Booked: The End of an Illusion Booked: The End of an Illusion Born on the radical left and then seized by the right, has the concept of “capitalism” outlived its usefulness? “Car graveyard” in Goldfield, Nevada (Wes Dickinson / Flickr)

Booked is a series of interviews about new books, hosted by Dissent editors. For this edition, co-editor Timothy Shenk spoke with Fred Block, author of Capitalism: The Future of an Illusion, out now from University of California Press.



Timothy Shenk: The title of your book—Capitalism: The Future of an Illusion—is clearly meant to provoke an argument. Why do you think capitalism is “an illusion”?

Fred Block: The premise of the book is that linguistic larceny plays a big role in politics. Between 1890 and 1914, reformist intellectuals in the U.S. and England redefined liberalism from economic liberalism to political liberalism to justify expanding state action to constrain market forces. Free-market thinkers protested against the redefinition, but they were ineffective and the move put them at a huge disadvantage for many decades. Ultimately, many of the Mont Pelerin types relabeled themselves as neoliberals. But they got their revenge by stealing the word capitalism from the left and redefining it as a coherent and unified system that cannot be modified without a huge loss in economic output. It is that view of capitalism that I am calling an illusion.

Shenk: I can imagine a sympathetic reader agreeing that it’s a mistake to talk about capitalism as an unchanging, hegemonic creature whose operations are dictated by a singular logic but still balking at the notion of giving up on “capitalism” altogether. You acknowledge as much in the book, writing that it’s “unrealistic to imagine that people will stop using the term ‘capitalism’—no matter how strong the arguments against the term might be.” Are there no definitions of “capitalism” that you think are acceptable?

Block: My point is that after forty years of the right successfully defining capitalism in a certain way, developing our own complicated and more accurate definitions is a fool’s errand. Protestors holding up signs saying “Down with Capitalism” cannot add a two-page footnote explaining exactly which definition they are using. Many people who see that protest sign have already internalized the right’s definition and will assume the protestors are advocating impractical measures that will make us all poorer.

We should instead be fighting on the terrain of democracy by arguing that we can make our economy more productive, more just, and more sustainable by extending and deepening democracy. The reality is that the right’s successes in limiting democracy by empowering big money in campaigns, gerrymandering, restricting voting rights, and undermining unions have the consequence of making our economy less productive. When democracy is restricted, business opts for predation rather than efficiency since it is always easier to rip people off than to build a better mousetrap.

Shenk: You pair this argument about capitalism with a history that I think will be surprising to younger readers. Through the 1960s, you write, the term capitalism was freighted with negative connotations, so much so that even radicals worried that using the word might alienate potential allies. What was so dangerous about invoking “capitalism”?

Block: During the Cold War, Soviet and Chinese Communists routinely used the term “capitalism” to denounce the evils of U.S. society. So in the 1950s, the society’s defenders talked about “free enterprise” to contrast freedom with communist tyranny. Meanwhile, in response to McCarthy’s anti-communist crusade, liberals and some radicals did everything they could to distance themselves from the vocabulary of communist parties. So in the 1960s, anybody who talked about capitalism risked being seen as part of the far left.

Shenk: However risky it might have been to talk about capitalism in the 1960s, by the 1980s that stigma had worn away—and it did so, you argue, because the term was claimed by the right. Why did conservatives embrace the concept of capitalism after resisting it for so long?

Block: Actually as early as the 1960s, thinkers such as Milton Friedman and Ayn Rand started to reclaim the word capitalism for the right, but they were still way out of the mainstream. The big change happened late in the 1970s with Irving Kristol, the original neoconservative intellectual, playing a central role. Kristol had been a Trotskyist at City College and he knew Marx well. He saw that describing the existing order as a capitalist system would allow conservatives to insist that any reform initiatives would produce equal and opposite negative effects. It followed logically that all the reforms of the New Deal and the Great Society were responsible for the economic woes of the time, and that massive tax cuts for the rich, rollback of government programs, and the slashing of regulations were needed to restore the economy to health.

Shenk: I’m struck by how much emphasis your account gives to ideas. “Our political leaders are being held hostage,” you write, “by the illusion that we live within a coherent, unified, and unchangeable capitalist order.” It’s a powerful argument, but what would you say to a skeptic who said that who our political leaders were really held hostage to were donors who care a lot more about the balance in their bank accounts than they do about the health of capitalism as a whole? Or what about a more sophisticated version of a similar argument—for instance, that in periods of modest economic growth, clashes over the distribution of resources will inevitably be intense, which means that politics will come to seem like a zero-sum game?

Block: I stress ideas because politics is essentially a battle of ideas. Yes, of course, I recognize the importance of class power as represented by campaign contributions and threats of disinvestment. But we also know from Thomas Piketty and others that from 1910 to 1970, radicals and reformers were able to win major victories and diminish the magnitude of income and wealth inequalities despite that class power. So I don’t think it is the nature of the system that produces the extreme inequality that we now have. It is the weakened mobilization of progressive forces, and part of the explanation for that weakness is the ideological hegemony of free-market ideas. Challenging those ideas is essential to any effective mobilization against class power.

Shenk: Are you as skeptical about the uses of “neoliberalism” as you are of capitalism? The narrative of a welfare state in retreat over the last forty-odd years is extremely popular with both scholars and activists, and this simultaneous rollback across much of the globe would seem to be a problem for an account that gives ideas so much causal weight. Do you just not buy this narrative?

Block: I agree with the basic narrative, but I prefer the term “market fundamentalism” for two reasons. First, it highlights the theological and unfalsifiable nature of their belief system. Second, I don’t see what is “neo” about their economic liberalism. The original market liberals—Malthus and Ricardo—also believed in the use of state coercion to construct a market system.

But I also see the triumph of market fundamentalism as contingent, rather than a necessary product of the logic of capitalism. It is here that I put a lot of emphasis on international economic arrangements. The Bretton Woods international order, despite all of its weaknesses, created a framework in which governments had considerable policy space to pursue full employment and egalitarian social policies. When the developed nations shifted to floating exchange rates in 1973, it set in motion the enormous expansion in global capital movements that undermined Keynesian economic management. That was the context in which market fundamentalism became dominant.

But we could, once again, reform the rules governing the global economy to expand the policy space available to governments to protect people from economic volatility and uncertainty. There is nothing inevitable about the current rules governing the global economy. They represent a particular political settlement that urgently needs to be revisited.

Shenk: One of the pleasures of reading this book—and of reading all your work—is seeing the range of influences you draw upon. But the dominant figure has to be Karl Polanyi (who you’ve written about extensively before.) How would you situate this book in relation to Polanyi—what are you drawing upon, and what are you pushing against?

Block: My core arguments in the book are certainly Polanyian—that a self-regulating market system cannot possibly exist and that actually existing market societies rely heavily on government action to make markets work. But I also tried to avoid the Polanyian language of embeddedness and disembeddedness in explaining the relationship between the economy and the rest of society. I worry that those terms have become more confusing than illuminating. For me the fundamental point that Polanyi was making is that the economy cannot possibly be autonomous, let alone self-regulating.

Shenk: Reading this book, I couldn’t help but think of Quinn Slobodian’s fantastic new book Globalists. According to Slobodian, the founding neoliberals—economists like Friedrich Hayek and Ludwig von Mises—shared Polanyi’s belief that the market couldn’t be trusted to take care of itself. They thought providing markets with the right institutional support was absolutely crucial, but they also thought that mass democracy posed potentially fatal threat to these institutions. You, obviously, take a different view. What do you think Hayek and von Mises got wrong?

Block: Here is another case where I think Polanyi got it right. He insisted that while Hayek and von Mises constantly proclaimed their antipathy to fascism, they had, in fact, paved the path for its triumph. On the one side, they wanted the market to determine how much work people were offered and how much they would be paid. On the other, they wanted constraints on democracy, so that workers could not use their voting power to win pensions and unemployment insurance. The consequence was that those who faced high levels of economic instability could not use democratic institutions to protect themselves. That was the context in which fascism developed and ultimately triumphed. In a word, what Hayek and von Mises got wrong was that they imagined that people would tolerate the instability and uncertainty that lightly regulated markets inevitably produce.

What is so scary about our current moment is that a new generation of free-market ideologues have weakened democratic institutions by again blocking their use to protect people from higher levels of economic uncertainty. This was most clear in Greece where no matter how people voted, the European Community insisted that Greece endure continuing austerity. But the same thing has been happening around the world and it is the reason that authoritarianism is on the march.

Shenk: I’ve been skeptical about the political uses of “capitalism” for a long time, and for similar reasons to the ones you outline here. Basically, I worry that by presenting a deceptively totalizing system it tricks us into thinking the economic order is more coherent and stable than it is, which reduces our choices to either socialist triumph or total defeat. That fits, too, with your narrative of a concept that was born on the radical left and then appropriated by the right to bludgeon its inventors with. But lately I’ve been wondering if I’m wrong about this. It seems like disillusionment with capitalism is leading more and more people toward socialism, even if it’s a modest, Bernie-Sanders-style understanding of the term. There’s a pragmatism here that cuts against the fear that using “capitalism” dooms us to a totalizing program that inevitably leads to disappointment. What do you think—having stolen the concept of capitalism from the left, might conservatives come to regret their victory?

Block: Polanyi wrote that “Socialism is, essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society.” By that definition, our existing society is already somewhat socialist because of democratic reforms such as minimum wages, public schools, income taxes, Social Security, and unemployment insurance. In other words, socialism and extending democracy in the economy are the same thing. As you say, this is pretty close to what people like Bernie Sanders and Jeremy Corbyn are talking about.

But the great advantage of focusing on democracy is that we can build a bridge that connects moderate reforms such as universal health care to a vision of a society that is much more egalitarian and democratic than anything that currently exists. It is not utopian to talk about a society in which people are not bullied or exploited by employers, by big corporations, or by government agencies because there are effective democratic safeguards against arbitrary authority. Of course, we will not end racism and sexism and the abuse of power any day soon, but that idea of radical democracy is powerful enough to inspire people to engage in a struggle that will take generations.

Shenk: Some of my favorite moments in the book were the brief autobiographical asides where you note that back in the day you were one of those New Left Marxists trying to force capitalism into the academic (and, eventually, public) conversation. Can you take a moment to explain the road that led you to here? What mistakes are you trying to stop younger activists from making today? What lessons from your own experience do you think are the most important to convey?

Block: As with many others, I joined the New Left to end the Vietnam War and to fight racial inequality. I understood why people in the movement turned toward revolutionary rhetoric and violence, but it was profoundly mistaken as a political strategy. What we needed, instead, were years of careful and patient organizing to build power from the bottom up. That is what Bernie Sanders and his people did in Vermont. Had the same thing happened in forty-nine other states, we would not today be facing Donald Trump and a reactionary Supreme Court majority.

So my message to younger activists is that it is possible to combine a radical vision of a society in which people freely govern themselves with participation in struggles for incremental reforms that do not buy people off but instead whet their appetites to fight for more. And such mobilizations can weaken and undermine class power and open space for an expansion of democracy.