For a quarter of a century, the remedies of
neoliberalism appeared to work. Growth returned, if at a markedly lower pace
than in the quarter of a century after the Second World War. Inflation was mastered.
Recessions were short and shallow. Rates of profit rebounded. Economists and
pundits hailed the triumph of what the future chairman of the Federal Reserve
in the United States, Ben Bernanke, extolled as the Great Moderation. The
success of neoliberalism as an international system didn’t rest, however,
on the recovery of investment to the levels of the postwar era in the West:
this would have required an increase in economic demand precluded by the wage
repression central to the system. It was built, rather, on a massive
expansion of credit – that is, on the creation of unprecedented levels of
private, corporate and eventually public debt. In Buying Time, his
pathbreaking work of 2014, Wolfgang Streeck describes this as claims on future
resources that have yet to be produced; Marx more bluntly called it ‘fictitious
capital’. Eventually, as predicted by more than one critic of the system, the
pyramid of debt caved in, causing the crash of 2008.
Por un cuarto de siglo, los remedios del neoliberalismo
parecieron funcionar. El crecimiento regresó, aunque a un ritmo significativamente
más bajo que en el cuarto de siglo después de la Segunda Guerra Mundial. La inflación
se contuvo. Las recesiones fueron cortas y poco profundas. Los márgenes de
beneficio regresaron. Los economistas y luminarias saludaron el triunfo de lo
que el Jefe de la Reserva Federal americana, Ben Bernanke, ensalzó como la Gran
Moderación. El éxito del neoliberalismo como sistema internacional, sin
embargo, no se basó en la recuperación en el Oeste de los niveles de inversión
de la posguerra: ello habría exigido un incremento de la demanda económica
excluido por la contención de salarios sistémica. Fue construido, sobre todo,
por una masiva expansión del crédito- esto es, por niveles sin precedentes de deuda
privada, corporativa y pública. En Buying Time, su original trabajo de
2014, Wolgang Streeck lo describió como pretensiones sobre recursos futuros que
todavía no se han producido; Marx más rudamente lo llamó “capital ficticio”. Hasta
que, tal y como se predijo por más de un crítico del sistema, la pirámide de
deuda se hundió, causando el crash de 2008.
The crisis that ensued was, as
Bernanke confessed, ‘life-threatening’ for capitalism. In magnitude, it was
fully comparable to the Wall Street Crash of 1929. Over the next year,
global output and world trade fell more rapidly than during the first twelve
months of the Great Depression. What followed, however, was not another great
depression, but a great recession – a big difference. A starting point for
understanding the political position the West is in today is to look back at
the sequence of events in the 1930s.
La crisis que siguió fue, como
Bernanke confesó, una “amenaza de muerte” para el capitalismo. En magnitud, fue
completamente comparable al crash de Wall Street de 1929.En el año siguiente,
el producto global y el comercio mundiales cayeron más rápidamente que durante
los doce primeros meses de la Gran Depresión. Lo que siguió, sin embrago, no
fue otra gran depresión, sino una gran recesión- una gran diferencia. Un punto
de partida pare entender la posición política en la que el Oeste está hoy es
mirar atrás a la secuencia de sucesos de la década de 1930.
When Black Monday hit the American
stock market in October 1929, conservative governments were in office in the
United States, France and Sweden, while there were social democratic
governments in Britain and Germany. All, however, were more or less
indistinguishably faithful to the economic orthodoxies of the period: a
commitment to sound money – that is, the gold standard – and balanced budgets,
policies that simply deepened and prolonged the Depression. It was not until
the autumn of 1932 and the spring of 1933, a time-lag of three years or more,
that unconventional programmes to combat the situation began to be introduced,
first in Sweden, then in Germany and finally in America. These corresponded to
three quite different political configurations: the arrival in power of social
democracy in Sweden, of fascism in Germany and of an updated liberalism in the
United States. Behind each of these lay pre-existent heterodoxies, ready to
hand if rulers cared to adopt them, as Per Albin Hansson in Sweden, Hitler in
Germany and Roosevelt in America were to do: the Stockholm school of economics
descending from Knut Wicksell to Ernst Wigforss in Sweden, Hjalmar Schacht’s
valorisation of public works in Germany, and the neo-progressive regulatory
inclinations of Raymond Moley, Rexford Tugwell and Adolf Berle – FDR’s original
‘brain trust’ – in the United States. None of these was a fully worked out or
coherent system. Schacht in Germany and Keynes in Britain had been in touch
with each other since the 1920s, but Keynesianism proper – The General
Theory of Employment, Interest and Money didn’t appear until 1936 – was not
a direct input into these experiments, though all involved the enhanced role of
the state. Such were the scattered technical toolkits of the time.
(…)
The scenario following the crash of 2008 differed
entirely. In the United States, policy ambulances were on the spot immediately.
Under Obama fraudulent banks and insurance companies and bankrupt automobile
corporations were rescued with huge infusions of public funds never available
for decent healthcare, schools, pensions, railways, roads, airports, let alone
income support for the worst-off. A massive fiscal stimulus, ignoring budgetary
discipline, was unleashed. To prop up the stock market, under the polite
euphemism of Quantitative Easing, money was loosed by the central bank on a massive
scale. On the quiet and in defiance of its mandate, the Federal Reserve bailed
out not only failing American but also European banks in transactions hidden
from Congress and public scrutiny, while the Treasury ensured – in close
liaison behind the scenes with the People’s Bank of China – that there was no
Chinese faltering in the purchase of T-bonds. In short, once the central institutions of capital
were at risk, every shibboleth of neoliberal economics was thrown to the winds,
with doses of mega-Keynesian remedies beyond Keynes’s own imagination. In
Britain, where the crisis struck quickest in the countries of Europe, these
went so far as temporary nationalisation of what the American gift for
bureaucratic euphemism termed ‘troubled assets’.
El escenario que siguió al crash de 2008 difirió por
completo. En los Estados Unidos las ambulancias con medidas estuvieron
disponibles inmediatamente. Bajo Obama los bancos defraudadores y las compañías
de seguros y automóviles quebradas fueron rescatadas con inmensas cantidades de
fondos públicos nunca disponibles para salud, escuelas, pensiones, ferrocarriles,
carreteras, aeropuertos, y ni siquiera para ayudar económicamente a los
desfavorecidos. Un estímulo fiscal masivo, ignorando la disciplina fiscal, fue
adoptado. Para elevar el mercado de capitales, bajo la eufemismo de Relajación
Cuantitativa, el dinero fue inyectado por el banco central a escala masiva.
Tranquilamente y desafiando su mandato, la Reserva Federal no solo rescató los
bancos americanos fracasados sino también los europeos mediante transacciones
ocultadas al Congreso y al escrutinio público, mientras el Tesoro aseguraba- en
estrecha relación detrás de bastidores, con el Banco Popular de China- que no
faltara la contribución china en la compra de T-bonds (americanos). En resumen,
una vez las instituciones centrales del capital estuvieron en riesgo, todos los
dogmas sagrados de la economía liberal saltaron por los aires, con dosis de
remedios megakeynesianos más allá de la imaginación de Keynes. En el Reino
Unido, donde la crisis golpéo antes en Europa, los remedios llegaron tan lejos
como nacionalizaciones temporales de lo que el don americano para los eufemismos
burocráticos denominó “activos en riesgo”.
Did all this signify a repudiation of neoliberalism
and a turn towards a new international regime of accumulation? In no way. The
core tenet of neoliberal ideology, coined by Thatcher, had always lain in the
attractively feminine-sounding acronym TINA: There Is No Alternative.
Taboo-breaking as the measures to master the crisis looked, and in good part
were, judged by neoclassical canons what they essentially amounted to was a
mathematical squaring, or cubing, of the underlying dynamic of the neoliberal
epoch, namely the continuous expansion of credit above any increase in
production, in what the French call a fuite en avant – a flight forward.
So, once the measures required by its life-threatening emergency had stabilised
the system, the logic of neoliberalism rolled forward again, in country after
country.
Significó ello un repudio del neoliberalismo y un
desvío a un nuevo régimen de acumulación? De ninguna manera. El mantra central
de la ideología liberal, acuñado por Thatcher, residió siempre en el atractivo
acrónimo con resonancia femenina TINA: No hay alternativa. Aunque las medidas
para controlar la crisis parecieran rompedoras de tabús, y en buena parte lo
eran, juzgadas por los cánones neoclásicos consistían esencialmente en un
cuadratura o cubicación matemática de la dinámica subyacente de la época
liberal, es decir la continua expansión del crédito por encima de cualquier
incremento en la producción, en lo que los Franceses llaman un fluite en avant-
un vuelo hacia delante. Así, una vez que las medidas requeridas por la amenaza
de muerte estabilizaron el sistema, la lógica del neoliberalismo se desplegó de
nuevo hacia adelante, país tras país.
(…)
None of this meant, or could mean, that after reigning
for a quarter of a century and then suddenly stumbling to its knees, the
neoliberal system was left without opposition. After 2008, its accumulated social and political
consequences started to come home to roost. Social consequences: a steep and in
some cases (the United States and United Kingdom above all) staggering
escalation of inequality; long-term wage stagnation; a spreading precariat. Political
consequences: wholesale corruption, growing interchangeability of parties,
erosion of meaningful electoral choice, declining voter participation – in
short, the increasing eclipse of the popular will by a hardening oligarchy.
This system now generated its antibody, deplored in every reputable organ of
opinion and respectable political quarter as the sickness of the age – namely,
populism. The widely differing set of revolts comprised under this label are
united in their rejection of the international regime in place in the West
since the 1980s. What they oppose is not capitalism as such, but the
current socio-economic version of it: neoliberalism. Their common enemy is the
political establishment that presides over the neoliberal order, comprising the
alternating duo of centre-right and centre-left parties that have monopolised
government under its rule. These parties have often, though not always, offered
two slightly different variants of neoliberalism: one is disciplinary, and
typically more innovative in its initiatives, as with Thatcher and Reagan; the
other is compensatory, offering side-payments to the poor that the disciplinary
variant withholds, as with Clinton or Blair. Both versions, however, have been
unswervingly committed to furthering the common objective of fortifying capital
against any untoward shocks.
(…)
If we look at the populist revolts against
neoliberalism, they roughly divide, as everyone knows, into movements of the
right and of the left. In that respect, they repeat the pattern of the revolts
against classical liberalism after its debacle in the Slump: fascist on the
right, social democratic or communist on the left. What differentiates today’s
rebellions is that they lack any comparably articulated ideologies or
programmes – anything that matches the theoretical or practical consistency
of neoliberalism itself. They are defined by what they are against, far more
than what they are for. What do they protest against? The neoliberal system
of today, as yesterday, embodies three principles: escalation of differentials
in wealth and income; abrogation of democratic control and representation; and
deregulation of as many economic transactions as is feasible. In short:
inequality, oligarchy and factor mobility. These are the three central targets
of populist insurgencies. Where such insurgencies divide is over the weight
they attach to each element – that is, against which segment of the neoliberal
palette they direct most hostility. Notoriously, movements of the right fasten
on the last, factor mobility, playing on xenophobic and racist reactions to
immigrants to gain widespread support among the most vulnerable sectors of the
population. Movements of the left resist this move, targeting inequality as the
principal evil. Hostility to the established political oligarchy is common to
populisms of both right and left.
(…)
For a full seven years after the crash of 2008,
however, the political impact of the populist revolts in Europe was quite
modest – nothing remotely comparable to the storms that swept through Europe
and America in the 1930s. The Northern League and the AfD were stuck below 5
per cent of the vote. Ukip, the Sweden Democrats, the Dutch Freedom Party, the
Norwegian Progress Party and the Front National were winning between 10 and 18
per cent of the electorate. All these were populisms of the right. Reaching
just over a fifth of the active citizenry were the Freedom Party in Austria and
the Danish People’s Party, also on the right, and Podemos on the left. The two
most successful populisms were recent creations of the left, in Italy the Five
Star Movement gaining a quarter of the votes, in Greece Syriza more than a
third.
What changed all this were four further events. In
Britain, the ruling Conservative Party, under both internal pressure and the
threat of losing voters to Ukip, allowed a referendum on membership of the
European Union which its leaders assumed would produce a fairly easy victory
for the status quo, given that three-quarters of MPs, the totality of high
finance and big business, the top levels of trade-union bureaucracy and the
massed ranks of the country’s intelligentsia and cultural establishment all
favoured continuing membership. To general astonishment, a clear-cut majority of the
population voted for exit from Europe, with a much higher turnout than in
general elections. Decisive in the result was the revolt of the most abandoned
regions and classes of the country against the bipartisan neoliberal
establishment that had been continuously in power since the 1990s. This was the
first time a populist rebellion became the expression of a political majority
in any capitalist country, and in so doing altered the course of its history.
It was a revolt orchestrated by forces of the right: Ukip, the traditionalist
wing of the Conservative Party and most of the tabloid press. But its success
rested on their mobilisation of widespread parts of the population that had in
the past been bastions of the labourist left.
A few months later came Trump’s triumph in the US
presidential election, for which he had hailed Brexit as a dress rehearsal. His campaign, as distinct
obviously from his administration, was undilutedly right-populist in tone and
content – chords struck for the last time in his inauguration speech, which
combined blistering denunciations of political involution, increasing
inequality and loss of national sovereignty with hostility to immigration. His
national victory was in a sense accidental: had the Democrats picked virtually
any other mainstream candidate less unpopular than Hillary Clinton, he would
probably have been defeated. Falling well below an absolute majority, with
fewer aggregate votes than Clinton, Trump’s victory not only didn’t reach the
same proportions as Brexit, but was dependent for its success on hijacking
reflex partisan loyalties among those willing to vote for any candidate provided
they were Republican, no matter how otherwise distasteful. Yet Trump’s victory
was won not on a single yes/no issue like Brexit but on a broad
ideological-political platform, and his support among working-class voters may
have been higher than Brexit managed: some 70 per cent of those voting for him
lacked a college degree. Nor was this the only populist outbreak in America
that year, with Bernie Sanders proving a formidable challenger for the
Democratic nomination from the left. If we reckon those from the less
privileged classes who cast their ballot for Trump in the presidential
election, and those who voted for Sanders in the Democratic primaries as a pro
rata percentage of those who did so for Clinton in November, about a third of
those who voted in 2016 were susceptible to a populism of the right, and a
fifth to a populism of the left.
(…)
In 2018 the highest hurdle yet was jumped in Italy,
where two explicitly populist parties, the Five Star Movement on the left and
the League on the right, together got 50 per cent of the vote – an earthquake
in Italy, and by far the most alarming result yet for the European
establishment, since both announced they had no intention of submitting the
country to the dictates of any more austerity from Berlin, Paris or Brussels. The Italian election also marked
the first time that, when ranged head-to-head, a populism of the left surpassed
by a wide margin a populism of the right: 33 per cent for the M5S, 17 per cent
for the League. Everywhere else, it was the other way round. In France in 2017,
Le Pen’s vote exceeded Mélenchon’s. In Britain, Corbyn was heavily defeated in
2019 by the Conservative demagogue Boris Johnson, flamboyant embodiment of a
simulacrum of populism of the right.
(…)
The problem, indeed, is a more general one. No
populism, right or left, has so far produced a powerful remedy for the ills it
denounces. Programmatically, the contemporary opponents of neoliberalism are still
for the most part whistling in the dark. How is inequality to be tackled – not
just tinkered with – in a serious fashion, without immediately bringing on a
capital strike? What measures might be envisaged for meeting the enemy blow for
blow on that contested terrain, and emerging victorious? What sort of
reconstruction, by now inevitably a radical one, of actually existing liberal
democracy would be required to put an end to the oligarchies it has spawned?
How is the deep state, organised in every Western country for imperial war –
clandestine or overt – to be dismantled? What reconversion of the economy to
combat climate change, without impoverishing already poor societies in other
continents, is imagined? That so many arrows remain missing in the quiver of
serious opposition to the status quo is not, of course, just the fault of
today’s populisms. It reflects the intellectual contraction of the left in its
long years of retreat since the 1970s, and the sterility in that time of what
were once original strands of thought at the edges of the mainstream. Remedial
proposals can be cited, varying from country to country: Medicare for all in
the US, guaranteed citizen incomes in Italy, public investment banks in
Britain, Tobin taxes in France and the like. But so far as any general,
interlocking alternative to the status quo is concerned, the cupboard is still
bare. If a populist party or movement comes to power at present, to see the
probable outcome we have only to look at the turncoat fate of Syriza in Greece
on the left – in opposition a rebel against the diktats of the EU, in office a
submissive instrument of it – or on the right, the overnight standardisation of
Trump’s first presidency, as he breathed fire against establishment complacency
and inequality on Inauguration Day, and did nothing about them once in the
White House. Politically speaking, neoliberalism has been in no great danger
from either.
Into this scene, the Covid virus struck like a bolt
of lightning in 2020, forcing lockdowns across the world. Trump and Johnson,
riding high a year earlier, were each felled by its impact. Trump would all but
certainly have been re-elected that year if his administration had not been hit
by the pandemic. Johnson was ousted by his own party in 2022. Under the
Covid shockwave, international trade plummeted, and five hundred million jobs
were lost worldwide in a few months. In the United States the stock market
crashed and gross domestic product suffered its worst drop since 1946,
contracting by 3.5 per cent in 2020. In Britain, GDP fell by 10 per cent, in
the European Union by 6 per cent. As global supply chains frayed, inflation
started to rise across the OECD and with it unemployment. In this
emergency, the last year of Trump’s first administration saw a massive fiscal
stimulus to prevent a deeper recession. From 2021 onwards, with Biden in the
White House, a still larger intervention by the state to stabilise the American
economy was set in motion with the so-called Inflation Reduction Act, pumping
$750 billion into the economy, with a huge package of state subsidies to
encourage new investment, sustain household incomes and alter energy usage;
followed by the Chips and Science Act of 2022, which poured another $280
billion of public expenditure into the country’s semi-conductor and allied
industries, together with a battery of protectionist measures designed to
defeat hi-tech competition from China. This was a programme proudly
described by supporters of the Biden administration as a 21st-century version
of Roosevelt’s New Deal: its recipes would modernise American industry, help
the worst-off and equip the country’s armed forces to combat the threat posed
by the rise of China. Many hailed its sweeping statist interventions and
embrace of active industrial policies as a break with neoliberalism comparable
to and as decisive as Roosevelt’s break with palaeo-liberal doctrines in
the 1930s. Others applauded Biden’s revival of the Cold War policy of building
alliances against deadly foes abroad, whether around the Black Sea, in the
Middle East or in the Far East, in the best spirit of Truman in the 1940s and
1950s.
Mainstream opinion, not only in
America but equally and often even more ardently in Europe, greeted the results
of this change as little less than a miracle.
(…)
What Trump’s second presidency will mean for America,
and the world, remains indeterminate, given the long-standing gap between his
words and his deeds. At home, he might no more keep his electoral promises this
time, to impose tariffs of 60 per cent on all goods from China and to deport
all eleven million illegal immigrants in the United States, than he kept his
promises last time to rebuild America’s crumbling infrastructure and construct
an uncrossable wall along the whole Mexican border. Yet given Republican
control of both Houses of Congress for at least two years, he is more likely to
act on some of his promises than discard all of them, and in matters of trade
to force allies as well as adversaries to pay greater monetary tribute to
America than in the past. Abroad, he could stop the war in Ukraine by cutting
off all aid to Kyiv, or he could escalate it, if Russia declines the terms on
which he hopes to bring the fighting to an end. He believes in the advantage of
being unpredictable, and certainly the European Union, Britain and Japan, even
if they dislike what he does, are too weak as subordinate partners to deflect
him from it.
The government of Germany – the strongest power in
Europe – collapsed the day after Trump was elected, when Scholz dismissed his
finance minister and lost the third party on which his coalition depended. No
such event had ever occurred in the Federal Republic before. New elections have
doubled the vote of the AfD to a fifth of the electorate, yielding another
establishment coalition rushing to ram through higher defence spending in a
Bundestag voters have just rejected, in yet one more demonstration of how
little European elites care about the democracy they volubly proclaim. In France, the government
appointed by Macron after his defeat at the polls last summer collapsed within
a couple of months, overthrown by a combination of right and left opposition in
the National Assembly, in a revolt the country has known only once before, more
than sixty years ago. Few believe its precarious successor, resting on a
grudging co-option of the Socialist Party, will last very long. In short,
Trump’s version of right-wing populism, abominated by half the country as a
deadly threat to democracy, has taken over in Washington at a moment of
institutional disarray in Berlin and Paris, and with a government in London
that is now even less popular than the discredited opposition it routed a short
while ago. Everywhere the scene is one of instability, insecurity, unpredictability.
‘All is disorder under the heavens,’ and there is little sign of a return to
order, as understood by those accustomed to rule the West.
(…)
The obese share of finance in American GDP has not
dropped, it has increased. The American government’s deficit has tripled in the
last decade. In the same period, public debt in the United States has jumped by
$17 trillion, an increase equivalent to that in the previous 240 years. In the
OECD as a whole, total sovereign debt, which stood at $26 trillion in 2008, has
more than doubled, soaring to $56 trillion in 2024. An international regime
which a decade ago capsized and all but drowned in the sea of debt it had
created, is drenching itself with a still larger flood of debt, with no end in
sight.
So are we finally witnessing the
arrival of a regime change in the West, one already announced many times this
century?
(…)
In some ways a yet harsher indictment of the
socio-economic balance sheet since Reagan comes from a former admirer of the
Gipper, the Indian American banker Ruchir Sharma, formerly chief global
strategist at Morgan Stanley, in What Went Wrong with Capitalism.4 Its leitmotif is that ‘the
periodic financial crises – erupting in 2001, 2008 and 2020 – now unfold
against the background of a permanent, daily crisis of colossal capital
misallocation,’ the result of enormous infusions of easy money injected into
the advanced economies by central banks to prop up steadily declining rates of
growth. Such state-dispensed torrents of cash are the ultimate, overriding
truth of the period. Sooner or later, Sharma warns, a momentous shock to the
system is bound to come. What remedy would that bring? Sharma’s answer: return
to a smaller state and tighter money, the classic recipe of Mises and Hayek
– neoliberalism rendered whole once more.
(…)
An international regime being lowered into the ground,
or rising anew like Lazarus? The stand-off in such expert verdicts has its
correlate in the political landscape, where the conflict between neoliberalism
and populism, the adversaries that have confronted each other across the West
since the turn of the century, has become steadily more explosive, as events of
the past weeks show – even if, for all its apparent compromises or setbacks,
neoliberalism retains the upper hand. The first has survived only by
continuing to reproduce what threatens to bring it down, while the second has
grown in magnitude without advancing in meaningful strategy. The political
deadlock between the two is not over: how long it will last is anyone’s guess.
Does that mean that until a coherent set of economic
and political ideas, comparable to Keynesian or Hayekian paradigms of old, has
taken shape as an alternative way of running contemporary societies, no serious
change in the existing mode of production can be expected? Not necessarily.
Outside the core zones of capitalism, at least two alterations of great
moment occurred without any systematic doctrine imagining or proposing them in
advance. One was the transformation of Brazil with the revolution that brought
Getúlio Vargas to power in 1930, when the coffee exports on which its economy
relied collapsed in the Slump and recovery was pragmatically stumbled on by
import substitution, without the benefit of any advocacy in advance. The other,
still more far-reaching, was the transformation after the death of Mao of the
command economy in China in the Reform Era presided over by Deng Xiaoping, with
the arrival of the household responsibility system in agriculture and the
ignition by township and village enterprises of the most spectacular sustained
burst of economic growth in recorded history – this too was improvised and
experimental, without pre-existent theories of any kind. Are such cases too
exotic to have any bearing on the heartland of advanced capitalism? What made
them possible was the magnitude of the shock and depth of the crisis each
society had suffered: the Slump in Brazil, the Cultural Revolution in China
– tropical and oriental equivalents of the blows to occidental self-assurance
in the Second World War. If disbelief that any alternative is possible were
ever to lapse in the West, the probability is that something comparable will be
the occasion of it.
