Swans and Zombies: Neoliberalism's Permanent Contradiction
It wasn’t a black swan.
The term was coined by Nassim Taleb, a former hedge-fund manager turned author of bestselling books on finance, and it served as a popular description of the 2008 financial crisis. It refers to an event of such peculiarity that it cannot be predicted or related to preceding developments. All swans are white until they aren’t. Taleb’s characterization had that charisma of the paradoxical analysis that says this can’t be analyzed. At best you can expect the unexpected.
As months have passed and molten panic has cooled to the rocky facts of a global slowdown, this idea has been quietly abandoned. There are still a few ideologues who think the crisis was caused by the Community Reinvestment Act or by a claque of particularly invidious bankers; that it was just a few ill-advised or morally dubious decisions made by lenders, borrowers or speculators sometime in the 2000s that brought the economy to a halt. It is now high time—and highly possible—to move toward a more thorough understanding, and it is in this direction that much of the thinking and writing about the crisis has been going.
In lieu of the black swan theory, the following things have become clear. The crisis wasn’t financial but economic. The supposed failure of liquidity was, in fact, insolvency; it was a long time coming; finally there was not enough actual value (as opposed to paper profits) in the circuits to sustain the economic order. This wasn’t a momentary event; we are in the fourth year of an unfolding sequence that is itself the climax of a lengthier reorientation of politics, economics and social relations commonly known as neoliberalism.
Scarcely existing before 1980, the term “neoliberalism” became commonplace between the fall of the Berlin Wall and the fall of Lehman Brothers. It is surely tossed about more than understood. This much is something like common knowledge: neoliberalism’s roots are in the classical liberalism of Adam Smith and John Stuart Mill, and the idea that a government exists to assure the individual liberty and economic opportunity of its people. Its parents are Margaret Thatcher and Ronald Reagan; thus, its birth is often dated to around 1979. It is inseparable from the idea of globalization, but it seems to emanate from the United States. Its ideological field contains both Republicans and Democrats; more confusing, it includes liberals and conservatives, and even—especially—neocons. It is the triumph of the liberal idea at a planetary scale. In Thatcher’s famously implacable pronouncement, “There is no alternative.”
And yet, lacking a serious challenge globally and going from electoral victory to victory in its home countries, neoliberalism has nonetheless managed to overcome itself. Or at least to weaken so dramatically as to seem vulnerable, if not its own worst enemy. The question of what next—whether we should be imagining an alternative to the complex of political and economic relations or pursuing a restoration—must be rather high on our agenda.
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This is the question of John Quiggin’s Zombie Economics, albeit phrased differently. The book offers itself as a compendium of economic ideas from the past several decades that should have been slain by the force of overwhelming counterevidence—ideas that, nonetheless, still walk among us, neither living nor dead. Quiggin, an Australian economist, dodges the term “neoliberalism” (as well as Reaganism, Thatcherism, et al.) because of concerns about ideological overtones: “The most neutral term I can find for the set of ideas described by these pejoratives is market liberalism.” Why he would pursue such politesse in the midst of what will reveal itself as a decisive taking of ideological sides is not entirely clear.
The book is a survey of key concepts, and thus a nice companion to the more narrative (if less combative) The Myth of the Rational Market, Justin Fox’s comprehensive intellectual history from 2009. Quiggin offers five undead ideas, from general conceptions to somewhat technical theories. These are the “Great Moderation,” the idea that we may live amid the gentle swells of the business cycle but have tamed excessive risk and overcome the tendency toward dizzying bubbles and disastrous busts; the “Efficient Markets Hypothesis,” which suggests the price is always right—that the market, as an aggregate of what everybody knows and intends, is itself the best information about value, and gets more perfect the more it grows and the less it is regulated; “Dynamic Stochastic General Equilibrium,” an array of concepts revolving around monetary mechanisms to match supply and demand, designed to mitigate inflation before unemployment; “Trickle-Down Economics,” the proposition that economic intervention should always help profit-making enterprises, said profits then purportedly flowing naturally toward wage workers and other poor people; and “Privatization,” which is more of a worldview than an idea and should by this juncture need no parenthetical gloss, being a first principle of capitalism.
The book is a cogent and readable debunking of these ideas—or at least of the market fundamentalism holding that they are true at all times and in all situations. Each idea gets a chapter, and each chapter follows a zombie Bildung wherein the idea is born; comes of age as a core concept of market liberalism; is dealt what should be a fatal blow by later developments, the culmination of which is the reality machine that Quiggin calls “the Global Financial Crisis”; and then rises from the grave, out but not down. Quiggin measures the ideas against the empirical data and finds them lacking: “The prevailing emphasis on mathematical and logical rigor has given economics an internal consistency that is missing in other social sciences. But there is little value in being consistently wrong.” Quiggin also revisits some of the logic on its own terms, showing where it was always dubious and threadbare. Somewhat more provocatively, he insinuates that such ideas might have taken on the force of facts not because they described the world or made it better but because they served the interests of the mighty (see “Trickle-Down,” above; see also William Kristol and Robert Kagan’s ill-fated Project for the New American Century).
Quiggin may believe he takes the side of truth against flimflammery (don’t we all?). In truth, he is engaged in a partisan war of position, pillorying neoliberalism in favor of the preceding Keynesian compromise, with its allowance of regulation, capital controls and social-democratic programs. Though he admits “that Golden Age ended in the chaos and failure of the 1970s,” he concludes rightly that the current failure is “at least as bad.” Older and wiser, we ought to prefer “a return to successful Keynesian policies that take account of the errors of the past.” Though he occasionally promises “radical new directions in macroeconomics,” none are forthcoming.
Something rankles about Quiggin’s plainspoken conclusion, despite the able history of ideas and the enjoyable skewering of some disingenuous beliefs. His book doesn’t seem to take its lovely, lurid starting point as anything more than a hook. There is a rich tradition of zombies as figures of capitalism, perhaps most gloriously in George Romero’s film Dawn of the Dead. Lumbering automatons stripped down to the most ingrained habits, his living dead recall nothing but ceaseless consumption. They can only return to the mall’s torpid palace of commodities: they are blank, mindless, their arms outstretched for sustenance. The disease that has captured them is not a local phenomenon; as with countless other versions of the allegory, it is everywhere. Dawn of the Dead was made in 1978 and cannot be adduced either to the Keynesian or neoliberal era; it is not a withering critique of one importunate variant of modern economics but a total allegory.
Quiggin misses this. Indeed, it verges on intellectual malpractice that the fifteen pages of references running up through 2010 do not include Chris Harman’s 2009 book, Zombie Capitalism: Global Crisis and the Relevance of Marx. It is not Harman’s provocative text but the specter it represents that Quiggin must suppress: the possibility that the zombie arises from capitalism itself. Such scope is foreclosed. The entirety of Quiggin’s historical presentation reduces to an alternation between two recent and closely related modes, which have together prevailed for less time than my mother has been alive. It is a glaring omission to leave unexplored the fact that the conditions under which Keynesianism thrived—a historically high rate of profit, driven by an unchallenged imperial leader—no longer obtain, and do not seem on the verge of returning, for reasons that have very little to do with the stinginess of Obama’s stimulus or the dearth of WPA-inspired work programs. Those are ways of treating the symptoms; they are far from a diagnosis, much less a cure. In such circumstances, a reversion to Keynesianism is somewhere between a tactical retreat and wishful thinking writ large. But the intrinsic flaw of the book is that Quiggin is unwilling to apply his analytic frame to the larger picture, to wonder whether his most basic assumptions might themselves be due at the boneyard.