In The Great Mortification: Economists’ Responses to the Crisis of 2007–(and counting) in The Hedgehog Review Philip Mirowski draws attention to an obvious point since the global financial crisis that those neo-classical economists with their “vision of capitalism as a perfect or nearly perfect system” got things badly wrong. They'd been caught with their pants down.
Mirowski says:
Economists have not comported themselves with much dignity of late. Normally so quick off the mark to ferret out and expose irrationality in others, currently they have been distinctly loathe to recognize a pandemic within their own ranks. I refer here to the outpourings spewn forth by the economists themselves, provoked by the numerous embarrassments that have been visited upon them consequent to the onset of the world economic crisis...General interest magazines, from Business Week to The Economist to The New York Times—previously cheerleaders for the economics profession—turned openly hostile in 2008, hectoring whole schools of thought for their failures, grasping randomly for “new paradigms,” rooting around for sixth-round draft picks and telegenic wicked rebels to replace their prior stable of catallactic pundits.
Leading active members of today’s economics profession…have formed themselves into a kind of Politburo for correct economic thinking. As a general rule—as one might generally expect from a gentleman’s club—this has placed them on the wrong side of every important policy issue, and not just recently but for decades. They predict disaster where none occurs. They deny the possibility of events that then happen.… They oppose the most basic, decent and sensible reforms, while offering placebos instead. They are always surprised when something untoward (like a recession) actually occurs. And when finally they sense that some position cannot be sustained, they do not reexamine their ideas. They do not consider the possibility of a flaw in logic or theory. Rather, they simply change the subject. No one loses face, in this club, for having been wrong.
Mirowski's second point is that the economics profession was caught unawares by the meltdown in 2008 when the entire financial system seemed poised on the brink of utter failure. The professional economists had played a large role in producing the conditions leading to systemic breakdown, from theorizing the financial innovations and staffing the financial institutions to justifying the deconstruction of regulatory structures held over from the last Great Depression. The economists were convinced their Great Moderation and neoliberal triumph would last forever.
It came to an end with a bang and the economics profession had great difficulty in coming to terms with the current crisis. They continued to assert their neo-liberal beliefs that the market can recover from a credit if left alone when reality showed the opposite. The banks had to be bailed out by the state. The discrepancy between belief and actuality is stark.The inference is that capitalism is not a perfect or nearly-perfect system.
Unsurprisingly, as Galbraith points out, recent work into the nature and caus-es of financial collapse has been marginalized, shunted to the sidelines within academic economics:
Articles that discuss these problems are relegated to secondary journals, even to newsletters and blog posts. The scholars who betray their skepticism by taking an interest in them are discouraged from academic life—or if they remain, they are sent out into the vast diaspora of lesser state universities and lib- eral arts colleges. There, they can be safely ignored.
Steven Shaviro in The ‘Bitter Necessity’ of Debt: Neoliberal Finance and the Society of Control refers to Gilles Deleuze argument that we are in process of moving away from Michel Foucault’s disciplinary society, and towards a new sort of social formation, which Deleuze calls the control society. The differences between these two social formations, we may say that, where the disciplinary society is closed and hierarchical, the control society is open, fluid, and rhizomatic.
He says that:
Deleuze carefully points out that “this technological development is more deeply rooted in a mutation of capitalism” .... He goes on to show how the transition from discpline to control is coordinated with the major changes in capitalism that other commentators have noted: the transition from the welfare state to the ne- oliberal state; from Taylorism to Toyotaism; from Fordism to post-Fordism and flexible accumulation...; from demands for obedience on the part of workers to demands that workers be adaptible, flexible, versatile and “entrepreneurial” ....; from industrial capital and “material expansion” to finance capital and “financial expansion” ....; and from the formal to the real subsumption of labor under capital....
Shaviro says:
No State apparatus, no “governmentality,” no measure of surveillance, and no form of education or propaganda has been able to constrain human freedom as comprehensively – or as invisibly – as the neoliberal market has done...capitalist debt as we know it today is a kind of double process. It ravages the present in the name of a future that will never actually arrive; and it depletes our hopes for, and imaginings of, the future by turning it into nothing but a projection and endless repetition of the present.
The media, and especially business journalism, played a profound role in representing the global financial crisis, and therefore, in setting the parameters of meaningful debate about them. Business journalism primarily uses the frame of instantaneous economic growth, the “miracle of the market” and its self organizing character and negative power of the state and the democratic public.
In their Neoliberal Newspeak and Digital Capitalism in Crisis in the International Journal of Communication (4 2010) Paula Chakravartty and Dan Schiller situate the global financial crisis:
in relationship to the transformed domestic and transnational field of business and financial news, encompassing traditional and new media and across the blurred boundaries of infotainment. After briefly reprising the transition to a neoliberal digital capitalism and the crisis to which it has led, we show that economic journalism has been no mere reflection but a constitutive element of the crisis. Our objective here is to provide a political economic overview of the evolution of the dominant business and financial news field primarily in the U.S. and provisionally in terms of linked transnational transformations.
Chakravartty and Schiller say that the global financial crisis the financial sector, which demanded light regulation now demands the socialization of losses, thereby undermining the legitimacy of neoliberal doctrine. Did this happen in journalism? How did journalists address this and other questions:
What are the causes and likely outcomes of the crisis? What are its social and human costs? How might our political economic arrangements be additionally altered to mitigate the crisis and to ensure that the rescue effort itself adheres to principles of democratic accountability?
We began this article discussing the moment that many within the business news field identified as a turning point in the history of neoliberalism in the United States and, by extension, in the world. Upon reflection, it seems that it is certainly too early to tell what, if anything, has changed in terms of the continued dominance of neoliberal newspeak. We have tried to make sense of the meaning of this drama and have argued that we must do more than accord scrutiny to media representations of a process that is supposedly occurring someplace else.
The Contemporary Condition is an interesting academic weblog. The latest post--What was Fascism? written by William E. Connolly raises the issue of fascism. He argues, following Karl Polanyi in The Great Transformation, that fascism in the 1930s was a reaction to the failure of unfettered capitalism.
This raises a problem for the contemporary Right today, given that unfettered capitalism causes global warming and the Right's insistence that a minimally regulated economy is the only way to avoid the danger now of a major recession or depression caused by the global financial crisis. If neo-liberalism has been a hegemonic class project, to restore profitability to corporations (and it was successful in this), then its hegemony is now being undermined by the global financial crisis and climate change.
Connolly says that the Right in the US are engaged in historical revisionism. Jonah Goldberg, for instance argues that those who place fascism on the right side of the ideological spectrum are wrong, since fascism is really a phenomenon of the left.
Jonah Goldberg in Liberal Fascism now redefine it [fascism] to mean any large intervention of the state into the economy, even if it is to reduce poverty, respond to recession, regulate capital more carefully, or respond to global warming. Keynesianism, the New Deal, anti poverty programs, are now placed under the umbrella of “liberal fascism”, even though these developments in the thirties actually helped to ward off the fascist potential simmering in several states
Golberg's is an old theme---totalitarianism and that all totalitarianisms (fascism and communism) are essentially the same. To say that liberalism is a totalitarianism and a fascism--the assumption here is that statism is fascism--- is to ignore that Fascism is a specific species of totalitarianism, and it's best understood not by the things it has in common with other forms of this phenomenon, but what distinguishes it from those other forms.
To say that liberalism is a totalitarianism and a fascism---rather than liberalism is a statism--- is to inhabit the outer rim of the conservative wingnut territory around National Review and the Tea Party movement, who ignore the real American fascism---skinheads, neo-Nazis, the Klu Klux Klan, white supremacists, nativists, the Montana Freemen and right wing militias etc --lurking in the Right's closet.
The increasing turn to austerity (fiscal contraction) and structural adjustment means a contraction in demand whilst the assumption that the private sector will pick things up and become the engine room of recovery is questionable. The economic shockwaves are going to continue for some time from the failures of an unfettered financial capitalism, and so the Right are going to contaminate the shift to government intervention and an expansion of the welfare state to deal with unemployment and social unrest with state repression, tyranny and dictatorship.
The implication is that anything that enhances the power and reach of the state is bad. Only the state threatens us--not rogue corporations or Wall Street.The economic strategy is to bail out the banks, pay off the bond traders, keep the basic infrastructure working, and make the poorest bear the cost through welfare cuts in phrased steps.
Paul Krugman's The third Depression sure makes depressing reading. The background is market failure in the form of the global economic crisis and the claims of the Right that a minimally regulated economy is the only way to avoid the danger now.The assumption here is that that the market is a self-organizing, self-regulating system that optimizes freedom and benefits if the state confines itself to adjusting the money supply, waging war, and punishing crime etc.
Krugman says that recessions are common but depressions are rare. As far as he can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 (Long Depression) and the years of mass unemployment that followed the financial crisis of 1929-31 (Great Depression). He adds:
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
He ends thus:
And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.
Why so? Because fiscal austerity improves business confidence!