Why "Neoliberalism" is Not a Helpful Term

Over at The New Inquiry Mike Konczal has an excellent review of Philip Mirowski's new book, Never Let a Serious Crisis Go to Waste. Mirowski's book consists of two distinct pieces. The first is an effort to define that most abused of contemporary academic buzzwords, neoliberalism; the second is an account of how and why the economics profession as a whole has failed to reform itself in the wake of the 2007-8 financial crisis and global depression. Konczal criticizes both halves of this argument, more fairly in the case of the first half than the second.

 While appreciating what Mirowski is trying to do in offering a clear definition of "neoliberalism" - a term that, as he says, should be "added to "the 'avoid jargon' list on graduate-school syllabi" - Konczal takes issue with Mirowski's heterodox reading of this term. In brief, Mirowski argues that neoliberalism is best seen not as an ideology that aims at "free markets" - that is, at getting government out of the regulatory game, but rather as a system in which the government sets up markets that favor capital over labor. By contrast, Konczal argues that neoliberalism is better seen as class warfare, tout court. But is this really the choice? Can't it be both?

While I agree with Konczal that neoliberalism is a code word for class warfare, things get complicated depending on how literally we take the metaphor of war. Does this metaphor necessarily imply a systematic strategy handed down by the standing committee of the ruling class (a role Mirowski elsewhere has seemed to impute to the Mont Pelerin Society)? That seems implausible. However, a more reasonable reading of the metaphor is that there is a struggle for power going on between two different categories of interest groups, but that one side is much more effective in organizing its efforts (mainly because the collective action problems of capital holders are far fewer than those of laborers; that further, the former have many more resources at their disposal than the latter). This more modest understanding of the "war" metaphor also permits us to understand that there are meaningful debates within the class of capital holders as to the best strategy for sustaining capital accumulation.

This latter point is the focus of Konczal's critique of Mirowski. As Konczal usefully points out, the central policy debate today is within neoliberalism. On the one hand, there are those who think that the best way to improve capital formation (marketed to the masses as "growth") is for the state to be help construct and regulate markets in order to ensure socially-optimal outcomes, which includes regularizing profits for capitalists and avoiding social outcomes which put political stability at risk within a democratic society. This is what Mirowski calls neoliberalism. On the other hand, there are those who call for the state to get out of the regulatory game altogether. Mirowski calls this latter group libertarianism, in contrast to (his definition of) neoliberalism, but Konczal argues (following David Harvey) that this is in fact not as a completely different ideological formation, but rather as a debate among sympathizers with capital over political strategy.

Where I part ways with Konczal is over the practical politics involved. As politically sympathetic as I am to the idea that neoliberalism all amounts to class warfare in the final analysis, we must admit that these two broad strategies constitute more and less humane ways in which to prosecute that war. It is simply too crude to dismiss these differences as irrelevant. The interim analysis matters as much as the final analysis, in other words. It's all well and good to observe that the post-DLC Democratic Establishment are neoliberals who side with capital over labor in the class struggle, but it is politically obtuse not to see a difference between the Tea Party and Obama. The latter may be a class warrior, but he is in favor of a more humane way of conducting that war. What's certain is that the term "neoliberalism" is unhelpful for clarifying any of this.

The second part of Mirowski's book is about how and why the economics profession has refused to come to terms with its abject failures over the last decade. As many people have pointed out, one would think that the failure of the economics profession to foresee the global financial crisis would have caused some serious soul-searching for the profession about the scientificity of its claims. For economists, the failure to foresee 2007-8 should have been as much of a come-to-jesus as the failure to foresee the collapse of the USSR was for Sovietologists and international relations scholars. But there's been no serious effort to reform the field. (One small but telling measure of the lack of accountability is that one of the head cheerleaders for the system that imploded in 2008 was rewarded with a Nobel Prize this year.) What Mirowski wants to do is to ask why this is so.

Rather than rehearse Mirowski's argument, I would just say the following: The problem with economics is not with its substantive accomplishments as a field. In terms of creating reliable predictions or offering useful assessments of real-world phenomena, economics probably does a bit better than most other kinds of social science. (No one else really anticipated the meltdown either, right?) No, the real problem with economics has to do with economists' overweening self-confidence and their (concomitant) intellectual hegemony. To put it another way, the problem is not that they're wrong more often than the rest of us, it's that they're not right that much more often and despite this fact, policymakers continue to defer to them far too much. It's the politics of it. What needs to be explained is how, despite their failures, economists have managed to establish and defend their warrant in the public sphere much more effectively than any other group of social scientists. (Possible exception: demographers.) Mirowski has spent his career assessing how economics as a profession pulled off this confidence trick. His answer is: by emulating the discursive structure of 19th century physics (that is: mathematical modeling of closed systems whose 'natural' propensity is assumed to be towards equilibrium), economics has made its claims about the proper social organization and distribution of scarce goods seem like an objective and scientific matter, rather than a fundamentally political question about norms and institutions. Konczal finds this part of the book weak, since Mirowski doesn't propose an alternative and better form of economics. But this seems to me unfair: the lack of a cure shouldn't distract us from the value of the diagnosis.