinion, crippled the ability of the left to understand its predicament. A created want (by e.g. advertising) is still a want, and there is a kind of demand, a sort of meta-want, for wants to be created. A reallocation of labour and capital to the production of fashions and baubles may at first glance remove resources from more elevated and enlightened uses of resources, but it has worked to create the demand to make China, yes, more polluted, but also better-developed (the two obviously going hand in hand).
The events of 2008 proved that this programme has limits. The unleashing of finance did not result in a convergence between the interests of consumers and producers, but instead an unstable accumulation of financial instruments at the top. At the same time, the downward pressure on wages created by reduced labour protection, reduced regulation, and less government favorite-playing eventually resulted in less capacity for consumers to buy. This was only fed by the attempt to substitute cheap credit for wages, which in turn promoted the accumulation of increasingly risky financial instruments, until the events of 2008 created the straw that broke the camel’s back. In order to prevent a complete breakdown of the system — which would likely have been genuinely catastrophic — the powers that be followed their class interests and chose a patch that protected large portions of existing investments. The price of that patch has been an effectively deflationary or growth-impaired situation in much of the world.
That in turn has created political risks because a deflationary situation with the pain allocated in a very one-sided way cannot be politically stable forever. The growth of “populist” parties in Europe, which in the developed world has been the most evident victim of stagnation due to design flaws in the single currency, is one of the most visible signs of this instability.
But even European populism has not dared to pull the keystone out of the decaying structure. In the most dramatic sequence of events so far, European leaders were able to call the bluff of the Greek challenger Syriza. Unlike many progressives, who view Syriza’s apparent lack of courage as as betrayal, I understand the choice of Alexis Tsipras not to be scapegoat of a systemic breakdown that European leaders would immediately move to confine to Greece alone. But the price of this is that Greece was forced to continue to participate in the failing patchwork and to continue the expansion of the neoliberal practices I describe above. (Possibly because Greek voters understand the nature of this dilemma, they returned Syriza to power without its most uncompromisingly left flank.)
In the meantime, the UK Labour Party elected Jeremy Corbyn as its leader over and above the protests of its existing establishment. The principal accusation levelled at him is his support for allegedly antiquated economic solutions that have been superceded by the Thatcherite revolution. According to the mainstream press, better progressives must accept what neoliberalism has accomplished and either find something that supercedes it (whatever creative, new utopia that may be) or adopt a position of minor reform to neoliberalism — slightly stronger social insurance, for example.
The former family of solutions requires a certain degree of science-fictional vision, but implementing alternate societies is probably beyond the bounds of present-day politics. (I also do not believe that this is proposed honestly; neoliberals usually implicitly believe that their ideology is the end of history and no society will supercede it that has principles more effective than its practices.) The latter reinforces the existing system but does not solve or really ameliorate any of its underlying systemic problems, potentially making the failure more catastrophic in the future.
Instead, I’m afraid to say that the most obvious feasible next steps are the oldies that Corbyn allegedly wishes to resurrect. We must overcome the neoliberal taboos against state favorite-playing and interventionism. At the very least, the state needs to be restored in its role as the spender of last resort. The failure of loose monetary policy to cause banks to lend to domestic enterprises suggests that the demand—-both for goods and for capital—-needs to be created “artificially”. This has its own risks, but they are not avoidable: even if one is against state interventionism and dirigisme, I believe it will become quickly apparent that it is the least worst solution. Unfortunately, one of the risks is exactly the backlash by capital—-but I suspect that this risk will become less and less apparent the more financial capital becomes divorced from the productive economy.
