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Neoliberalism defined: part one

 

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Several attempts at defining and then mapping the characteristics of neoliberalism (or “neoliberalization”) begin with a list of obstacles which such an effort must confront (see Streeck, 2014: 4; Kotz, 2015: 8 and Dean, 2012: 1). Many of these obstacles are also evident when reviewing the wider literature concerned with neoliberalism: there are different emphases, on different neoliberal dynamics, between and within academic disciplines. Furthermore, doubt is regularly cast on the efficacy of neoliberalism as a coherent term worthy of further investigation (see Jessop, 2013: 65), even to the extent that there is little consensus as to whether neoliberalism was “created” in the 1930s (Mirowski & Plehwe, 2009: 2), the 1970s (Harvey, 2005: 9) or if it mutated into something else entirely after the 2008 Global Financial Crisis (GFC) and we are currently experiencing either an “interregnum” of capitalist models, or living in “post-neoliberalism” (Madra & Adaman, 2010).

This set of obstacles is compounded by the paucity of available, explicitly neoliberal, actors or agents. Even the think-tanks most readily associated with neoliberalism (e.g. the Adam Smith Institute; Heritage Foundation etc.) avoid use of the term, which in popular criticism is often used as a vague pejorative. Without an ur-text, and without high profile advocates to demarcate as “neoliberals”, much of the academic writing has instead responded to changes in governance and culture during the neoliberal era, speculating on isolated examples of neoliberal influence (Apple, 2005) as opposed to proactive efforts at providing a fixed definition. This has led to many analyses focusing on “accelerated contradictions” that have manifest during “the enduring contradictions of neoliberalism [which] have, rather perversely, become drivers of this rolling program… at the same time reactively opportunistic and proactively experimental” (Peck et al, 2012: 267).

 

“Neoliberalism, as understood from the perspective of Western market economies, embodies the ideological shift in the purpose of the state from one that has a responsibility to insure full employment and protect its citizens against the exigencies of the market to one that has a responsibility to insure protection of the market itself” (Wrenn: 346-347)

Neoliberalism is often cited as an iteration of capitalist reproduction, which was, to use the neoliberal term, a “victor” in a “struggle of ideas” (Hayek, 1960) during the [Western] economic shocks of the 1970s (see Davies, 2016). This positions neoliberalism as the successor to the Fordist political-economic compromise, and Keynesian management of the economy. However, even if we accept this temporal dimension uncritically (see below for reasons why this is problematic), the question as to what this new political-economic arrangement looks like, and how best to ascertain its impression, is answered by several distinct academic voices.

David Harvey’s (2005) influential, historical account is clear in its characterisation of neoliberalism as being the latest answer to capitalist crises of profitability, and notes a variety of policies pursued consistently by different neoliberal governments that share an emphasis on what he calls “accumulation by dispossession”. These include but are not limited to the selling off of public housing where it previously existed; aggressive deregulatory efforts (particularly in the banking sector) and the privatisation of public spaces in redevelopment programs. This emphasis on the continuity of neoliberalism, as an example of a “return to laissez-faire”, is a common thread in the existing literature (see Connell, 2013 & Cahill, 2014). “Laissez-faire” is a key term here, and one we will return to, for it is in the changing role of the state, and its relationship to the market, that we can observe a relatively clear distinction within the academic writing as to the nature of neoliberalism. Harvey’s broad argument is that the modern state apparatus has been shrunk under neoliberalism.

Many critical engagements have emphasised the role of highly complex financial devices and services, as being the key transformation during the neoliberal era. There are nuances in the form and practice of financial arrangements, but there is a wider point here about how important the incorporation of finance (and, crucially, the incorporation of financial speculation into normative business strategy: financialisation) has been to private enterprise and the role of the state, under neoliberalism:

“Financialisation is the term that describes the dissociation between money as capital and money as claim on future capital… I think it is innate to the dynamic of the capitalist form of wealth, of money that begets more money”

(Bonefeld, 2017)

According to this line of thinking, the removal of barriers to globalised financial trading practices and the introduction of super-fast technological mediums, both of which were the result of economic, political and social interventions mediated by the state, facilitated the financial sector’s tremendous growth to upwards of several trillion USD by 2007 (Atkinson et al, 2013). The “new normal” of highly complex amalgamations of various products (Credit Default Swaps, securities, futures and hedges et al) “pressured banking capital to supplement the ‘boring banking’ activities of financial intermediation and risk-management with financial speculation and risk-taking in the search for higher profits” (Jessop, 2013: 88). There is a burgeoning literature concerned with detailed examinations of these financial products (e.g. Lavoie, 2013), and the impact that this growth has had for business, the state and markets. This literature often intersects with both the debate over the role of the state (i.e. is the state marginalised by seismic economic activity occurring in financial trading, or is it reified by its role as mediator/facilitator?), as well as an extensive literature concentrating on global economic and cultural flows (globalisation).

Academics have in the past tied globalisation to the ascension of neoliberalism and, although I argue that the former is best understood as both neoliberal epiphenomena and an example of historical-materialist transformation, it is clear why:

“The globalization of the economy destroys a historical constellation that made the welfare state compromise temporarily possible. Even if this compromise was never the ideal solution for a problem inherent within capitalism itself, it nevertheless held capitalism’s social costs within tolerable limits.”

(Habermas, trans. Penksy, 2001: 43)

The correlation between global economic flows and stymied national sovereignty, pressures on welfare services and increased inequality, are features of many political-economic accounts of neoliberalism (e.g. Dufresne & Sacchetti, 2013). Further, the ease with which financial transactions occur, and the [neoliberal] demands for financial liberalisation in countries seeking IMF assistance (the “Washington Consensus”), have led to a significant expansion of the financial economy. The volatility of financial markets is well recognised, though there is some dispute over the possibility of “light touch” regulatory bodies keeping them in “balance”. This is in contrast to some of the business organisations engaged in these markets, who, as this leaked citigroup memo suggests, are uninterested in the paradoxical “bull” market and accentuation of international (as well as national) inequality levels:

“The “disaster waiting to happen scenario” we hear about most from our clients, is the low savings rates in countries such as the UK and US. Well, we disagree that this is such a big problem in the near term, the time horizon that matters for most equity investors… We think this income and wealth inequality (plutonomy) helps explain many of the conundrums that vex equity investors, such as why high oil prices haven’t seriously dented growth, or why “global imbalances” are growing along with the equity bull market. Implication 1: Worry less about these conundrums”

(Kapur et al, 2006: 1-5)

There are questions of neoliberalism’s “home” that will be discussed below, however it is worth noting that, while financial markets might inflict economic hardship on countries across the world, there is no question that the financial centers of the world are “HQ’d in the West” (Harvey, 2005). There is then, a thread of academic writing, often from a post-colonialist perspective, that positions neoliberalism as a type of financialised neo-conservatism (e.g. Wacquant, 2012). This is not unusual; even among those who write in favour of “neoliberalism” as an accurate signifier, there is acknowledgement of its propensity to “latch on” to alternative ideological configurations (see Brown, 2006 and Springer, 2012).

Prior to fully assessing the contentious transformation of the state, and its role under neoliberalism, it should be noted that much of the literature on neoliberalism concentrates on how it has changed the practices of work and business, particularly in the realm of corporate pay and strategy. There are two primary approaches evident in this literature: first, that corporate strategy began to reflect new technological investments and shifts in the subjectivities of the self. This typically comes from heterogeneous and radical economic accounts (e.g. Quiggin, 2010). According to these writings, the “incentives” required for a workforce cannot not feasibly be reduced to pecuniary gain: “Work psychologists have regularly emphasized that pay is insufficient to induce commitment and stimulate enthusiasm” (Boltanksi & Chiapello, 2005: 8), and so the space of work itself is said to have been assigned renewed importance as a [re]producer of capitalist relations. The critique of bureaucracy, planning and hierarchy, which had crossed the political spectrum in the “climactic” disturbances of 1968 (Berardi, 2014) were absorbed into new organizational models which repeated as mantra the virtues of loose networks, flexibility and autonomy. This supposed rejection of hierarchy, and its confrontation with notions of[self]-control, has been the defining dynamic of neoliberal business theory (Boltanksi & Chiapello, 2005: 81).

The second emphasis worth noting is that of corporate mergers, creative or fraudulent accounting practices (particularly in the investment banking sector) and generous remuneration schemes for managers, either in the form of stock or bonus structures. The demand for short term profit found its way into the boardroom through radical “idea[s] that any manager should achieve at the minimum a 15 percent rate of return on equity (ROE)… notwithstanding the fact that such a norm was impossible to achieve consistently at a macroeconomic level under the usual conditions in developed economies” (Lavoie, 2013: 222). The “stakeholder view” has been substituted for a “shareholder view”, wherein the “bottom line” – itself subject to neoliberal calculations – takes on such a position of importance that it incentivizes the type of highly leveraged, complex financial “shadow” economy, both within institutions and more broadly in national or transnational economies, that has characterised much neoliberal economic policymaking. This dynamic of creating the conditions for neoliberalism’s own reproduction and necessity is subtle, but as Mirowski notes, the system of financialised trading relied on the production of these now roundly castigated “toxic” assets: “The [toxic] metaphor … elided all the hard work of explaining ABSs, CDOs, CDSs, SIVs, and nearly everything else that actually caused the crisis. The assets were toxic; we didn’t need to know how or why. We didn’t stop to think that the financial system intentionally produced them and therefore the entire metaphor was wonky at base.” (2013: 169).

The role of the state under neoliberalism is changed, this much most academics agree on. However, whether the state is more influential (or interventionist), or whether it is in retreat, is unresolved. Where one sits is this debate, I suggest, depends on the epistemic position staked: is neoliberalism’s impact on the state most convincingly illustrated by its direct influence over policymaking (here we have a greater focus on the sovereignty of the state to affect economic development, and the “post-democracy” phenomenon of economic matters being taken outside the remit of traditional democratic structures and the election of governments with the capacity to pursue alternative programs), or is it the state’s role in setting out the conditions that allow for economic growth to be dictated in its shape by [transnational] market forces? In the first case, there is ample literature detailing how options for alternative policies in the field of economy have been put outside the purview of governments (see Brenner et al, 2010; Berardi, 2014 and Fraser, 2007). Examples of this include but are not limited to: the tacticalization of the juridical system (Kalb, 2012: 325); bypassing of democratic structures; production of misinformation (agnotology) and the positing of financial crises as independent of neoliberal historicity (Hilgers, 2012:183). These coincide to varying degrees with Agamben’s thesis that the “new normal” of neoliberalism is constructed via the binary of “continuity” and “exception” (2005: vi). It certainly mimics Hayek’s declaration of war upon the “realm of common sense” (see Jones, 2012: 26).

These examples do not make mandatory the rejection of a second epistemic position, best described in Foucault’s biopolitics lectures as: “the market determines that good government is no longer simply government that functions according to justice… The market now means that to be good government, government has to function according to [market] truth.” (1979). This rethinking of the role of the state under neoliberalism is developed by subsequent writers, who posit that the neoliberal state is better understood as a “rationality” that operates through policymaking that ensures “pathway dependency” (i.e. granting ultimate authority and agency to the market: not a natural condition, but one that must be constructed). I use the term “rationalities” rather than “theory” partially because the aforementioned reversals make deciphering any core neoliberal theoretical principles problematic. “A mongrel mode of governance” (Peck et al, 2012: 270) the claim here is that it is no accident that neoliberalism evades definitional capture when even those governments most associated with the term employ the rhetoric of alternative ideologies (e.g. neo-conservatism, or social democracy (Le Baron & Roberts, 2012: 28; Lazzarato, 2012)), while simultaneously pursuing policies which seem to contradict those same principles. Furthermore, it is rationality – the inculcation of neoliberal ideas in the very functioning of the state, the market and its citizenship –  rather than a precise political model that neoliberalism typically fosters.

But what is this rationality? Is it any more precise than “constantly hybridised”? I defer here to the closest to a consensus that I have come across in the literature: if neoliberalism is founded on any core belief it is that “the market is the ultimate information processor” (Mirowski, 2013: 42 but on this consensus see also Hall et al, 2012; & Brown, 2003) and so has access to efficacy beyond the capacity of human knowledge. Neoliberalism is predicated on the limits of human knowledge and the endorsement of market alternatives as a governing force. In practice this is far from a stable approach to governance, and so remains an obstacle for securing a firm understanding (or list of characteristics) of neoliberalism. For one, “the market” can – and is – distinguished from simply a location for competition (Solty, 2013: 92). It is referenced constantly and contradictorily by the neoliberal state, from desire to withdraw state influence in utilities (“creating markets”) to the facilitating, contra ordoliberal theory, of monopolies (“de-regulating markets”).

It is therefore vital to understand neoliberalism as a future-orientated process wherein the expansion of market society is continual: “Neoliberalism is a constructivist project: it does not presume the ontological giveness [sic] of a thoroughgoing economic rationality for all domains of society but rather takes as its task the development, dissemination and institutionalization of such a rationality” (Brown, 2003: 4). The impossibility of a pure market provides the neoliberal “core” with a utopian and so eternally thwarted vision: no amount of deregulation and no degree of market expansion into the public sector can erase externalities and the imperfect input of human knowledge. Concurrently, no market failure can ever be the fault of the market per se.

This is an important step in recognising a pattern of neoliberal governance, one in which “waves” of de-regulation, trade liberalisation, financialisation etc. repeatedly attempt to construct environments better suited to further enforcement of market rationalities (Peck et al, 2010: 713-714). This propensity for one policy to “open” the space for a succession of ostensibly disparate pro-market policies defuses the autonomy of state apparatus, no matter the government in power, to shift this directional force: it is politically easier to give up responsibilities than take them back (Crouch, 2011: xi).

The role of crises in perpetual “neoliberalization” (ibid. 269) is an illustrative historic contingency, demonstrating both reactive and proactive qualities to neoliberal processes. As with the example of British tuition fees, a “problem” is discovered and via the axiomatic “truth” the market provides, is deemed suited to pro-market “solutions” which in turn require market corrections and so on. The point here is not to focus on the discovery of a problem, nor the [temporary] solution, but the tautology which is inscribed to the system, what [Jodi] Dean calls a “neoliberal self-reflexivity” (2010: 8). In this way neoliberalism is a directional rather than destinational movement, which fixes its utopia as permanently another [market]solution away.

The literature on “state rationality” under neoliberalism is often accompanied by analyses of the body politic living under neoliberalism. Again, Foucault’s final lectures are an influence here, especially when discussing the themes of “governmentality” “biopolitics” and “human capital”. There is a broad acknowledgement that one part of the “neo” in neoliberalism, particularly in comparison to previous capitalist iterations, is its devolution of control and agency to the market – and, further to this, the “marketisation of the self” (Dean, 2010). It is in uncovering and repoliticising this “everyday neoliberalism” or “neoliberalism of the self” (Gershon, 2011: 537) that many academics have found more manageable means of examining neoliberal events and processes. We will return to this theme of “cultural neoliberalism” under the bracket of “Space Problems”. Governmentality is in the first instance an extension of this investigation into neoliberal freedom, and its role in the constitution of the self. Furthermore, it has been linked directly to the previously described “new spirit” of the workforce under neoliberal conditions: networked, self-reliant and prepared for immediate redistribution. The most critical voices during the Keynesian consensus were those of neoliberals, and of [neo-]Marxists (Žižek, 2009: 19; Bell, 1976: 36-37). Both critiques extrapolate from this same observation: the neglect of labour as a factor of production.

There are however limitations of a Foucauldian analysis, at least if we only use his biopolitics lectures and ignore his earlier works (see Foucault, 1972; 1976). Namely, in an environment when control is deferred to the self, and the self is then required to interact on the terms of an increasingly “market-led” society, where is authority located? The search for new forms and fields of power is never quite answered in Foucault’s lectures – unsurprisingly considering they were very much ‘research in progress’. While he problematizes the construction of [neoliberal] individual freedom, he ends by implying a reification of the market: “What is the utility value of government and all actions of government in a society where exchange determines the true value of things?” (1979). This I suggest is a bizarre limitation of governmentality as it is communicated by Foucault and some of his successors. Having concluded that the “self” has been identified and pursued as a site for the reproduction of capitalist processes, and that the dispositif arrangements of the state are an unstable and threatened quest to secure order, he “leaves “the economy” as the independent Representative of the Real, a placeholder without interrogation” (Mirowski, 2013: 98). In this case, “the economy” – or “the market” – is not merely ideally beyond the interference of the state or civil society, it occupies the position of referent; in not bringing “the economy” to light, Foucauldian governmentality paradoxically mirrors its own conception of neoliberalism. The impact of this neoliberalization of the self crosses many political sites, but none more so than mental wellbeing: “know yourself” becomes “express yourself”; exoteric measures of worth rather than internal self-actualization stirs within the individual invidious comparisons… and dogged fears of inadequacy” (Wrenn, 2014: 347)

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