Saturday I wrote a sort of call to arms about the ongoing unemployment rate that argued for a consensus deadline after which we would revolt. In the comments I saw a differing reaction over the definition of revolt, and I have come to see that as the result of a lack of consensus on who or what we are revolting against. You hear the term neoliberal thrown around a lot by people ready for real struggle, but even this term is highly misunderstood. We are not stupid people and this is not a difficult problem to grasp, but the finer points do matter when it comes to reaching a consensus on something like a deadline for unemployment improvement before Greek-style uprisings, general strikes, or whatever are called for. Forget about the feasibility of such actions, without an advanced consensus on the urgency, the root problem, the opposition, nothing new or noteworthy can be done. The left has often taken the Neoliberal turn of the late 1970's, especially the so-called "washington consensus," as a watershed moment in its war against cultural and/or free-market conservatism. I want to take the opportunity to take stock of the term as it has evolved in meaning historically and ideologically. A nuanced meaning of the term will help us understand how best to counteract it, how eventually to overcome it, and why we so often lose to it on the most basic arguments, like in Haiti for example, where people are arguing to this day that Haiti's problems would be solved if it were "open for Business," even as the US colluded with the Preval administration to keep the minimum wage at 3.00 an hour instead of the 5 that was being demanded; even as the US refuses to repeal the Bumper's Amendment, which outlaws US aid going toward the agricultural industry of another country. In this diary I will first explain the history of the term as it has evolved in meaning, and then try to use this understanding to suggest what I think revolt might mean, why I think it should happen as soon as possible, and who the actors are going to be.
The term Neoliberal is not so much economic as it is foreign policy-based. Its founder is Robert Keohane in a book called After Hegemony, and its original aims were far from the negative connotations the word generally garners in contemporary discourse, especially on the left. What's the matter with neoliberalism? The previous liberals, in the Immanuel Kant tradition (Perpetual Peace, for those philosophy buffs among us), and right on through their modern-age anointed philosopher-king, President Wilson, believed almost unanimously in a growing league of liberal, democratic states which would come to one another's aid in times of emergency and would thus aid in one another's prosperity by sharing the burden of defense and trading more freely with one another. The idea was simply that Republics (or democracies) could trust one another as a result of the superior ethical foundation of their domestic political systems. On these basic premises, retooled slightly as Roosevelt's 14 points, the League of Nations was founded at the conclusion of the first World War, a war that Wilson himself gambled somewhat recklessly in entering. Historians took note of the political underpinnings of Wilson's idealism. Peter Beinart's The Icarus Syndrome does a wonderful job of shedding light on the political motivations for Wilson's eventual policy of global liberalism (as opposed to traditional isolationism). The famous 14 points were essentially a political front to sell America's involvement in the war. And because this idealism was founded on a combination of cynical political calculation and somewhat reckless opportunism, there was already an intellectual constellation skeptical of liberalism, on the one hand, and idealism, on the other, when the League of Nations allies signed the fated Munich Pact on the 29 of september, 1938.
From this point on, war Hawks and so-called "realists" took center stage in both the policy and academic debates around foreign policy. Realists saw WWII as definitive proof that human nature was as Thomas Hobbes had predicted, i.e. in a state of anarchy, actors will behave in whatever unpleasant way necessary to ensure their own survival. The system, therefore, was at best "self-help" and quite plausibly dog-eat-dog, and any misgivings about that were likely to lead to unnecessary trouble. The road to hell was paved with good intentions, so to speak. The debate essentially came down to two camps within realism, each seeing international anarchy as a cause for great cynicism as to the possibility of interstate cooperation and collective security. Offensive realists saw survival as an unambiguous matter of constantly expanding one's influence or even one's territory, until major bodies of water or other geographical boundaries created the general security necessary to allow for the luxury of non-territorially-based expansion. As Catherine the Great famously put it, "whatever doesn't grow, rots." Defensive realists, on the other hand, argued that survival depended on the balance of threats, and when something happens, such as military buildups, volatile regime changes, etc., to dramatically alter that balance, only then does war or expansionism become wise. Otherwise, war is just too risky.
Whatever the dominant paradigm during these years, Presidents Eisenhower, Kennedy, Johnson, Nixon and Reagan were content to behave as non-ideal realists for most of their foreign policy careers. In these decades however, foreign policy experts in Academia saw signs of a third way between liberalism and realism. Neo-liberalism was not a product of neo-classical economics as is so often thought. The dominance of neoclassical over Keynesianism economic policies was a gradual process since the end of WWII that coincided with the dawn of a new foreign policy consensus; it was by no means a necessary part of neoliberalism. Neoliberalism essentially held that the reasons that the League of Nations failed were to be found in the work of economists studying [rational, self-interested] agent theory; agent theory, as we all know, is not unique to neo-classical theory. Essentially, the lack of a strong leader at the head of the League of Nations created what Rousseau referred to as a stag hunt (sort of a metaphorical game, for those unfamiliar with game theory) whereby the possibility of other people freeriding and chasing after smaller, more definite individual goals, made it at best a toss-up to pursue the common goal of security (eliminating Hitler multilaterally for his invasion of the Sudetenland). The United Nations, on the other hand, is led by the Security Council, which is almost like saying that it is led by the one superpower with veto power on it that has any real interest in meddling with the internal affairs of others, i.e. the US. This means that even if the whole hunting party decides to free ride, there is a strong enough actor to ensure that capture of the stag. The knowledge of this is said to allow more members to feel comfortable participating. Moreover, bilateral cooperation is hindered by the prisoner's dilemma, wherein neither side is likely to cooperate (akin to keeping 'mum' in interrogations) for fear of the other side defecting. The prisoner's dilemma was important for showing that whether or not the other side cooperates, in a non-repeated game, the best strategy is to defect. It could be surmounted only by creating institutions that heightened the repetition of interactions (or "iterations") between states, thus creating a longer "shadow of the future" to offset the payoffs for defecting. Thus, neoliberals reduced the historical obstacles to international cooperation and peace to a few basic games, instead of a treatise on human nature, and solved many of those obstacles by solving their games. This was an amazingly influential development in international relations theory, leading to a renewed sense of idealism, albeit a more realistic, cautious one. Indeed, the ironic thing was, they ACCEPTED Hobbes' basic arguments on human nature, but saw the potential to move beyond them as challenges to cooperation.
This led to a sort of explosion in scholarship on international institutions. In fact, the term neoliberalism is more properly known as neo-liberal institutionalism in terms of intellectual history. Due to such things as lowered transaction costs, iterated games, reputation and domestic audience costs, as well as the overall view that a "rising tide lifts all boats," the neo-liberal agenda began to seriously challenge realism for primacy in the foreign policy spheres of Washington and London, although realism held strong in academia.
Meanwhile, in the late 1970's, real wages stagnated in the U.S., and our trade balance dropped from historically positive to thus-far-permanently and increasingly negative. What was going on here? Four things were happening in tandem, each of which contributed to the specific quality of neoliberal institutionalism that we on the left generally refer to when we say "neoliberalism." First, with the passage of the union-busting Taft-Hartley act in the 1940's, the labor movement had begun an ever-increasing decline in members and overall power, essentially ensuring that American democracy would not look like the social democracies of Western Europe. Second, the rise of container shipment as a means of transport meant that goods could be produced overseas with minimal opportunity cost in lost time, and often at great savings due to the presence of cheap labor in such countries as India and China. Third, partly as a result of this development, and partly as a result of the increasing exploitation of middle east oil fields, the US began importing most of its oil, whereas until that time we were a net-exporter of oil, and the 1970's saw the resulting rise of the OPEC cartel, which caused a huge spike in prices in 1977, leading to inflation and rounds of austerity. Fourth, Ronald Reagan ran up a huge deficit in the arms race with the Soviet Union, while simultaneously cutting taxes for the rich, all of which necessitated further austerity and the mass gutting of social programs, all in the interest of sovereign debt. All of these things colluded with the popularity of international institutions to change the face of globalization to a class project.
What's important to notice about this is that only one small portion of Reagan's foreign policy could be considered neo-liberal in either the original or Washington Consensus (read:neoclassical) senses: the opening of its markets and the IMF's policy of forcing the southern countries' markets open to US companies. The military Keynesianism of the arms race with Russia was not based on neo-classical economics, for this creates inflation in the long run (although Reagan would have argued that the policy was a security necessity, this was more of a realist argument and anyway highly questionable). The cutting of taxes for the rich without paying for it was not neoclassical; neoclassical economics above all argues for a role for the government and taxes, but that budgets should be balanced. So the neoliberal institutionalist project argued for by Keohane and Axelrod in the foreign policy realm barely ever had a chance to see the light of day in the policy world. Bill Clinton, for his part, gave a serious shot at reviving it, but George W. Bush repeated the same failed policies of the Reagan administration, more than wiping out Clinton's gains... Obama has tried a larely Clintonian approach without much success. Why, after all these disappointing results, is there such a lack of imagination outside of the pure or watered down versions of neoliberalism?
I want to argue that even Clinton was participating, albeit somewhat unwittingly, in the neoliberal class project that Reagan largely started, and Bush junior more-or-less completed, despite Obama's relatively impressive attempts to save it from itself. When President Clinton left office, this country had an annual federal budget surplus of $236 billion. Nevertheless, the damage done to other countries and ourselves in the name of neo-classical free market economics was a part of the Clinton legacy. I think this was something he can largely plead ignorance on if he chooses, since he was a lawyer by training and the neo-liberal institutional consensus was predicated on the assumption of sound economic policy. However, those economists in the "washington consensus" who backed his policies at home and abroad, Robert Rubin, Larry Summers, Alan Greenspan, etc. are certainly culpable, as are any foreign policy analysts in Washington that had a relatively good understanding of Keynesian economics and the foreign policy implications of protectionism. Too much deregulation leads to business cycles and should these become too deep, recessions, stunted growth, full unemployment. China is a conundrum in the sense that it gets away with being seen as economically liberal simply by means of comparison to its former self. It is practicing a clear policy of economic protectionism of the highest order, and the US is essentially returning the favor with the most favored nation treatment as our export industries continue to go overseas. So the definition of neoliberal was not clear to the policy gurus who were responsible for shepherding it, and it is thus understandable that it would be a vague concept to us.
Now, once the washington consensus was passed, the negative effects at home were concealed with a wash of cheap money from China and a distressed Japan, which Global Financiers turned into easy credit, and bundled and sold as Collateralized Debt Obligations (CDO's), or simply just used to keep the aggregate demand afloat. This was already going on when Clinton got into office, and was difficult to argue with given the complexity of the products, the amounts of cheap capital arriving from China, as well as cheap goods, etc... most of all, the POLITICAL reality of stopping the party on his watch. So the party continued (keep in mind the point on the political reality, more on that in a minute).
However, by the second term of George W. Bush it was becoming clear that the market for new Mortgages had almost dried up and new markets had to be invented in the lower-class sector to keep housing prices from leveling off, and this led to a new and more pernicious sort of predatory loan becoming all-too-common. By the time 2008 came around, the foreclosure map of America was highly localized in states with large low income and non-english speaking populations, large urban centers, and weak state regulatory apparatus. This highlighted the geographical and class based realities of the crisis. The crash of 2008 was not only a return to pre-great depression era levels of inequality, it was also the greatest loss of collective wealth from the African American and Hispanic communities in this country's history. The most important point to take away from all of this is that as a result of the crisis, today the top 1% owns more wealth than the bottom 90%, according to Bernie Sanders, and since 2000, 12 million middle class earners have fallen out of the middle class. We are facing the fact today that Neo-liberal institutionalism coupled with Neo-classical economics is not significantly nuanced to shape policy in today's globalized world. The washington consensus is now a naked assault on the low-to-moderate income workers of the world, and must be seen as such. This is what is now intended by the term Neoliberalism.
Before I get to my solutions, it is worth noting that the new Neoliberalism has worked for some. In China, for example, it has allowed for unprecedented rates of growth to take place on the auspices of the american consumption market. India has seen a similar rise in its GDP as a result of neoliberalism and free trade. But China is hardly behaving like a good neoliberal country by artificially devaluing its currency. And income inequality within these two countries is worse than in the US by far. Some of Western China looks like sub saharan Africa, with the exception that workers have the potential to migrate to the big cities and earn a pittance.
Furthermore, China is the poster child for addressing this crisis with a true 1930's-American- style Keynesian infrastructure project. As a result of that, 18 of the twenty million jobs initially lost have been restored in the form of infrastructural work and renewed production. The US, on the other hand, is still involved with the deeply contradicted neoliberal project, which is really only understandable as class warfare, waged by the rich against the poor. So the decision to deal with the sovereign debt problem has two basic solutions, one pursued by China in the form of a Keynesian solution, the other by the US in the form of the neo-classical solution of tax-cuts and austerity. The latter is neoliberal, but only on the new, contemporary sense of the Washington consensus, where neoliberal institutionalism was fused with neoclassical economics.
What has allowed China to capitalize, of course, is its political system of central planning and state control of the banks and markets. China has paid for this in human rights violations and international reputation, and there is little good to be said about the Chinese system economically as well. The gap between rich and poor there is astronomical, as may be expected in a system with little popular accountability. But we might also note the weakness China's system points out in our own. Whereas China is an unabashed autocracy, the US is becoming a plutocracy, whereby we gain little of the benefits in terms of human rights from representative government, at the cost of little central planning that would cost a dime to our plutocratic ruling class. The human rights that we lose may remain basically representative, but they seem to be moving to other areas of the Universal Declaration of Human Rights spectrum over time. I'm thinking of the incarceration rate, the immigration struggle, the attacks on planned parenthood, the citizens united decision, the deteriorating environmental issues, the three wars we are unnecessarily involved in, etc.
So the first point is that we are no longer just simply talking about revolting against neo-classical economic hegemony in American political and academic discourse, nor are we simply rebelling against neoliberal institutionalism in the traditional sense of the term. If either were the case, the solutions would be more Keynesianism and more isolationism, and there are indeed those who argue for that, perhaps even most on the left. The problem with those views, however, is not that they are losing the ideological debate in American schools and policy circles. They probably are (well, certainly in the case Keynesianism, though probably with isolationism as well), but that in itself is not the problem. It's WHY they are losing that should drive our attention, and the reason is that new Neoliberalism as it has come to imply is more about class domination than it ever was about a rising tide floating all boats. That rhetoric is all but gone, in its place a system that is content just openly consolidating class power in a smaller and smaller upper class. No need seems to exist for intellectual or moral window dressing at this point. And it is precisely this fact that is hurting president Obama with the left. There is little he can do to paint a pleasant picture of the pillaging that is going on all around us, and yet he is not able or willing to call it what it is. That means that who we are rebelling against is not a group of intellectuals or a group of politicians, but a super powerful social class. And we are doing it largely ourselves, without help from Washington.
Therefore, the types of revolt are fairly limited, and must be seen in a Marxian perspective. There are many challenges to class struggle that Marx couldn't have predicted, such as employer-based health care, the conservatism of a landed middle class, etc. Still, the time is son coming when the upper class will grow impatient with these safety measures, and we have to be ready to capitalize. I judge that time to be one year away, if the austerity measures in the latest budget/debt ceiling talks and unemployment rates go as we are all expecting them to go. But I am open to other forecasts. Ultimately, the reason for having a deadline is to commit ourselves collectively far enough in advance to take bold action and have enough time to plan etc. I think that the exact timing perhaps secondary to the act of choosing a date and sticking with it.
There are some additional questions centered around what a revolt would actually look like that have yet to be addressed. When you consider that it will be many years before the middle class is actually psychologically eroded in this country, and in the mean time, the numbers of people firmly in the lower class is likely less than half the country, how can something like a general strike be achieved? I leave this question open as well. I think that by tying our struggle to those of international movements such as France, Spain, and the anti-globalization movements we achieve a moderate boost in terms of numbers and leverage. And once a date has been chosen, the publicity of the move could help jar people awake to their true economic interests. I think a lot of the so-called middle class is in debt, possibly facing foreclosure, and hanging by a thread, so I'm expecting our ranks to grow significantly between now and next summer. And I think the timing with the elections coming up would help democrats, meaning that this could ultimately be an organizing tool for the better elements of the Democratic party. These are just my thoughts, but the overall point is that Warren Buffet is right. There is class war. The rich are waging it, and they are winning. They use neo-liberalism as a clever intellectual disguise, but they are really pursuing a policy of worldwide class domination, and we can't let them.