Philip Mirowski is the Carl Koch Professor of Economics and the History and Philosophy of Science University of Notre Dame. Professor Mirowski’s latest book is Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown
The interview was conducted by Nathan Tankus, a student and research assistant at the University of Ottawa. He is currently a Visiting Researcher at the Fields Institute
NT: Your new book, Never Let a Serious Crisis Go to Waste, is not the first work you have produced that discusses Neoliberalism. In the Postscript to the book you edited entitled “The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective” you state that:
[O]ur own guiding heuristic has been that Neoliberalism has not existed in the past as a settled or fixed state, but is better understood as a transnational movement requiring time and substantial effort in order to attain the modicum of coherence and power it has achieved today. It was not a conspiracy; rather, it was an intricately structured long-term philosophical and political project, or in our terminology, a “thought collective”.
Given this context, could you explain what the salient features of Neoliberalism are? In particular it would be helpful if you explained about why “traditional” approaches to intellectual history are inadequate for understanding Neoliberalism.
PM: Standard history of economics has been mired in the primacy of the individual author/intellectual for quite some time now. There, one tends to become attached to some particular intellectual hero, reads everything they wrote, and hence seeks to channel ‘their’ ideas to a general audience. Maybe one consults a few of their allies or opponents to add a dash of ‘context’. This, perhaps inadvertently, has resulted in deep misunderstanding of how economics has developed over the last century or more.
Ideas generally don’t incubate like that. Traditions in the history and sociology of science [my current disciplinary home] have developed a number of methods and devices in order to highlight the elaborate social character of intellectual disciplines, and display the complex trajectories of validation of knowledge. The landmarks there are many, but the one I lean upon in Never Let a Serious Crisis go to Waste is the concept of a ‘thought collective’ that dates back to the work of Ludwik Fleck.*
Whatever one thinks of the specifics, that framework has permitted me to write a history of Neoliberalism which comes to terms with some of its more slippery aspects. In the first instance, it nurtures appreciation for the fact that Neoliberalism is both a set of philosophical doctrines – and not, as some would have it, a narrow few abstract propositions in economics—and a flexible ongoing political project.
The doctrines and the details of the project change through time, as do the roster of protagonists, but still maintain a coherence and stability that justifies treating the movement as an historical collective.
Next, it insists that Neoliberalism cannot be reduced to the writings of the few standout neoliberals that readers of this blog may have heard of – Friedrich Hayek, Milton Friedman, James Buchanan, Gary Becker – primarily because their individual tenets conflict, some with each other, and some with some other less famous comrades.
Fleck points us towards the fact that thought collectives are held together, in part, by formal social structures; in the case of the Neoliberals, it started out as the Mont Pèlerin Society [MPS] in 1947, but by the 1980s it was extended to a connected ring of think tanks around the world, from the Institute for Economic Affairs to the American Enterprise Institute to Heritage and Cato to the Atlas Foundation and beyond.
As early as 1956, the Volker Fund maintained a list of 1,841 affiliated individuals; the corresponding number easily exceeds the tens of thousands today. Clearly the thought collective harbors strong impressions of who is in and who is out.
Perhaps more importantly, the ‘thought collective’ approach has helped me grapple with one of the most nettlesome aspects of Neoliberalism: How can one write an intellectual history of a bunch of anti-intellectual intellectuals?
Some readers may have encountered Hayek’s sneers about those whom he dubs ‘second-hand dealers in ideas’; but that is just symptomatic of a more general stance towards knowledge which sets the Neoliberals apart from almost every other thought collective in recent history.
As I explain in Chapter 2, the MPS became a society of ‘rationalists’ who ended up promoting ignorance as a virtue for the larger population. Others have also documented this straddle in their think tank perimeter, such as Tom Medvetz in his Think Tanks in America. It seems we are not in Kansas anymore (apologies to Tom Frank).
Thus, to write a history of Neoliberalism in the current crisis, Fleck counsels one must connect their various epistemic attitudes to the content of their doctrines. In the case of modern Neoliberalism, this has been made manifest in their shared conviction that The Market knows more than any human being, however wise or well-schooled. Planning is doomed; socialism is a pipe dream.
The political project of Neoliberalism is not laissez-faire; rather, it is to use state power to get the populace to prostrate themselves before the only dependable source of Truth and Wisdom in human civilization—viz., something they call “The Market”. The more discombobulated the average citizen can be rendered, the quicker they will get with the program
NT: Given this context, what are the salient features of Neoliberalism that have generally been preserved over time? What are the origins of the Neoliberal Thought Collective and how has it changed?
PM:The origins were surprisingly transnational, given the mistaken widespread impression that Neoliberalism is predominantly an American fascination. It began with some tentative meetings of the Colloque Walter Lippmann in Paris in the 1930s, and became consolidated with the Mont Pèlerin Society in the 1940s. I try and demonstrate in the book that it has grown ever more cosmopolitan over time, although my own deficiencies in foreign languages and non-Western history thwarts my realization of that ambition.
Throughout the decades, the thought collective has maintained a productive tension between its American-flavored Chicago wing and its continental Austrian/Ordo tendency.
Although some on the left have suggested that the thought collective displays no substantial continuity across time and space, in the book I attempt to summarize some of its more enduring attributes.
One telltale complex encompasses some of the things Michel Foucault first drew our attention to, such as the image of ideal human life as becoming the ultimate entrepreneur of your own flexible self, but one where the putative Self as captain of your own fate deliquesces into a moral and intellectual vacuum.
This explains why Neoliberals are so contemptuous of Isaiah Berlin’s ‘positive freedom’, since there can be no enduring Self that demands fealty: you need to be an infinitely pliable entity in order to adequately respond to the demands of the marketplace. Various technologies like Facebook serve to teach the masses how to maintain the outward appearances of this empty self.
Because the book is focused on the crisis, I devote far more effort to enumerating and summarizing the Neoliberal approach to political economy. It starts from the premise (contrary to their public PR) that they reject classical liberalism, because they don’t believe in a traditional circumscribed sphere for the state separate from that of The Market.
Instead they are constructivists, redefining and building a strong state to institute and maintain the kinds of markets they think will not come about on their own.
For the collective, the most propitious time to make such bold interventions is during a crisis, when they are mobilized to define ‘exceptions’ to previous rules. Their prescription for apparent market failures is always more new-fangled markets.
Hence, as they have often explicitly written, they are not ‘conservatives’ in any meaningful sense of the term. They often vent their distrust of democratic structures, hoping to reconcile them with their interventions by portraying voting itself as a kind of hobbled marketplace. Democracy therefore needs to be contained and neutralized by a strong state.
For Neoliberals, The Market is the only ultimate arbiter of Truth. Their problem is that most people still resist this fundamental tenet, because they persist in believing in quaint notions of justice, including the notion that rewards should be proportionate to effort, or else hoping sustenance be apportioned according to basic needs.
Because The Market is smarter than anyone, the poor need to capitulate to whatever The Market currently bequeaths them. The rich, of course, have no problem with their lot. This unequal distribution of wealth is a necessary structural feature of capitalism.
Market discipline should also extend to corporations; the Neoliberals have long proselytized for the extension of market-like incentives within corporate boundaries. Outsourcing and outsized CEO recompense are direct corollaries. Gargantuan firms are not a serious problem, since they merely are a reflection of fleeting market success; antitrust should be jettisoned, and there is no long-term problem of Too Big to Fail.
The Neoliberals have changed over time primarily by sloughing off progressively more of their classical liberal heritage. It began with Chicago rejecting the very idea of corporate power as a problem for capitalism in the 1950s; it continued with rejection of the prior Austrian tendency to distrust the destabilizing potential of the finance sector. (Gold bugs and 100% money cranks no longer get much respect from the Neoliberals.)
They have abandoned all classical liberal aspirations to improve the lot of the working classes through education; rather, they now seek to undermine all public education by subjecting every credentialing process to the marketplace of ideas. They dismiss the classical liberal suspicions concerning intellectual property, since inventing new property rights is an effective way to defeat their opponents.
Finally, the thought collective has managed to string along their useful fellow-travelers, the true libertarians, without once admitting that they share little more in common than some vain posturing over freedom.
NT: Speaking of offering “more new-fangled markets”, you tell the story in the book of auction theorists who sold Paulson and company on the idea that they could design an auction facility that would “fix” the “toxic assets” problem. Could you summarize what happened here and how it is a perfect example of Neoliberal responses to crisis?
PM: That narrative was based on some historical work done jointly with Eddie Nik-Khah. One story concerning the crisis current amongst economists is that microeconomics played a role in ‘fixing the banks’, and that the repair was carried out by auction theorists.**
Readers will have to consult the book for the serpentine plot; but for our purposes here, it is enough to state that, in the initial stages of the crisis, certain American economists offered the services of their proprietary firms to create boutique auctions to price the ‘toxic assets’ in the flagging banking sector, and thus rescue the banks from failure; when the Federal Reserve quickly decided that the services on offer were dubious, to say the least, the economists in question turned on the Fed and the government, and went on radio and TV to disparage the government’s handling of the crisis.
In doing so, they aligned themselves explicitly with members of the Neoliberal thought collective who had been arguing all along that if we had just allowed ‘The Market’ to perform its magic, then there would be no need for emergency intervention (whereas, previously, when it looked like the auction designers would become subcontractors, they defended the need for emergency action).
This incident illustrates many of the themes of the book: the role of the economics profession in wreaking havoc with the public’s understanding of what could or should be done in the face of the emergency; the resort to the neoliberal precept that the way to rectify market failure is by doubling down with more markets; the extent to which the supposed Fed ‘rescue’ and government bailout was privatized from the get-go; and the ways in which neoliberal tenets dovetail with neoclassical economists’ inclinations to use the crisis to profit and misrepresent their own culpability for the way things turned out.
The economics profession has sought to straddle the horns of a deep contradiction throughout the current crisis: they implore the public to Trust the Market to save them, but equally, to Trust the Economists to come to the rescue. Few face up to the fact that option one cannot be collapsed to option two.
NT: Who was Carl Schmitt, what was his exception, and why is it relevant to understanding Neoliberalism?
PM: Carl Schmitt was one of the most important political thinkers of the 20th Century; however, he is mostly treated as verboten in Anglo political theory due to his participation in the Nazi regime. We know that Hayek cited him, even though he also treats him as located beyond the pale.
We also know many of the European figures in the postwar MPS were familiar with his ideas. I have been trying for some time now to get people to entertain the notion that Schmitt was a major influence on the development of neoliberal political economy, and further, upon the development of postwar social science. The topic is potentially huge, so let me suggest a few teasers.
First, there is Schmitt’s statement at the beginning of his Political Theology: “Sovereign is he who decides the exception.” One way to gloss this insight is that, if politics has a logic and a distinct sphere of social determination, it is not found in the ‘rule of law’ or in economic determinism, but rather, in who or what is able to assert the existence of a state of exception: that is, when a powerful leader must step in and override the rules by imposing a new order. The relevance of this principle for everyone from Paulson and Bernanke to faceless European bureaucrats throughout the history of the economic crisis should be obvious. But I would venture further, and suggest that the neoliberals have triumphed in the crisis partly because they have taken this precept on board in their own political theory. This is one meaning of the catchphrase, “never let a serious crisis go to waste”.
Second, as Renato Christi has pointed out, in the early 1920s liberalism had trouble coping with the ‘political’ as Schmitt understood it, but, incongruously, Schmitt also came to believe that liberalism provided one path to neutralize democracy, by rendering it internally unstable.
This may seem paradoxical to Americans, but it was a widespread conviction in interwar Germanophone social science that only a strong state could preserve and foster a free market economy. The thought collective’s postwar efforts sought to square this circle in their revised version of liberalism. While they could not acknowledge its sources, this constituted an important inspiration for the development of Ordoliberalism, but also for MPS theorists like James Buchanan.
Third, there is another facet of Schmitt that I do not cover in the present book. Schmitt identified “the decision” as the uncaused cause of all effective politics, existing outside of science and the economy. This challenge was so very disturbing for Western social science, that it responded by inventing something called “decision theory”, which was supposed to tame the inscrutable through provision of a scientific basis for the predictable generic logic of the economy, and later, all of society.
I find it striking that, although neoclassical economics as social physics dates back to the 1870s, there is no such animal as “choice theory” until after World War II, when the legacy of Continental thought had to be utterly repudiated by the new hegemonic power. It is no accident that neoclassical economics becomes the dominant orthodoxy in American economics right at this juncture.
NT: The politics of Climate Change are more widely known and discussed than many of the other issues you cover in this book. Yet your understanding of these other issues give you a view of the politics of Climate Change that I think is unique. In particular, how are the political responses to climate change a classic example of the Neoliberal response to crisis?
PM: It may seem odd to raise the issue of global warming in a book about the economic crisis, but I do it in order to suggest something that has escaped notice, namely, that the thought collective has developed a generic strategy to deal with really daunting crises that would seem to challenge its world view, and that this fact is easier to perceive in the case of global warming than it has been in the case of the global economic crisis.
In pursuing this, I am suggesting that works like Naomi Klein’s Shock Doctrine and her more recent writings on global warming don’t adequately comprehend the logic of neoliberal political economy.
Neoliberals neutralize their opponents by mounting a full spectrum response to crises: a short-term easily mobilized response to stymie their opponents; a subsequent medium-term response which involves a strong state in instituting more new-fangled markets; and a long-term science fiction response (also involving the state) to present an upbeat optimistic version of neoliberal doctrine.
The shorter-term responses buy time for the thought collective to mobilize their longer-term panaceas.
The book describes the dynamic in greater detail, but here, let me just indicate that, in the case of the climate crisis, the short term response is global warming denialism; the medium-term response is to institute trading schemes for carbon emission permits and offsets; and the long term science fiction response is geoengineering, such as schemes to pump particulates into the stratosphere to supposedly block out the sun and mitigate the warming process—but not, significantly, to actually cut back on carbon emissions.
What Klein and others get wrong is that neoliberals are not really ‘anti-science’ as such; rather, ploys such as denialism simply postpone political attempts by opponents to cut emissions until they can recruit and train a cadre of entrepreneurial neoliberal scientists, whereas meanwhile the situation gets so dire that their preferred ‘market’ solutions come to seem the last refuge for a desperate populace. It is significant that each of these ‘ideas’ were innovated in neoliberal think tanks.
The striking aspect of the history of the economic crisis is that the thought collective has resorted to the very same pattern of full-spectrum response to demands to restructure the financial sector after the crisis.
The initial short-term response was crisis denialism, as documented in the book: banks did nothing wrong, it was all the fault of Fannie Mae and Freddie Mac, the economics profession was not blind-sided, and so forth. The medium-term response comprised the market-based rescue of the banks.
People attribute far too much agency to central banks as saviors, when the details of the rescue reveal that the privatization of balance sheet restructuring and outsourcing of asset management was the clear alternative to nationalization and breaking up the banks.***
The long term science-fiction solution is financial engineering: the doctrine that the only way The Market can transcend its problems is by entrepreneurial souls whipping up even more complex financial instruments to ameliorate the burden of the previously hobbled balance sheets. Robert Shiller’s Finance and the Good Society is one hymnal to such deliverance.
A greater comprehension of the full-spectrum politics of the neoliberal thought collective has many profound implications; the most obvious is that the Left possesses nothing even remotely approaching its sophistication, which explains why it gets so repeatedly outfoxed.
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* A nice summary of his ideas can be consulted at the Stanford Encyclopedia of Philosophy: http://plato.stanford.edu/entries/fleck/
** This argument has even recently been made in the Guardian: http://www.theguardian.com/science/video/2013/jul/12/geometry-banking-crisis-video .
*** See, for instance Neil Barofsky, Bailout (2012, pp.129-130). This also encompasses the auction theory scenario, mentioned above.
Read more at http://www.nakedcapitalism.com/2013/08/fixing-old-markets-with-new-markets-the-origins-and-practice-of-neoliberalism.html#mFc0Cz8wmJzv4Q5Y.99