By Lorenzo

Humanities and social science academics write a remarkable amount of nonsense about “neoliberalism”, typically understanding neither the reasons for the general shift in public policy nor the motivations and ideas behind it.

A nice example of such nonsense is provided in a post by philosopher Robin James:

neoliberals think everything in the universe works like a deregulated, competitive, financialized capitalist market.

No one believes this. For a start, no “neoliberal” believes the state works like that. Nor do they advocate abolition of the state–anarcho-capitalism is not a widely held position, particularly not among policy wonks, policy advisors or policy-setting politicians (what we might call policy makers). It is one thing to be struck by how remarkable it is that there is any economic order at all, it is quite another to think such is the template for all that there is.

I am aware of the ideas, constraints, and reasonings involved in the “neoliberal” policy shift because I was involved in “neoliberal” policy advocacy. I moved in such circles, read the literature, even wrote minor bits of it. So, I am familiar. Including with the policy context that policy makers have been wrestling with.

I do not much like the term neoliberal. It is usually used as a “boo” word, and boo words are always analytically suspect. Moreover, the term is often used in a very unclear way, in meaning and scope. Is it a period of history? Is it an ideology? Is it a policy program? If so, what specific policies?

To the extent the term has a useful meaning, neoliberalism is economic liberalisation in the context of an expansive state: either the welfare state (in the developed world) or the development state (in the developing world). Key underpinning ideas in the original “neoliberal turn” include Milton Friedman’s rehabilitation of monetary economics (pdf) and his critique of (pdf) policy reliance on a presumed trade-off between inflation and unemployment, Friedrich Hayek’s analysis of the uses of knowledge in society, the development of public choice theory, feeding into (pdf) the analysis of rent-seeking (pdf), Ronald Coase’s development of (pdf) the concept of transaction costs and its application to property rights (pdf), and the development of supply-side ideas (pdf). The Lucas critique (plus rational expectations) and Fama’s efficient-market hypothesis came along a bit too late to have much influence on the original “neoliberal turn”.

What these key ideas have in common is that they cast strong doubt on belief in the omni-competent state, either directly or by comparison with market-based alternatives. Hence the “neoliberal trifecta” of corporatisation (restructuring of state institutions), privatisation (transfer or creation of property rights) and de-regulation (reduction of transaction costs). Plus the adoption of inflation-targeting by central banks, as a way of operationalising their responsibility for inflation as a monetary phenomenon. The critique of the widely assumed omni-competence of the state also encouraged taking gains from trade more seriously, while the policy premium for economic efficiency (see below) put the issue of opportunity costs in sharper policy focus.

The policy debates in which “neoliberals” have been engaged in have been very much about boundaries between state and non-state action, but that is a very different matter than the sort of absolutist claim James claims as defining “neoliberal” belief. You only have debates about the proper boundaries between realms of social action if no particular realm is universal–whether as underlying reality, as created order or as ideal order. A nice example of such thinking, with included critique of overweening confidence in state action, is provided in a a recent blog post by economist Scott Sumner:

Intellectuals on the left go through the following thought process. First they observe a “problem.” Then they declare a “market failure.” Then they consider what sort of government policy could remedy the problem. What they often overlook is that the problem is usually the side effect of other government policies. That doesn’t mean the free market solution is always best; there may be cases where those other government policies are needed, and hence further regulation is required to overcome the side effects. The real problem is that it’s much easier to dream up straightforward government policies to remedy a situation, than to envision how a problem is the side effect of other regulations. Or what further side effects will result from your proposed solution. That biases pundits toward supporting far too much government involvement in the economy.

“Neoliberals” do typically believe that spontaneous orders do and can exist. But markets are only a form of spontaneous order, and only in a rather specific sense. Nature, red in tooth and claw, is a spontaneous order, but it is not a market. (Though it is a realm of budget constraints and trade-offs, as can be seen in the distribution of ecological niches: but, then, the state is also such a realm, but is not a spontaneous order.)

So, in the above purported definition of “neoliberal belief”, we have a complete misunderstanding, both of notions of spontaneous order and of the ideas and motivations of “neoliberals”. And this from someone who has been teaching a graduate seminar on that very subject. (I wonder if someone with experience and knowledge from within the reform movement has ever been invited to address said seminar? Indeed, how often such folk are ever invited to talk to any such seminars or courses?)

There is no great mystery as to why academics write such nonsense about so-called “neoliberalism”: it is due to ignorance and irritation.

Irritation

The irritation is straightforward: there was a comfortable sense in “progressive” circles that they knew where history was going. And then it wasn’t.

At the grand history level, there was an expectation that socialism was the direction of history. The dawning realisation from the 1950s onward that actually existing socialism was not the transformative manifestation of the logic of history that it had been assumed to be led to the rise of postmodernism. As philosopher Stephen Hicks explains in his lucid and revelatory Explaining Postmodernism: Skepticism and Socialism from Rousseau to Foucault (2004).

At a more mundane level, there was (and is) an expectation that (moral and social) “progress” means an ever larger role for the state. This notion that state=civilisation (and the more expansive the role and power of the state, the more civilised) is one of the oldest tropes in human history. It is often a highly misleading and self-serving one, as James C Scott explains in his lucid and revelatory The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia (2010).

The state=civilisation trope does have the advantage of simplicity. Bigger state, good; smaller state, bad is an easy principle to rally one’s sense of moral and cognitive worthiness around. (It would also make North Korea the most civilised society on the planet–since the state has entirely taken over its society: but perhaps the bigger=better is only operating as an indicator at the margin.)

Then along came the “neoliberal” policy shift of corporatisation, privatisation and de-regulation. Suddenly, history got de-railed. This was not how things were supposed to be going. So, there is an underlying hostility to “neoliberalism” in much academic writing: more, there is a presumption that such hostility is the morally and cognitively correct posture to assume towards this “neoliberal” wrong turn.

Hence David Harvey can write (pdf) (via):

The corporatization, commodification, and privatization of hitherto public assets has been a signal feature of the neoliberal project. Its primary aim has been to open up new fields of capital accumulation in domains hitherto regarded off-limits to the calculus of profitability.

This is a wildly ahistorical reading, since much of what was done in privatisation was to put back into the commercial order things which the state had previously removed from that order. But the very ahistorical reading displays the underlying belief in history as having a “proper” direction and the expansion of the state as progress,

The resulting presumptive hostility towards the “neoliberal” de-railing of history’s proper course is nicely expressed in the aforementioned post by philosopher Robin James:

Generally, people use the term “neoliberal” to denote things they don’t like about our historical situation. It’s a kind of shorthand for “contemporary society” with a “which sucks” inflection. This shorthand sense is where all the looseness and imprecision comes in. As Hegel said, “now” can be narrowly particular because it can mean any particular point in time. So, “neoliberal” gets used to mean “now,” which means something specific because it can refer to any specific thing. But things suck for a reason. This reason lies in the deeper sense of “neoliberalism,” …

A clear message of much academic writing on “neoliberalism” is that if you don’t understand that neoliberalism is bad, you are clearly morally and cognitively deficient: not exactly conducive to engaging with, and so understanding, the phenomenon being studied. Especially if signalling one’s distance therefrom is a key part of the exercise.

If the state=civilisation, that implies that the only social interactions truly worth having are state mediated or framed. There is a fairly clear underlying notion within this literature that commerce is not civilising (or, at least, is not morally uplifting), which connects this line of thinking into a trope that goes back at least 2,500 years–that commerce is morally and intellectually vulgar.

Just as so much of said “analysis” conflates disparate phenomena together according to what reflects their own hopes, fears and frustrations, not that which is actually in any analytically useful sense a common phenomenon.

This conflating operates at various levels. For harmonising is also homogenising; abandon the notion of final social harmony and the play of diverse identities becomes enchanting and natural rather than inconvenient and threatening.

Again and again, this literature presents us with ahistorical grandiosity. The term “capitalism” helps promote such overweening systematisation. The term becomes so easily an ahistorical abstraction. One that is rhetorically powerful, yet analytically fraught. Retreat to terms such as “state capitalism” shows how analytically empty. Leading to treating the state as some epiphenomenon (typically of class), which it is not. One cannot understand the Euro project, for example, without understanding that it is a deeply political, even (super)state building, project.

So much of the anti “neoliberal” literature is deep crap, because intellectual sophistication is well in evidence even while rhetoric overwhelms and blocks understanding. It is something I find distressing, because I enjoy reading scholarly articles, made so delightfully accessible by the internet. To have such persistent nonsense written about something I am personally familiar with generates worries about the scholarship I appreciate. Though there is scholarship that can help us make sense of it. A paper by Dan Kahan and Donald Braman, Cultural Cognition and Public Policy, examines how people interpret evidence on the basis of their “cultural placement”. The paper alludes to the intensifying effects of cognitive conformity–Cass Sunstein’s Why Societies Need Dissent is an excellent presentation of the social science evidence on the powerful, and deleterious, effects of cognitive conformity. So much of the academic literature on “neoliberalism” is a case study of precisely that. In the post praising Robin James’s original post, philosopher Leigh Johnson writes: