The Strange Non-death of Neo-liberalism [Englisch] [Taschenbuch]

Colin Crouch's analysis of the continuing dominance of neoliberalism starts with a definition and history of his terms, showing how the word 'liberal' in particular has gone through some almost total reversals since the repeal of the Corn Laws. The ascendency of 'neo-liberalism', however, began in the 1980s, after the perceived failure of Keynsian economics.

The original 'Hayekian' or 'Ordoliberalismus' anti-totalitarian formulation whereby competition is seen as 'a process that would maintain in existence large numbers of firms, near-perfect markets and widespread consumer choice' was replaced by the Chicago School's view that competition should be seen:

'in terms of its 'outcome' as the destruction of small firms and medium-sized enterprises, the dominance of giant corporations and the replacement of the demotic idea of consumer choice by a paternalistic concern for 'consumer welfare' (P16-17)

This concept of 'consumer welfare' is crucial. Unlike Hayek, this formulation accepts, even welcomes, the idea that competition will eliminate competition:

'If there would be efficiency gains from a number of smaller firms being bought out by a larger one, then that would be the outcome that would maximise what they called consumer 'welfare', even if it led to reduced competition and left consumers with a reduced choice of goods. What should therefore be the concern of the law courts in deciding antitrust cases is what outcome would be most conducive to the maximisation of consumer 'welfare', not 'choice' as such.' (P55)

By 'welfare', the Chicago economists considered the overall wealth of the society. The fact that the wealth may become increasingly concentrated in the hands of a small and diminishing number of transnational corporations (or TNCs) and a stateless elite is neither here nor there. Any redistribution of wealth should be undertaken by governments and is not the concern of the corporation.

But then, the Chicago school has a major problem with the idea of government. Here, their ideas fit neatly in with those of the University of Virginia. The Virginia school considers that civil servants, politicians et al, are there purely for self-advancement - as portrayed in Margaret Thatcher's favourite sitcom 'Yes Minister' where the Machiavellian machinations of Sir Humphrey had little to do with the promotion of societal good. Governments are seen as 'at best incompetent and at worst corruptly self-seeking' (P63).

The only way to ensure any efficiency and effectiveness in government is to apply the rules of the market. In other words, governments should act like, and learn from, firms. Thus we have the endless setting of targets, the breakup of government agencies into competing bodies and, most importantly, the inclusion of firms in the running of government in Public Private Partnerships (PPP), Private Finance Initiatives et al in almost an odd sort of reversal of mercantilism.

What develops from all this is a tripartite division - firms (TNCs), national governments and, surprisingly perhaps, the market. Here, 'the market' really refers to small and medium sized enterprises (or SMEs). It is perhaps interesting to compare this with Dani Rodrik's 'trilemma' where power is negotiated between the 'nation state', 'democratic politics' and 'hyperglobalization' - here 'hyperglobalization' more or less equates with the TNCs while the 'nation state' and 'democratic politics' conflate into national government, but the market is not really considered. I find Colin Crouch's model more convincing.

Although Crouch doesn't use the term kleptocracy, he does refer to oligopolies. Quite frankly, in the case of international banking in paricular, the difference is only one of degree. The virtual merger of politics and corporations, particularly in the US, is plain to see. The revolving door between government agencies, lobbying organisations and the corporations is notorious (see Thomas Frank's excellent 'The Wrecking Crew') but, at the same time, corporations consider themselves to be only responsible to their shareholders - the maximisation of shareholder value is considered to be management's sole aim, even though they are increasingly intimately involved in the legislative process.

It is odd, then, to see the rise of Corporate Social Responsibility (CSR). More often than not, of course, this is simply just a marketing tool. Crouch puts it nicely in the heading of chapter 6 - 'From Corporate Political Entanglement to Corporate Social Responsibility'. Political power has become increasingly concentrated in firms, or governments acting like firms or firms working for/with governments. This is hardly surprising. As Crouch says:

'a polity in which economic resources were very unequally shared would be likely to be one in which political power was also concentrated, economic resources being so easily capable of conversion into political ones.' (P125)

Later, he seems to echo Peter Oborne's 'The Triumph of the Political Class':

'...the state, seen for so long by the left as the source of countervailing power against markets, is today likely to be the committed ally of giant corporations, whatever the ideological origins of the parties governing the state.' (P145)

It seems that CSR has, then, almost taken the role of what the French aristocracy used to refer to as 'noblesse oblige' (P150). But, suggests Crouch, the growing CSR movement might be seen as a reaction to pressure from a fourth element outside the 'firms, state and market' - 'civil society':

'Civil society includes, though extends further than, the voluntary sector. It defines all those extensions of the scope of human action beyond the private that lack recourse to the primary contemporary means of exercising power: the state and the firm...States and firms do dominate our societies, but there is a lively field of contention. Challenges to domination can be made, concepts of public goals explored and turned into practical projects, against the state's claim to monopoly of the legitimate interpretation of collective values, and against the firm's claim that the conversion of values into the maximisation of shareholders' interests is as good as life can get.' (P153-4)

Crouch considers that there are potentially five types of groups that may challenge the state and the firm. Most of these are pretty well compromised, he feels, and I would agree. Political parties (see Peter Oborne) and most organised religions - both seem unlikely contestants. Whether campaigning groups, the voluntary sector and ethically motivated professionals can make the difference and wield the 'power of the powerless' is finally what this book is about. Where Dani Rodrik calls for a 'reining in', a deliberate limitation to 'hyperglobalization' in order for nation states to again exert a moderating influence, Crouch sees the nation state as hopelessly compromised and the only moderating and humanising influence coming from civil society:

'Civil society...operates in the interstices left among the great erections of political and economic power, like little houses springing up busily and untidily, creating vitality in a street dominated by the inaccessible security-controlled doors of skyscrapers. Since it contains a vast array of competing groups, with different and sometimes opposed moral agendas, it also embodies a kind of moral relativism. But this is moral relativism only at the meta-level of the character of the system as a whole. Within it the great majority of participants act with moral purpose. In societies that contain a plurality of rival values, where no religion or set of beliefs has hegemony, that is all we can hope for.' (P161)

The question is, is it enough? Is this anything more than a 'post-modern relativist politics' or a restatement of 'pressure group politics'? I'm not convinced - but the ideas just might help fuel resistance to the neoliberal monolith. Thank-you Professor Crouch. :-)

The general public, such as myself, need to understand economics these days, supposing we didn't before. This book is the right kind of adult reading. It explains, with severe and unflagging concentration but without jargon or statistics, the economic theories that have dominated the last 80 years. Professor Crouch sees neoliberalism as having stepped into the vacant space left after the inflationary excesses of the 70's were taken as a sign that the generally Keynesian consensus that had dominated `western' economies since the 30's was played out. I think he should have gone one step further and made a point that would fit his later argument perfectly, namely that the reaction was not so much against Keynesian theory as against the behaviour of the working classes whom Keynesian demand management and deficit spending had empowered. They had created wage-push inflation, so here was the opportunity to push back and reduce them to the statistics that is all they constitute in market-forces economics of various varieties.

Crouch is repelled by this mentality and so am I, but he has written no kind of tract or political pamphlet. He issues no simplistic demands to change the system or even to reform it drastically, because however repellent it is not nonsense. There is strong economic argument underpinning it, and Crouch states in so many words that the Chicago economic theory at least describes the present-day economy. However it is masquerading as being some triumph of free markets, and Crouch demonstrates powerfully that it is nothing of the sort. What has happened behind the presentational sleight of hand is that the manipulation of the economy has reverted into the hands of a few movers and shakers in the big corporations. It has largely obliterated the kind of free market that Adam Smith and other such dreamers envisaged, and reduced `consumer choice' to choice among such options as it has itself contrived through gaining a grip on legislatures and controlling the terms of popular debate. The masquerade consists in the monstrous effrontery of representing this oligarchical outcome as the result of untrammelled consumer choice. We have got what we really asked for, apparently, it's just that we don't know it.

On the one hand this reduces individual consumers to statistics contained within aggregate economic performance, on the other it places the control of the economy in comparatively few hands; and that, I slightly suspect, may be neoliberalism's Achilles heel. To me, it seems to follow from Crouch's arguments that while there are some basic economic laws, such as supply and demand, that are more or less as immutable as gravity, others depend on what people in general will accept. It is convenient to depersonalise the behaviour of `money' or `capital' as if it moved itself without human intervention, but they can only get away with this story if it represents some genuine mass activity. Once it gets down to traceable individuals then sooner or later they can be traced. Technology helped to create the problem by allowing money to move so quickly that the transactions are done and dusted before anyone else realises, but technology can also now see into places that were once beyond inspection, even if there is a time-lag before the scrutiny happens. Disclosure, not by lumbering governments and regulators, but by the public at large, may yet be neoliberalism's nemesis.

I rather wish that Crouch had separated his analysis more, putting manufacturers in one category and the bankers and such like in another. There is surely a clear difference between firms that produce genuine products, items that at least have a genuine cash price and value, and the manipulators of `money' that is really no longer true money but a figment that gets progressively more fictional as it gets wrapped in bundles containing goodness knows what supposed transactions, valued according to what are literally bets on what the next punter, equally ignorant of what he is supposedly buying, might be willing to pay. How this current display of human arrogance and folly may develop obviously I have no idea, but it must be at least possible that if public outrage boils over it will target the money barons most. Major manufacturers may have the US congress, for example, eating out of their hands, but when the only financial reality is cash, something everyone knows and something that no conceivable economic system can change, then the spectacle of this or that finance house playing tricks it may not even itself understand in order to pile up phantom finances, thereby putting real people's real finances in peril, may just come to seem a racket too far. It takes me back to school history classes when we were required to identify the `causes of the French Revolution'. The causes could be summarised as one basic cause, namely that the oligarchy pushed their arrogance and presumption too far. Obviously an international money market is a different kind of target, and any putative onslaught on it would take different forms, but if the balloon goes up one thing for certain is that academic niceties, such as supposed inevitable rightness as markets work out their own impersonal logic, will be sidelined for the time being.

The international aspect is giving the whole show a breathing space, allowing, for one thing, outrageous remuneration to be given to banking executives on specious grounds of international comparability. That particular bluff will surely be called sooner or later, but in general Crouch's handwringing at the way in which the money miscreants are getting away with it is a little misplaced. It can't all be stopped in its tracks, but he should not have fallen for the simple error of feeling he has to provide alternatives. These are bound to be easy prey for critics. The real value of this important book is in the earlier chapters; and the answer to any supporter of the status quo who said `You have to provide an alternative' should have been `No, you'.