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. Ad Policy Zombie Economics

How Dead Ideas Still Walk Among Us.

By John Quiggin.

Buy this book.



The Crisis of Neoliberalism

By Gérard Duménil and Dominique Lévy.

Buy this book.



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.

* * *

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.

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.

* * *

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.