Neoliberalism and the Human Economy

What is Neoliberalism?

I’ve been pouring through some posts written during the recent neoliberalism debate and it’s struck me that nobody actually agrees on what constitutes a neoliberal. For a long time I’ve thought of neoliberalism as basically liberals who like markets, but this is far too imprecise. Corey Robin takes an even broader approach, and basically wraps together liberals and libertarians from Hayek to Friedman to, presumably, modern neoliberals like Brad DeLong and Paul Krugman, into a neo-feudalist framework:

For all their individualist bluster, libertarians—particularly those market-oriented libertarians who are rightly viewed as the leading theoreticians of neoliberalism—often make the same claim.  When these libertarians look out at society, they don’t always see isolated or autonomous individuals; they’re just as likely to see private hierarchies like the family or the workplace, where a father governs his family and an owner his employees.  And that, I suspect (though further research is certainly necessary), is what they think of and like about society: that it’s an archipelago of private governments.

Mike Konczal places neoliberals within the pity-charity framework, “where the conceptual project of the welfare state is to compensate the losers of society rather than broadly empower citizens” which I suppose would encapsulate libertarians and many market-oriented liberals who prefer safety nets and competition to traditional public entitlements and publicly provided services (think vouchers for instance).

In both definitions, the idea is basically to craft state functions using market-based private or semi-private or faux-private providers: private prisons, charter schools, mercenary outfits, and so forth. This varies by degree depending on who you’re talking to, and obviously some minarchists and anarchists want to privatize everything while some neoliberals just want to use market-mechanisms to achieve state ends – think of the UK’s efforts under recent Labour governments to make public hospitals “compete” with one another.

All of which is to say that I think I am most certainly not a neoliberal, though I do favor a market-based economic model. I think we need to draw a line between where markets operate and where the state operates; in other words, I think we can have a great deal of economic freedom alongside a public sphere that is not in thrall to the various market mechanisms that make private markets tick. Civil society and the state can work together. There is a strong case for public options that Konczal has made and that I find compelling.

An Archipelago of Private Governments

Writing of Mitt Romney’s poorly-thought-out idea to implement “unemployment accounts” Corey snarks:

What’s so astounding about Romney’s proposal—and the neoliberal worldview more generally—is that it would just add to this immense, and incredibly shitty, hassle of everyday life. One more account to keep track of, one more bell to answer. Why would anyone want to live like that? I sure as hell don’t know, but I think that’s the goal of the neoliberals: not just so that we’re more responsible with our money, but also so that we’re more consumed by it: so that we don’t have time for anything else. Especially anything, like politics, that would upset the social order as it is.

I’ve called this the neoliberal rather than the conservative view because though it arose on the right, it has long since migrated to the left, or at least the liberal part of the left. We saw a version of it during the debate on Obama’s healthcare plan.

Mike Konczal has written along similar lines before:

One of the general principles of a neoliberal approach to providing goods is that it is better to give people cash to spend among private providers of a good rather than the government provide these goods themselves at a discount. Giving people cash fosters competition, innovation and choice, while the government providing goods directly at a discount will likely lead to stagnation, dependency and wasted resources.

But that’s in a perfectly competitive market. What happens when we have producers with pricing power and where demand for a good – say because education is the main source of socio-economic mobility in this country – is inelastic? What if we decide to give people cash instead of directly providing a good at a discount? We can expect incumbent institutions to simply capture that money as a rent.  Is replacing public provisioning of colleges with pell grants and student loans actually helping students with college costs or is it simply increasing tuitions?

He directs us to this piece by JW Mason which makes this case in more detail.

This ties back into pity-charity liberalism. I think this is the most compelling case against pity-charity liberalism that exists: that without universal participation, welfare programs not only inspire shame in their recipients, but become politically vulnerable; brittle things, easily overturned.

All of which is to say that neoliberalism, broadly defined, favors the mechanisms of the market within the institution of the state; favors supply-side solutions over demand-side solutions; and favors capital over labor. But no matter how you define it, the broad definition covers some people on some issues and other people on other issues – there is a major divide between Von Mises and Krugman. It’s an imperfect sketch, but it’s something.

Leaping back to Corey’s point on an ‘archipelago of private governments” I’ll direct you to another of his pieces where he goes into the issue of local tyrannies in some greater depth:

[T]he entire history of American social movements has been about trying to bring the power of a—often sadly non-existent—centralized state apparatus to bear on private regimes of power (on the plantation, in the family, and in the workplace), to use a decentralized, federated national state to break the back of private autocracies. In the process, these activists have managed, on occasion, to centralize the national state, but only rarely and often imperfectly.

The overwhelming trend has been one of resistance to those attempts.  And the reason that trend has been so successful is that the American state is not nearly as unified or centralized—not by accident or because of the vagaries of history but by constitutional design—as other states.  This kind of programmatic decentralization gives local elites, with all their ideological legitimacy, economic power, and coercive power, an automatic and tremendous advantage. And even when local or state-level activists manage by some small miracle to achieve victory, they are immediately confronted by a sea of hostile forces around them, in nearby states and the federal court system—not to mention federal armies—that often overturn their victories.

Small, decentralized tyrannies are what eventually turned me against my penchant for localism, though not against my love of culturally vibrant, walkable cities.

This is also where I think libertarians are weakest in their critique of state power and of power more broadly. The state is simply one among many possible concentrations of power, and power left unchecked on any level, and at any scale, can result in domination of the weak by the powerful.

Power requires balance. A too-decentralized state can leave people (slaves, women, children) at the mercy of tyrannical states, husbands, employers. Just look back to the Wild West or to the grand old days of company towns and the Pinkertons and the many, many other ways that private companies and local governments abused their power over labor.

One way capital exercises its power is to keep unemployment high and keep workers on their toes. And while we may be witnessing something of a capital strike now, there used to be much more pernicious ways that private bosses stuck it to workers.

Mike put together this chart to show how prosecutions of workers who broke contracts with their employers in 19th century Britain align with the unemployment rate in that country during the same time:

He notes:

The “prosec” line is the number of people jailed as a result of quitting their jobs before their contract expired or not doing their jobs as well as their bosses dictated.  The other two lines are two estimates of unemployment at the time.  As you can see, at full employment, when workers have the most power to demand higher wages or leave to find better, more fulfilling, opportunities, is when the most workers were jailed under Master and Servant laws.

Neoliberals might argue that this only occurs because of the laws in place crafted and enforced by the state, but I can imagine a world of private prisons and contracts sans any state at all that returned us quickly to this state of affairs. Debtors prisons, corporate prisons. These aren’t hard to imagine.

The Human Economy, The Good Society

So what’s the alternative? What sort of liberalism do I envision?

I have sympathy for a number of libertarian positions both on civil rights issues and on the economy and like Jim Henley a “left-libertarian, post-state society where neighbor cares for neighbor and we crowd-source help for the needy by leveraging internet technology still appeals to me on a deep emotional level.”

So let’s have as free an economy as possible, and let’s take civil liberties seriously. Our prisons are too full. Our war on drugs is a disaster. Our foreign adventurism is crippling. Let’s scale all these parts of government way back – these are the chains and hammers in ours society. Then let’s set up a truly robust welfare state – a universal welfare state that everybody is a part of and a participant in – I’ve called this the crutches in the past, but I think it needs a better term. Nor have I said much about organized labor in this piece but I intend to follow up on unionism’s role in all of this soon.

I believe we may be headed toward a gig economy or a peer-to-peer style DIY economy. Let’s allow that to happen by allowing people to create their own economy, work from their own homes or food trucks or lemonade stands or whatever – but let’s also make sure that we’re crafting a human economy that doesn’t allow anyone to fall through the cracks. No pity-charity. No shameful revelations. No stupid corporatist regulations either, designed to squeeze everyone out of the market, into stultifying, soul-sucking wage labor.

As I wrote recently:

Society is a compromise. We elect to stay here instead of fashioning Galt’s Gulch in the sea because we are compromising with our democratic peers, electing to stumble through the democratic process. So we pay taxes on things both good and bad and then stumble through the democratic process yet again to make things a tiny bit better. Or much worse, depending on how we bungle democracy. And we do bungle it, very frequently. We bungle other systems worse because they tend to have even more systemic risk.

In any case, it doesn’t matter what people are entitled to, and we’ll never agree on that anyways. In the great democratic compromises that fashion society we make choices about what is best and most practical and most humane. To me this means we do our best to end harmful policies first, but also to craft helpful policies second. So end the war on drugs, but also work toward a society that frees us “from the domination of poverty, violence, culture, prejudice, hunger, ignorance, exploitation and so on and so forth.” Free markets vs. command and control is a false choice.

More on this as it evolves.