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Liberal ideology

I know what liberal ideology in economics is all about. I’ve encountered it at every turn, even before I began my formal studies in economics. The same is true of liberal ideology in politics, which has shown its ugly face once again in the current electoral campaign.

In both cases, liberal ideology is based on the idea that the existing system, while perhaps imperfect, is the only game in town. It is a conception both of what is and of how change can and should take place—gradually and without major disruption. According to liberals, the biggest threat is populism, when the masses of people challenge the existing common sense and seek radical change. It therefore works with conservative ideology, as two bookends of mainstream discourse, to limit the theoretical and policy debate to a narrow set of options.

Here’s how liberal ideology works in economics: At the microeconomic level, capitalism (or, as liberals generally refer to it, the market system) has the potential of achieving an efficient allocation of resources. As for the macroeconomy, capitalism is capable of providing stable growth and full employment. Capitalism, therefore, promises the best possible outcomes both for individuals and for the economy as a whole.

Now, while conservative mainstream economists believe that efficiency, growth, and full employment stem from allowing markets to operate freely, liberal mainstream economists argue that markets are often imperfect and therefore the only way to achieve (or at least approximate) those goals is to intervene in and regulate markets. Those are the terms of the mainstream debate in economics, from the origins of modern economic discourse in the late-eighteenth century right on down to the present.

Think about it as the difference between the invisible hand and the visible hand.

Liberal mainstream economists, of course, hotly contest the free-market doctrine of their conservative counterparts. But notice also that they hold in common both the goals and the limits of economic policy with conservatives. Liberals and conservatives share the idea that the goals of an economy are to ensure efficiency, growth, and full employment. And they share the idea that economic policy should be limited to tinkering with capitalism—in the direction of more regulation or, for conservatives, more free markets—in order to achieve those goals.

That’s it, the limits of the mainstream debate.

Liberals, in particular, believe that the appropriate set of government institutions and regulations can move capitalism toward microeconomic efficiency (within individual markets, national economies, and across the global economy) and macroeconomic stability and full employment (especially, during a downturn, with expansionary fiscal and monetary policies). Anything else, from the perspective of liberal ideology, represents an unscientific view of the economy and an unwarranted attempt to dismantle existing economic institutions.

What liberal mainstream economists don’t see is that capitalism, despite its premises and promises, fails to deliver on them. For example, capitalism holds up “just deserts” as an ideal—everybody gets what they deserve—but it actually means that most people are forced to surrender the surplus they create to their employers, who are allowed to either keep it (and do with it what they want) or distribute it to still others (the tiny group at the top that manages the way those enterprises operate). Capitalism also pledges stable growth and full employment but then, precisely because of that private control over the surplus, regularly delivers boom-and-bust cycles and throws millions out of work.

Liberals also don’t see (because they don’t want to or, given their theory, can’t see) that even the policies they endorse to make capitalism work better are frustrated at every turn. Why? Because, even when regulations are imposed (such as they were during the New Deal programs of the 1930s), they leave in place both the interest and means on the part of employers and their allies to first evade and then, eventually, overturn those regulations.

Not only does liberal economic ideology offer a limited view of how capitalism works; it is also serves to keep out of the debate both other theories of capitalism and other ideas of how the economy might be organized. It’s premised on the notion that here are the acceptable terms of discussion—capitalism is characterized by markets that work more or less well, at the microeconomic and macroeconomic levels—and that other conceptions of capitalism—which introduce things like class exploitation into the discussion—are simply wrong or irrelevant. And it limits the discussion to regulating markets and rules out of court the possibility of imagining and creating other economic institutions—ways of organizing the economy that seek, for example, to actually eliminate class exploitation.

Part of the problem is that, from the perspective of liberal ideology, fundamental changes to the way the economy is organized aren’t necessary. That’s the liberal fantasy that markets can be made to work correctly. The other part of the problem is the liberal stoking of fears that changing current institutions—dismantling some and creating new ones—leads to chaos.

The latter is the basis of the ever-present charge of populism. Creating economic institutions that give “too much” to the mass of working people—whether high minimum wages or guaranteed lifetime incomes or taking areas of the economy out of international trade or giving workers some say in how the enterprises in which they labor operate—are deemed to be too costly or simply unfeasible.

And then, when those arguments fail to work, if radical ideas appear to capture the popular imagination, liberal economic ideology casts the final die: fundamentally changing how the economy works would be so disruptive of existing arrangements that it would invite a negative reaction by those currently in charge. It would create, so the argument goes, chaos. Therefore, it is necessary to protect existing regulations and perhaps introduce a few new regulations to markets and leave things at that.

That’s how liberal ideology works in economics. And, as it turns out, that’s exactly how liberal ideology is being deployed in our current political debate—to normalize one, very limited set of options and to marginalize any discontent or desire that threatens to go beyond them.

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Chart of the day

source

It’s not just stock market turmoil. Capitalist growth is clearly slowing—and the downturn in the Purchasing Managers Index (as calculated by Markit) suggests weak growth in the months ahead.

Worries about financial market volatility, the impact of slower growth overseas, a downturn in the energy sector and uncertainty about higher interest rates all took their toll and set the scene for further weakness in coming months.

 

Paul Kantner RIP

Some songs and singers define (and, then, transcend) an age and an ethos. This is one, written by Paul Kantner (with Stephen Stills and David Crosby), who was a central figure in Jefferson Airplane and later Jefferson Starship.

Cartoon of the day

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A case for reparations?

In the summer of 2014, Ta-Nehisi Coates made headlines by announcing that he had changed sides and was now in favor of reparations to African-Americans (accompanied by an explanation of why, in contrast to four years earlier, he had changed his mind). Two weeks ago, Coates made headlines again by criticizing Bernie Sanders for opposing “reparations for slavery” (accompanied, a week later, by a defense of his critique of Sanders).

Needless to say, this is a sensitive debate, one that over time might contribute to the development of a progressive movement in the United States but also one that, at the present moment, threatens to undermine the fragile foundations of that movement. So, I want to step lightly and, instead of taking a firm position, merely raise a few issues for further discussion.

The first point I want to make is that, notwithstanding the title of his original article in The Atlantic, Coates did not make a case for reparations. He did make a case that the history of American democracy and capitalism is a profoundly racialized history, which stretches back to slavery, continues through the Jim Crow era, and persists to the present. It’s a history this nation persists in overlooking or forgetting—and its effects are profoundly present both in memory and in daily life today. No matter how many times we imagine a post-racial society, we are reminded of the racial disparities and injustices that have accompanied the emergence and development of all of our major economic, political, and social institutions. Coates’s essay provides eloquent testimony to at least some of that history—including, of course, the stark racial segregation of my own city.

But we also have to recognize the fact Coates did not make a case for reparations per se. Nowhere in his essay does he explain how a payment, no matter how large or small, from the United States government to the descendants of African and African-American slaves will actually undo the enduring legacy of racism in the United States.

True, there’s an enormous racial wealth gap in the United States—between, for example, median white households and African-American (by a factor of 12) and Hispanic (by a factor of 10) households. Much of that wealth is in the form of housing. But that’s not where the bulk of the wealth in the United States has been accumulated. Rather, we’ll find it in the hands of a small group of wealthy individuals and large corporations—and reparations to the descendants of slaves will do little to close the gap between those at the top and the bulk of individual (whether African-American, Hispanic, or white) households.

Now, to give Coates his due, perhaps he is more interested in the investigation of the consequences of that racist legacy, a public airing and discussion that would be provoked by a full-scale debate about reparations (which would come from passing Congressman John Conyers Jr.’s HR 40, the Commission to Study Reparation Proposals for African Americans Act), and that’s fine. Let us, as a nation, finally come to grips with both the history of American racism and of the racial disparities and injustices that are so much a part of our recent history—from discriminatory subprime mortgages through unequal rates of unemployment and incarceration to racially biased police violence.

Or, alternatively, Coates might reframe the debate about reparations and begin to write about who actually gained from racist policies and practices over the course of U.S. history. If he did, he’d end up with a very small group of slaveowners, landowners, and capitalists (along with a larger, but still relatively small, group of overseers, merchants, and managers) who benefited from the labor performed by a much larger group of slaves, sharecroppers, and wage-workers. He might also add the institutions—including many colleges and universities—that grew from the proceeds of slavery and the slave trade, sharecropping, and capitalist enterprises. Those are the groups and institutions he might want to look at for reparations.

But, if he did, Coates would also discover that the wealth accumulated by a tiny minority of those at the top stemmed from activities that have also employed white (and Hispanic and other) tenants and workers. They’ve all been plundered—whether at work and in attempting to secure adequate housing, by private employers and bankers and through government policy—and, in that sense, are all due reparations.

No, it certainly hasn’t been the same—the same treatment, the same outcomes—for different racial and ethnic groups. Not by a long shot.

The problem is, reparations might not solve that problem of social theft for any of those groups, as it took place over the course of U.S. history and as it still exists today. In fact, we have to recognize, those gaps are getting larger—for whites, blacks, Hispanics, and everyone else.

As I see it, nothing short of a radical change in the way our economy is organized will overcome those gaps. That’s what conservatives and liberals have no interest in but is exactly what Coates and Sanders should be talking about—with one another and with everyone else in the country as this political campaign moves forward.

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Radical dreams

500 years after Thomas More’s powerful critique, the interest in utopia seems not to have wained.

In fact, you can make the case, as Tobia Jones [ht: ja] does, that the end-of-history realism of the 1990s has finally given way to a new search for utopia:

Everything looks different now. George Bush Sr’s new world order is frightening and deeply disordered. Religion, which sociologists predicted would slowly slide out of view, is the dominant political issue of the early 21st century, a form of utopianism that just won’t go away. Meanwhile capitalism, which was the motif of triumphalist freedom, seems less noble after Enron, Madoff, Libor and RBS. If anything, people are even more fed-up with the laziness, injustices and profligacy of consumerism than they were back in the 1990s.

It is precisely the combination of ongoing economic instability and grotesque levels of inequality that has undermined capitalist triumphalism and created the space for new kinds of radical dreams.

That’s why I am curious to see what will emerge from Julia O’Connell Davidson and Neil Howard new series on utopia thinking and “Utopia 2016: A Year of Imagination and Possibility” currently being staged by Somerset House, King’s College London, and the Courtauld Institute.

The question, as always, is where the new utopian inspiration will come from. More, while replete with criticisms of the existing order, never attempts to offer an answer. But Ursula Le Guin does, repeatedly throughout The Dispossessed (pdf):

“It is our suffering that brings us together. It is not love. Love does not obey the mind, and turns to hate when forced. The bond that binds us is beyond choice. We are brothers. We are brothers in what we share. In pain, which each of us must suffer alone, in hunger, in poverty, in hope, we know our brotherhood. We know it, because we have had to learn it. We know that there is no help for us but from one another, that no hand will save us if we do not reach out our hand. And the hand that you reach out is empty, as mine is. You have nothing. You possess nothing. You own nothing. You are free. All you have is what you are, and what you give.”

That “shared pain” is the precisely the ground for utopian critique.

Addendum

It just so happens a new London exhibition, Things Fall Apart, is based on a series of posters from the 1930s designed to criticism racism and colonialism and to attract Africans and African-Americans to the racial harmony promised by the communist utopia.