Swans and Zombies: Neoliberalism's Permanent Contradiction
The Crisis of Neoliberalism confronts the same situation as Zombie Economics, and its authors surely share much of the same skepticism regarding the intellectual landscape. Amplifying the glimpses found in Quiggin, French economists Gérard Duménil and Dominique Lévy proceed from the somewhat heterodox proposition that ruling ideas arise not from their persuasive power or inner logic but from the interest of ruling groups. Quiggin’s limits present themselves clearly in his choice to go after these ideas rather than their political foundations; it’s a bit like attacking a lemon tree by plucking its fruit.
Duménil and Lévy move directly to the social and political history that led us to this turn, the underlying situation in which such intellectually bankrupt ideas could prevail. And what might become of a world that can no longer sustain such beliefs. As they say, “the stakes are high.”
Though elements of their analysis proceed (in their words) “à la Marx,” the book is scarcely what one might thereby expect—that is, the opposite of Quiggin’s unreflective apologia for capitalism’s premises. There is barely a trace of schadenfreude at neoliberalism’s misfortunes, much less a flare of revolutionary fire; the Marxism is largely a matter of fidelity to the idea of social class and the significance of class struggle. The authors are less polemical than Paul Krugman or Joseph Stiglitz, though like them Duménil and Lévy tend toward the empirical. The book makes sincere use of charts and graphs, though not more than the thoughtful reader will appreciate. Moreover, the pair have previously made the case that global capital was actually doing better than many of the left’s crisis mavens would admit. In brief, they argued that if one filtered out certain capital-intensive industries (railroads, mining and the like), the economy had succeeded in recovering to boom levels of profitability sometime in the ’80s, largely through the artifice of depressing real wages and lowering corporate taxes. The neoliberal program, they concluded, had worked.
But worked for whom? The two argue (like David Harvey in his clarion A Brief History of Neoliberalism) that neoliberalism is not a collection of theories meant to improve the economy. Instead, it should be understood as a class strategy designed to redistribute wealth upward toward an increasingly narrow fraction of folks. This transfer is undertaken, they argue, with near indifference to what happens below some platinum plateau—even as the failures and contradictions of the economic system inevitably drive the entire structure toward disaster.
Duménil and Lévy offer two provocative and interlocking schemas. They decline the bluntest of Marxist oppositions, which supposes a world divided only between owners and workers. But they equally abjure the endless proliferation of categories and distinctions, the slippery slope of micro-differences that leads to the paradoxical homily of conventional American thought: that individuals are just that, and thereby classless—and that everybody is middle-class. One might well see in this the shadow of Thatcher’s other hyperbolic dictum of neoliberalism: “There is no such thing as society. There are only individuals and families.”
Duménil and Lévy are having none of that. Instead, they proffer the simplest possible formulation that allows for both the existence of class interest and the dynamics peculiar to the current epoch. With the modern increase in size and complexity of enterprises, a managerial class came into being to run the show on behalf of owners. This new cohort is distinct from modernity’s legion of clerical staff, who are grouped with production workers into what the authors call (after the French tradition) the “popular classes.”
The new managerial class rests between that stratum and the capitalist class proper, and therein lies the tale. For Duménil and Lévy, the century is a story of shifting alliances. In the century’s first third, this tripartite formation comes into being under the auspices of a new breed of monopoly barons. In the period following the Great Depression came an alliance between the managerial and popular classes; this “compromise to the left” is the enabling condition for the Keynesian era, the Long Boom and eventually the cluster of political and economic failures that defined the 1970s. The last third of the century can thus be called “the neoliberal compromise”—a “compromise to the right” between the managerial and ownership classes, with its own restoration of capital’s power (hence the title of their previous book, Capital Resurgent) at the expense of the popular classes.
The book’s other seductively lucid schema concerns the history of structural crises, which follow an alternating pattern. The authors count four in the “long twentieth century”: the first “great depression” in the 1890s, the Great Depression, the 1970s collapse and the current morass. The first and third they identify as crises of profitability; the second and fourth, crises of “financial hegemony.” In these periods the profit rate is relatively stable, but the unchecked power of the upper echelons allows for unsustainable demands. They are gilded ages, perhaps; yet every such age gilds not the lily but the tulip: they are built out of bubbles. With the wealthy unwilling and the poor unable to support the mountain of social debt, the bubble eventually pops. This is, for our authors, the nature of the present crisis, and it is from here we must seek a way forward.
Duménil and Lévy see a series of branching possibilities, none of them brilliant. In line with Quiggin, they can imagine a New New Deal with Keynesian characteristics, as well as a short-term restoration of the neoliberal regime under the fig leaf of a couple of regulatory concessions. This latter is a fair description of what we have seen so far; there have been only the most timorous signs of the consequential social and labor militancy that might force a renewal of the New Deal.
On balance, their vision remains one of American hegemony, if their more sophisticated historical model allows them more nuanced forecasts than Quiggin’s Manichaeanism. For them a less likely, but not impossible, outcome is a real lurch to the far right, of the sort presaged by the Tea Party and its ilk—wherein ascendant economic distress opens a path for a craven and belligerent nationalism. But their most suggestive scenario is a renewed compromise to the center-right. This time, however, the managerial classes will not be a supplement to higher powers but will be the leading faction. This “neomanagerial capitalism” would be empowered to contain the volatilizing influence of the lords of finance without yielding economic ground to the popular classes.
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This is a somewhat gnomic conclusion. Certainly, it is appropriately sober and takes the book’s preceding logic seriously. It follows a clear and elegant trajectory leading from the pair’s model of the long twentieth century and from the underlying nature of its crises and class dynamics. Yet certain things about it are obscure. It is not entirely clear how such a development would, in the immediate future, restore the solvency of the West (and recent indications are that China may be resting on a bubble). At a concrete level, then, the management in question would be something on the order of a super-powerful central bank maintaining rigorous control over a zero-growth economy that is mortally sensitive to the slightest imbalance. It is hard to see this coming to pass without dramatic changes to the ideological landscape, and it is hard, in turn, to imagine such a revolution just to achieve centrally managed capitalism. Surely revolution would have better things to do.
A further analytical conundrum arises in Duménil and Lévy’s rigid distinction between kinds of crises, treating each as a discrete event concluding its own sequence. This risks reproducing Taleb’s error at a more subtle level: in their accounting, each crisis-punctuated era becomes a singularity—not quite unexpected but unthinkable beyond its own particulars, a three- or four-decade swan.
It might make more sense to see each of the periods as overlapping in a complex and extended chain. From this perspective, each crisis would end one era and start the next, and each era would thus link together a pair of crises into one sequence. This would allow us to consider the past two dramatic failures as part of an ongoing story: to see the 1970s decline in profits and the current crisis of financial hegemony as facts that together form a unity. Neoliberalism is less a new era, in such a view, than the specific outcome of the earlier bust.
It would not be terribly unfaithful to Duménil and Lévy’s thesis to suggest that neoliberalism is less an economic system or social order than global capital’s management style for a situation of lower profits. In this sense we might recognize the birth of neoliberalism not in the ideologies of Thatcher and Reagan but in the California tax revolts of 1978: what played at being a moral jihad of suburban homeowners was simply part of an intensifying competition for a smaller pool of profits. Similarly, New York City’s 1975 brush with bankruptcy was a struggle between municipal government and Wall Street over insufficient revenues; the utter triumph of the latter was the shape of things to come.
But the seeming restoration of profit by the financial sector proved illusory. The neoliberal strategy of opening new markets to sell more widgets, and internalizing more cheap labor into the growing empire of capital, arrived both at diminishing returns and at the limits of the globe. One could say that the ’70s crisis was a wound to the economy; the following decades provided a series of wrappings, poultices and painkillers. The blowout of 2008 was akin to their sudden removal—beneath which the old wound had only deepened and abscessed. Real profit was not restored, even if the profit rate briefly danced on air; it was a temporary fix to a permanent contradiction.
The current catastrophe is a rare creature, to be sure. But it is not a black swan; it is a zombie. It is the last crisis come calling, and the one before that and before that again—not just returned but fortified by the intervening years and the deferral of a reckoning. This crisis that keeps returning, now dressed in finery, now in rags, is evidently not a monster sprung from one particular deviation. Global crisis is, increasingly, the unnatural natural state of modern capital. It will not be laid to rest by fiddling with the alignment of parts, much less returning to a previous mode—these parts, these modes, are what set it shambling forward, hungry, blindly grasping, in the first place.