Home > Uncategorized > This is the end—or is it?

This is the end—or is it?

from David Ruccio

Obviously, recent events—such as Brexit, Donald Trump’s presidency, and the rise of Bernie Sanders and Jeremy Corbyn—have surprised many experts and shaken up the existing common sense. Some have therefore begun to make the case that an era has come to an end.

The problem, of course, is while the old may be dying, it’s not all clear the new can be born. And, as Antonio Gramsci warned during the previous world-shaking crisis, “in this interregnum morbid phenomena of the most varied kind come to pass.”

For Pankaj Mishra, it is the era of neoliberalism that has come to an end.

In this new reality, the rhetoric of the conservative right echoes that of the socialistic left as it tries to acknowledge the politically explosive problem of inequality. The leaders of Britain and the United States, two countries that practically invented global capitalism, flirt with rejecting the free-trade zones (the European Union, Nafta) they helped build.

Mishra is correct in tracing British neoliberalism—at least, I hasten to add, its most recent phase—through both the Conservative and Labour Parties, from Margaret Thatcher to Tony Blair and David Cameron.* All of them, albeit in different ways, celebrated and defended individual initiative, self-regulating markets, cheap credit, privatized social services, and greater international trade—bolstered by military adventurism abroad. Similarly, in the United States, Reaganism extended through both Bush administrations as well as the presidencies of Bill Clinton and Barak Obama—and would have been continued by Hillary Clinton—with analogous promises of prosperity based on unleashing competitive market forces, together with military interventions in other countries. 

Without a doubt, the combination of capitalist instability—the worst crisis of capitalism since the first Great Depression—and obscene levels of inequality—parallel to the years leading up to the crash of 1929—not to mention the interminable military conflicts that have deflected funding at home and created waves of refugees from war-torn zones, has called into question the legacy and presumptions of Thatcherism and Reaganism.

Where I think Mishra goes wrong is in arguing that “A new economic consensus is quickly replacing the neoliberal one to which Blair and Clinton, as well as Thatcher and Reagan, subscribed.” Yes, in both the United Kingdom and the United States—in the campaign rhetoric of Theresa May and Trump, and in the actual policy proposals of Corbyn and Sanders—neoliberalism has been challenged. But precisely because the existing framing of the questions has not changed, a new economic consensus—an alternative common sense—cannot be born.

To put it differently, the neoliberal frame has been discarded but the ongoing debate remains framed by the terms that gave rise to neoliberalism in the first place. What I mean by that is, while recent criticisms of neoliberalism have emphasized the myriad problems created by individualism and free markets, the current discussion forgets about or overlooks the even-deeper problems based on and associated with capitalism itself. So, once again, we’re caught in the pendulum swing between a more private, market-oriented form of capitalism and a more public, government-regulated form of capitalism. The former has failed—that era does seem to be crumbling—and so now we begin to turn (as we did during the last system-wide economic crisis) to the latter.**

However, the issue that keeps getting swept under the political rug is, how do we deal with the surplus? If the surplus is left largely in private hands, and the vast majority who produce it have no say in how it’s appropriated and distributed, it should come as no surprise that we continue to see a whole host of “morbid phenomena”—from toxic urban water and a burning tower block to a new wave of corporate concentration  and still-escalating inequality.

Questioning some dimensions of neoliberalism does not, in and of itself, constitute a new economic consensus. I’m willing to admit it is a start. But, as long as remain within the present framing of the issues, as long as we cannot show how unreasonable the existing reason is, we cannot say the existing era has actually come to an end and a new era is upon us.

For that we need a new common sense, one that identifies capitalism itself as the problem and imagines and enacts a different relationship to the surplus.

 

*I add that caveat because, as I argued a year ago,

Neoliberal ideas about self-governing individuals and a self-organizing economic system have been articulated since the beginning of capitalism. . .capitalism has been governed by many different (incomplete and contested) projects over the past three centuries or so. Sometimes, it has been more private and oriented around free markets (as it has been with neoliberalism); at other times, more public or state oriented and focused on regulated markets (as it was under the Depression-era New Deals and during the immediate postwar period).

**And even then it’s only a beginning—since, we need to remember, both Sanders and Corbyn did lose in their respective electoral contests. And, at least in the United States, the terms of neoliberalism are still being invoked—for example, by Ron Johnson, Republican senator from Wisconsin—in the current healthcare debate

  1. robert locke
    June 28, 2017 at 8:28 am

    What failed, after 1980 was socialism, which neoliberalism tried to replace. When socialist regimes reigned from the Pacific to the Fulda Gap, capitalism seemed to be on its last legs. But socialism collapsed on its own incompetence. The drama of what will replace it is still being played out in the road and belt era. We must get ourselves out from under the American economic umbrella that dominates this blog. Read the pieces in rwer, no 80, especially on Economics in China. It is not rooted in neoliberalism. Neither were alternative forms of capitalism in cental and northern Europe, which investor capitalism has fought so hard to replace after the socialist collapsed regimes in the Asian-European heartland, but have failed to do because of investor capitalism’s own 2008 debacle. Cheer up, it is just getting interesting.

  2. June 28, 2017 at 10:00 am

    The end of political economics
    Comment on David Ruccio on ‘This is the end—or is it?’

    There is no such thing as economics. There are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics the scientific standards of material and formal consistency are observed.

    Theoretical economics consists of four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― which are mutually contradictory, axiomatically false, materially/formally inconsistent, and which got the foundational economic concept profit wrong. What we actually have is the pluralism of provable false theories.

    Theoretical economics is scientifically unacceptable. Because of this, economics has nothing to offer in the way of a scientifically well-founded advice: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

    Fact is that neither Orthodoxy nor Heterodoxy has the true theory and that, by consequence, economic policy guidance of BOTH sides has NO sound scientific foundation. Economists should no longer pretend to do science but openly push their respective political agendas.

    Even if economists had the true theory they would have NO political mandate. There is NO such thing as a trade-off between theoretical and political economics. It was John Stuart Mill who told economists that they must decide themselves between science and politics: “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.”

    Since the founding fathers economists violate the principle of the separation of science and politics. Economics is what Feynman famously called a cargo cult science and neither right wing nor left wing economic policy guidance has a sound scientific foundation since Adam Smith/Karl Marx. Political economics has produced NOTHING of scientific value in the last 200+ years. It is high time that economics frees itself from the all-pervasive and all-corrupting grip of politics.

    What Burke termed ‘one of the finest problems in legislation, namely, to determine what the State ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual exertion’ is a POLITICAL question entirely OUTSIDE the sphere of economics. Economists have to step down from the political soap box which the founding fathers have illegitimately usurped 200+ year ago.

    Egmont Kakarot-Handtke

  3. June 28, 2017 at 10:36 am

    Allow me to re-word some of Senator Johnson’s remarks. First, the primary goals of any health care arrangements are to improve and broaden quality, access, and innovation of care, while taking into account that resources are limited and not every need can or will be met. While these arrangements may be in part stated in terms of money, money alone should never limit or impede the provision of such care. Second, as with other fundamental and necessary arrangements that undergird society and thus the future of the species, participation is mandatory. Finally, the ultimate choice of the form of these arrangements is selected via comprehensive and open elections, held at least annually. Per the President of BMW, whom I interviewed in 2001, “BMW’s objective is to build fine automobiles. The money will take care of itself.” So it should be with health care. The objective is to deliver effective and comprehensive health care to all humans. The money will take care of itself. Allocation by money may work for things that humans can choose to live without. It doesn’t work for things like health care.

  4. June 28, 2017 at 8:48 pm

    The elephant in the room is resources. No one here considers that the post WW2 boom came to an end in 1965-71.The boom was fuelled partly by cheap oil, an EroEI of 100/. Since then the utility has declined to around 10/1 today. So socialism had no answer to the new – even though unrecognised – paradigm. I’m not sure why it shifted to neoliberalism but it coincided with Nixon’s repudiation of the gold standard and the start of the credit creation boom, which managed to hide the facts of decline. Now we are in a situation where we don’t create wealth in the old sense, we manage it instead and what wealth there as is drains to the financial economy as often explained by Michael Hudson.

    What is really coming to an end is us. Our overpopulation and wasteful use of resources is stripping the finite world while forever promoting the goal of economic growth. This mix cannot endure.

  5. July 1, 2017 at 7:48 am

    Capitalists (supporters of capitalism) created a fictional way of life, meanings, and justifications and then worked like hell to have everyone accept and live within their fictional world. Such things are not unusual. Humans have created and lived within fictions for at least 12,000 years. This fiction, capitalism, is an economic fiction (earlier humans had created the fiction of economic actions and thoughts) supporting private ownership of the means of production and their use for “private” profit (humans had earlier created the split between public and private). The basic elements of this fiction are private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. Capitalism is often labeled a “market economy” (humans had earlier created the shape and functions of markets). Decision-making and investment are determined by the owners of the factors of production (physical resources, labor, etc.) in financial and capital markets. The prices for and distribution of goods are mainly determined by competition in the consumer market. Needless to say, the supporters of capitalism have been extraordinarily successful in popularizing their fiction over other fictions. If economists spent their time in the study of all this using multiple vantage points and tools they would be scientists. They don’t and they aren’t.

  6. July 1, 2017 at 10:16 am

    Reading between the lines of Ken’s fiction, what I see are land-grabbers producing more than they need and marketing the surplus, then creating a need to mass-produce advertisement by mass-producing surplus, thereby drowning out the cries of consumers trying to advertise their need. Is there any hope in internet marketing of this NOT being the end of it?

    • July 1, 2017 at 1:25 pm

      I agree. But is this any different than “monarchs” creating “crown land” the royal right to own, control, and benefit from any part of land the monarch chooses? Or the “divine right” of monarchs to rule over the rest of us? We’ve been creating fictions that harm, or kill some of us to help others of us for 12,000 years. Did you think we’d stop now?

      • July 1, 2017 at 2:19 pm

        Ken, you said “The basic elements of this fiction are private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets.”

        I was trying to bring out the “mass production of surplus” and advertising (ie communication) elements implicit when capital accumulation is joined with mass-production technology and the introduction of waged labour.

        What you now portray is the Macchiavellian pre-Christian story in which monarchs are not responsible for the well-being of their subjects, but wise to take care of their army and friends. Perhaps you are not familiar with Good Pope John’s relational argument for “the reciprocity of rights and duties”?
        .

      • robert locke
        July 1, 2017 at 6:01 pm

        You might know the distinction that the French make between ” mystique” and “politique,” that is, people when discussing their own view talk of it in terms or a “mystique,” but when discussing the views of their opponent frame them in terms of “politique”.

      • July 2, 2017 at 6:28 am

        This was my attempt to respond to your statement, “…what I see are land-grabbers producing more than they need and marketing the surplus, then creating a need to mass-produce advertisement by mass-producing surplus, thereby drowning out the cries of consumers trying to advertise their need. Is there any hope in internet marketing of this NOT being the end of it?” I’m more focused on the control of basics by any group or philosophy. Neoliberalism and economists, to be specific. Monarchs and divine right fit here as well. They take different routes and use different tools for control. But the end results are similar. I’m not a religious scholar but I have read John XXIII’s encyclicals and other statements. I fully support the ones I have read.

        As Marx pointed out long ago what to do with the money from selling production is a defining issue in capitalism. For capitalists the obvious answer is the owner of the factory, business keeps it all, except for what’s needed to maintain the business and maintain the productivity of the workers. This has been in contention for over 200 years. One of the changes today is that capitalist propaganda is so effective that the workers themselves now often support owners in this division.

      • July 2, 2017 at 8:29 am

        Robert, I know ”mystique” and “politique” are distinctive parts of French culture. Don’t much of the history of this culture, however.

      • robert locke
        July 3, 2017 at 1:03 pm

        Ken, the distinction you make between what Marx pointed out long ago about what to do with the money from the sale of production and what capitalist think (that it is theirs to dispose of as they see fit) is the familiar one. Imagine my surprise when I started reading German academic periodicals on business economics, wherein I discovered capitalists who believed that employees should have a voice in the distribution of money made from the sale of production.

        Capitalists can only claim what they do if they have a proprietary conception of the firm. The scholars in the German periodicals (issues in the 1920s) could give a voice to the employees in the matter of distribution, because they had an organic conception of the firm, in which the capitalist-proprietaire was only one voice in a organic firm, others being employees, customers, and community. Those Germans were way ahead of the neo-liberals in the sophistication of their analysis.

      • July 4, 2017 at 1:06 pm

        Robert, thank you for these insights. Similarly, I just read a copy of the original story of the development of the American Economics Association. And I quote,

        “The AEA emerged through the efforts of young economists Richard T. Ely (then at Johns Hopkins), Henry C. Adams (then at Cornell) and E.R.A. Seligman (then, and for a long time after, at Columbia). To some extent, it emerged out of the methodenstreit and power struggle between Richard T. Ely and Simon Newcomb at the Johns Hopkins University in the 1880s. Ely hoped the AEA would galvanize the fledgling “New Generation” of German Historicist-trained American economists against the conservative old guard. Ely was inspired by the organization of the American Historical Association (AHA) by his close Hopkins colleague Herbert Baxter Adams in 1884, and drew on the same rolls.

        The early members of the AEA divided over whether to conceive itself as an organization with broad membership (like the SSA had been) or a narrower academic-oriented one. Many, including Ely himself, originally nurtured visions of the AEA becoming a applied and social policy body, an American version of theGerman Verein für Socialpolitik, with a goal to influence the general public and politicians, and push for social
        and economic reform. Its original provisional platform composed in the Spring of 1885 (see Ely, 1886, p.6). It
        included declarations such as “we regard the State as an educational and ethical agency whose positive aid is an
        indispensable condition of human progress”, that “laissez faire is unsafe in politics and unsound in morals”, a rejection of the economic theory “of the past generation” and a demand for a new scientific economics based not on speculative inquiry but on “the aid of statistics in the present, and history in the past”, explicit recognition that the “conflict of labor and capital” needs the “united efforts of church, state and science”, but
        that in the matter of restrictions on trade and protection “we take no partisan attitude”. The provisional platform was circulated as a prospectus among American economists, and a founding meeting arranged at Saratoga, New York (Sep 8-11, 1885) to coincide with the conference of the American Historical Association (of which many economists were members; see list of participants). Ely’s provisional platform was discussed at Saratoga, although broadly agreed with, objections were raised to some of its negative statements. Although diluted (e.g. the condemnation of laissez faire and past economics was omitted), Ely’s platform was
        incorporated as a “statement of principles” in Art III in the first AEA constitution (1885 Const).

        Don’t know how much of this is accurate but is interesting to consider.

  7. robert locke
    July 4, 2017 at 4:35 pm

    “we regard the State as an educational and ethical agency whose positive aid is an
    indispensable condition of human progress”, that “laissez faire is unsafe in politics and unsound in morals”, a rejection of the economic theory “of the past generation” and a demand for a new scientific economics based not on speculative inquiry but on “the aid of statistics in the present, and history in the past”,

    When we read statements about the triumph of neoclassical economics against this background of the origins of the American Eononomics Association, it gives the lie to their view that they formed orthodoxy in American economics. When? Not until after World War II, certainly, and not even then, for the neoclassical view was always challenged. If people knew some history, then the view the neoclassical economists express about how their views were accepted as mainline economics would be rejected.

    • July 6, 2017 at 10:45 am

      The struggles over health care insurance or health care security, whichever you prefer is powerful evidence that capitalism often is neither effective nor efficient. Over the nearly 100 years the US has attempted to address this issue, and provide some sort of health care protection for all American citizens almost all the proposed solutions are based on competitive markets of private providers. Even when these failed, the opponents of single-payer or other types of government operated services were rejected, out-of-hand. The cry of opponents during the Presidency of Harry Truman is still heard today – “socialized medicine.” In other words, our elected representatives seem to prefer protecting and defending private companies and their profits over universal health care insurance. But economists’ agenda seems to have changed. While considering the added taxes to provide insurance for more Americans, economists now also consider the number of Americans who have health care insurance because of these taxes. Maybe the spirit of the original AEA is coming back?

  8. July 5, 2017 at 2:10 pm

    Ken Zimmerman

    You summarize: “Many, including Ely himself, originally nurtured visions of the AEA becoming a applied and social policy body, an American version of the German Verein für Socialpolitik, with a goal to influence the general public and politicians, and push for social and economic reform.”

    You are making my point: “There are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics the scientific standards of material and formal consistency are observed.”

    The economic societies (AEA, VfS, RES and so on) defined themselves as agenda pushers, that is, they opted themselves OUT of science. No surprise then that economists have produced NOTHING of scientific value since the founding fathers. Until this day economics lacks the true theory.

    Worse: Walrasians, Keynesians, Marxians, Austrians have corrupted science by de facto accepting the pluralism of provable false theories.

    Worst: Vis-a-vis the general public economists claim since Adam Smith/Karl Marx to do science.

    Clarification: Economics is NOT a science and neither orthodox nor heterodox economists are scientists. They have never been anything else than brain-dead blatherers, gossipers, and agenda pushers.

    Egmont Kakarot-Handtke

    • July 16, 2017 at 7:13 am

      Egmont Kakarot-Handtke, science isn’t what you believe it to be. Science theories and observations and linking the two is not merely comparing theory (guesses) with the results of experiment (observation). Theories are always underdetermined by any finite set of data. It is always possible to invent an unlimited set of theories, each one capable of explaining a given set of observations. Of course, many of these theories may seem implausible, but to speak of plausibility is to point to a role for scientific judgment: the relative plausibility of competing theories cannot be seen as residing in data which are equally well explained by all of them. Rather, the relative plausibility of theories is a result of judgements by scientists, which have a history and background. Similarly, the results of observations (culturally identified often as “facts”) are equivocal. These too are based on judgements by scientists. So, shouldn’t it be the focus of research in and on science to reveal and describe as fully as possible these judgements’ history and background. Then we have both a more complete and more accurate description of how science is done, as well as how non-scientists construct such things as economies. So, what is the history and background of the judgements of economic actors and the social scientists who study them? That’s always my focus.

  9. July 8, 2017 at 8:39 am

    This blog is really insightful because of its information. The economy of the whole world needs to get stronger after the global crisis 7 years ago. I have read something about the leading economic countries coming together to build a strong global economy https://goo.gl/GeXdmr

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