Neoliberalism Discredited?

It’s easy to claim that the economic crisis did a better job deconstructing the ideology of privatization than the work of any economist. After all, we saw the damage done, we understand that regulation is necessary, that markets can’t always provide the best good for everyone, that the government neglected its duty. It’s almost conventional wisdom at this point. But does that really describe the assessment of the situation?

David Harvey observed that “…if you say neo-liberalism is about consolidation of class power… we’re seeing the further consolidation of it right now, rather than the lessening of it.” Neoliberalism as a class project is alive and well, as the bailouts indicate. As far as ideology is concerned, not much more progress is being made.

Of course, on the right, the relentless critics are saying once again that poor people caused the housing crash through the Community Reinvestment Act, that “we can’t spend our way out of a recession,” that we should abolish the Federal Reserve, and all other manner of ruthlessly pro-rich policy. But it’s not them I’m really concerned with, because they count few actual economists and writers among their number (it’s mostly politicians and TV personalities). Besides, they’d be saying this regardless of the state of the economy- the crisis has only affected their volume.

The mainstream writing about the economic crisis now carries some appeals to responsibly (and perhaps, regulation), but the primary criticism of CDOs and securitization is that the SEC rated the resulting financial innovations improperly, causing investors to be unaware of what exactly they were buying. Though the assessment is undoubtedly accurate, the force driving it is still a reliance on the neoliberal favorite of rational choice theory. If investors knew what they were really getting, they never would have bought these derivatives. The criticism is not on the fictitious nature of the securities, merely the lack of information surrounding them.

Additionally, some of the same economists who were calling for globalization and unfettered free trade now seemingly seeing the error of their ways. “No one has addressed the ‘too big to fail’ problem that was at the core of the crisis. Meanwhile, Goldman Sachs, JPMorgan Chase, and a host of hedge funds have already gone back to their old ways of making money, and have used their resources to hire legions of lobbyists to block new regulation they don’t like. Now that the stark fear of last winter has passed, so too has the popular anger that’s necessary to overcome their behind-the-scenes clout,” Francis Fukuyama wrote late last year. It’s a remarkably accurate assessment, but unfortunately Fukuyama runs exactly the wrong way with it and uses it as prima facie evidence to insist that “history is still over.” Capitalism is the best system, still the only game in town- we simply went about it in the wrong way.

Fareed Zakaria wrote in 2002 that the global economy was “teflon,” that globalization was in everyone’s interests, that unfettered trade of commodities and capital was the key for prosperity. Now he’s saying that government policy to prop up businesses continues to distort the market. The implicit assumption here being, of course, that an undistorted market will provide for everyone more equitably. Additionally, he claims the central problem with healthcare is not that millions are uninsured, but that we have a system that encourages “overconsumption.”

President Obama is calling for a spending freeze. The Democrats argue that the public option’s greatest benefit is not its ability to provide health insurance to people, but that through competition it will keep private insurance honest. Everyone’s still talking about helping the economy instead of helping people directly. We’re supposed to place trust in private for-profit entities instead of the state or independent social networks. The assumption that the state should only become involved in matters when and where markets fail goes largely unchallenged (the “state of the gaps,” if you will), despite calls for greater regulation and spending.

It’s quite disconcerting to see these ideas being reconstituted so quickly after the crisis, and the ideological capitulation that comes with the insistence that “there is no alternative” to capitalism is both irresponsible and intellectually bankrupt. We can reclaim public discourse from the neoliberal trap by redefining the terms of the argument. We can ask questions like “what is an economy for?” and “how will capitalism continue to sustain the growth it needs to survive?”, questions which the pervasive ideology of privatization has a considerable deal of trouble answering. The key is not to let the mainstream vocabulary and ideology limit our imaginations.

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