Death by Neoliberalism

Photograph by Nathaniel St. Clair

One of the persistent questions from history is how once thriving peoples and nations decline. This decline can come in the form of high drama— think Germany in the 1930s, or steady social decline that reaches a point where it becomes irreversible. Part of an explanation is that the terms ‘peoples’ and ‘nations’ suggest singularities that internal divisions render irrelevant. Many of the nations created when the Allies divided the world after WWII were built to fail. Current political rancor in the U.S. is largely attributable to five decades of the public realm being handed over to ‘capital’ through neoliberalism

This isn’t a line of reasoning that has a grip on the public imagination at present. The press is busy proclaiming upheavals and social clarity that haven’t yet come to pass. Theories from both the political right and left have it that moral depravity— social injustices from one side, and the economic dependencies created through social-welfare policies on the other, are motivating social decline. That these ideas have long histories in the U.S., both through their facts and as points of political contestation, begs the question of timing: why now? That both critiques emerge from neoliberal premises illustrates its totalizing character.

This latter point will seem counterintuitive to readers on what is now called the ‘cultural’ left, which apparently constitutes much of the American left. How can social justice concerns emerge from the logic of the political right? The answer comes through proposed solutions. Trying to solve social problems through changing individual behavior has been the purview of the patrician right for a century or more. Doing so is a base conceit of neoliberalism. It is hardly incidental that the dominant neoliberal institutions all claim to support racial justice while doing what is in their power to head off redistributive policies.

Picture: J.P. Morgan Chase CEO Jamie Dimon takes a knee, Colin Kaepernick style, in front of a bank vault to demonstrate his political affiliation with the cultural left in the U.S. J.P. Morgan’s Payday Lending operations are part of the ‘democratization of capital’ intended to liberate the poor via high interest loans. Source: source photo from New York Post.

To this affect, the back-and-forth over a CIA recruitment ad that uses woke buzzwords largely misses the point. The CIA isn’t acting to change its institutional mandate. It is using what is alleged to be liberatory language to create the appearance that its institutional mandate is somehow liberatory. Jamie Dimon ‘taking a knee’ in front of a bank vault, which I address in detail below, isn’t tied to changes in J.P. Morgan Chase’s institutional mandate or business practices. Mr. Dimon is shifting the blame for so-called institutional racism to people who overwhelmingly lack the capacity to act on their beliefs, whatever they might be.

The point here isn’t a search for some abstract ideological purity. The question, again, is how did the U.S. get so far gone? Furthermore, what do the relevant ‘we’ do about it? For instance, two differing ideological interpretations of the shifting political allegiances of suburban Republicans are 1) suburban Republicans are shifting left or 2) cultural liberalism is providing cover for right-wing economics. The motive for the question is that a similar shift took place in the U.S. in the mid-1970s. The sensibility being promoted then was similar to today, cultural liberalism combined with the economics of the John Birch Society. In fact, this about dates the launch of neoliberalism.

This thesis likely reads as if I haven’t seen a newspaper in the last six months. In the ghettoized environs of the establishment press, the U.S. is in the midst of the second coming of FDR, with both positive and negative takes on the move. In fact, all of the dominant neoliberal institutions are as fat, flush, and ready to take on challenges from without, as they have ever been. What is being undertaken— that which actually gets turned into legislation, is a bridge, not a change of course. With apologies, this looks very much like 1976 or thereabouts, without the art, the outstanding jazz, the Punk Rock, and the sense of humor.

Coming out of WWII, the programs of the New Deal and more precisely, the power of organized labor, served to balance political power in the U.S. Neoliberalism was a counter-revolution that shifted economic power, and with it, political power, all to the side of capital. From 1950 to about 1980, Democrats served power through serving organized labor. As the power of organized labor was diminished, Democrats joined Republicans on the side of capital. At present, the political contest in the U.S. is over who can better serve capital.

By the 1990s, two miraculous conversions occurred. The first was a mass migration of former Marxists over to the side of neoliberalism. The second was a coalescing of the then emerging professional class around neoliberal logic. In both cases, the individualist premises of American liberalism facilitated the re-emergence of a unified class logic. While neoliberal economic reorganization created the material basis for clear class distinctions, it also served to hide the unity of this emerging class logic behind a stilted cultural liberalism.

To see this, consider the picture above of Jamie Dimon using the symbology of racial justice in front of a bank vault. Mr. Dimon heads one of the largest banks in the world. His politics are expressed through the institutional role that J.P. Morgan Chase plays in global affairs. The idea that Mr. Dimon can believe one thing, say in ‘racial justice,’ while targeting the (disproportionately PoC) poor through the bank’s Payday Lending operations, points to a package of suspect logic.

In the first, Mr. Dimon’s social power as head of a major neoliberal institution is erased through the flattening of ‘beliefs.’ Through beliefs, what Mr. Dimon believes and what an unemployed former factory worker in the American Midwest believes are equilibrated. The asymmetrical capacity to act on these beliefs is erased through the erasure of power. Furthermore, what of compound, and / or contradictory beliefs. Mr. Dimon almost certainly believes that J.P. Morgan Chase should earn a profit. Is predatory lending racist because PoC are disproportionately poor, or anti-racist because race isn’t a consideration in the predatory lending process?

Mr. Dimon presumably spends his days acting on behalf of ‘his’ bank, but the institutional mandates that motivate the bank’s actions and business practices are distinct from Mr. Dimon’s personal beliefs. This isn’t to merely claim that they are different. It means that institutions have mandates that are wholly unrelated to personal beliefs. But actual human beings create these mandates. And actual human beings act on them. In this sense, the mandates are codified power, instructions on how to behave that are enforced through economic rewards and sanctions.

This form of economic organization has produced a social order where people, in particular the PMC, spend their days fulfilling institutional mandates that are wholly unrelated to their ‘personal beliefs’ as they are conceived in liberal theory. Should an anti-racist, in terms of ‘personal beliefs,’ be appointed to head J.P. Morgan Chase’s Payday Lending operations, the profit motive would dictate that they disproportionately target PoC because that is where the profits are made. Conversely, were they to target the rich, the Payday Lending unit would go out of business because the rich have easy access to low cost credit. The business of Payday Lending is targeting the economically vulnerable.

In this circumstance, which is broadly analogous to most capitalist practice, the PMC spends its days carefully separating what it does for a living from what it ‘believes.’ The anti-racist head of a major Wall Street bank spends his or her days engaging in ‘institutional racism.’ s/he can join a Black Lives Matter protest, or ‘take a knee,’ with a clean conscience because s/he isn’t personally racist. From a perspective of power, the Payday Lending model is of large, powerful, institutions using asymmetrical power to prey upon the economically vulnerable. Conversely, if there is no large, economically vulnerable population, there is no Payday Lending industry.

This latter point is important. So-called subprime lending operations tend to be far more profitable than lending to ‘prime’ borrowers. This means that a bank like J.P. Morgan Chase benefits when the breadth of economic vulnerability in ‘the economy’ increases. While there are multiple explanations for the explosion in bank profits in recent decades, seeing what used to be called the Middle Class reduced to ‘subprime’ status was an unqualified boon to retail lenders, slumlords, liquor stores, pawn shops and private security firms. And through financialization, retailers have seem profits rise through their finance subsidiaries. Taken together, there is a powerful constituency for immiseration.

The patronizing, and ultimately racist, nature of the liberal conception of racism is rendered visible through Payday Lending. Once economic power is removed from consideration, all capitalist exchange is freely undertaken. The case from 2008 where Blacks were charged predatory interest rates on home mortgages while Whites with similar credit ratings weren’t, faces the challenge that everyone engaged in these transactions did so freely. The interest rate paid wasn’t determined by the mortgage brokers. It was determined in negotiation with the borrowers. The ‘customers’ had the choice of either negotiating the interest rate offered lower, searching for a lower interest rate elsewhere, or forgo the transaction entirely. I guarantee that this is how the bankers involved saw it.

This conceit of free choice is central to capitalist economics, liberal social theory, and racist dogma. ‘Free’ here means uncoerced. All exchange is considered to be freely undertaken because once coercive power enters, the difference between freedom and authoritarianism quickly disappears. In the mortgage lending case, the mortgage brokers could have pledged allegiance to Adolf Hitler and come directly from a cross burning to negotiate the mortgage lending rates, and this wouldn’t have demonstrated racist intent. As long as the borrowers had the ability to walk away, the price they paid was / is on them.

Through the conceit of free exchange, the charge of ‘institutional racism’ devolves to either the claim that certain classes of people are incapable of competently engaging in market transactions, or that racism produces an asymmetry in social power that impacts some groups more than others. Only the first ‘explanation’ can be specific to race. Multiple factors produce asymmetries is social power, including prior asymmetries in social power. These asymmetries explain ‘risk’ pricing. Tellingly, it is illegal to include ‘intersectional’ categories in lending decisions. However, these are easy enough to deduce through economic metrics like income, home ownership, purchasing patterns, etc.

The charge of ‘systemic racism’ begs the question of which system? In terms of accountability, J.P. Morgan Chase and Payday Lenders aren’t responsible for the banking system. And the banking system isn’t responsible for capitalist social relations. Jamie Dimon and the major thinkers on Twitter understand the public relations value of spouting vague platitudes about social justice to which no one— in particular, them, can be held to account. However, to the extent that ‘systemic racism’ can be tied to asymmetrical social power, and asymmetrical social power can be tied to its basis in asymmetrical economic power, the tables can be turned.

Through the (descriptively) liberal frame of voluntary exchange, systemic racism is either incoherent— which system?, or racist— some classes of people have special needs when it comes to navigating the world. When Jamie Dimon took a knee, was he implying that the ‘system’ that he plays a key role in needs to be radically reorganized? Or was he implying that certain classes of the bank’s customers lack the social competence to be held responsible for their economic decisions? When it comes to ‘internal’ considerations, the same conceit of voluntary exchange was given a diversity overlay.

In earlier epochs, the ‘special needs’ critique was used to substantially end so-called quotas. In an effort to get around charges of racial discrimination, large employers began to use class markers like education to claim that hiring decisions were based on qualifications, not race, gender, etc. However, as class markers, qualifications come far more easily to those of the right class than to others. Racial quotas occasionally led to those with fewer ‘qualifications’ being hired or promoted over those with more, leading to the charge that racial quota hires were inferior. Logically speaking, corporations were never called upon to demonstrate that the qualifications they deemed important had bearing on job performance.

Not addressed, or even considered publicly, is that if there were enough jobs for those who want to work, none of this would be necessary. Labor market competition, and even the base fact of a market for labor, are evidence of the failure of capitalism to provide enough employment to fill the social need. Racial bias in hiring and racial quotas to right the wrong both result in capable workers being denied jobs that they can do. ‘Qualifications’ that are stealth class markers do the same. Implied is that capable workers without the ‘qualifications’ are being denied jobs that they are capable of doing.

Graph: The premise of full employment needed to assume away economic power, and with it economic vulnerability, hasn’t held for more than a few months in modern history. The Labor Participation Rate is the more accurate measure of labor market conditions than the unemployment rate. It is currently at the level it was at when Donald Trump was elected in 2016. Whatever your beliefs regarding the reasons behind the election of Mr. Trump, the failure to create full employment will leave the economic explanation open. Source St. Louis Federal Reserve.

The promise of neoliberalism was that neoliberal reforms would produce full employment. Had the quantity of meaningful and remunerative jobs grown in excess of the working population, all boats might have been lifted. The actual outcome is that tremendous wealth has been generated since 1980. But much of it is illusory— wealth transfers rather creation. And the wealth that was created has been concentrated to an extent that would make the Ancien Regime envious. The result is a lot of people competing for the few jobs that pay, and a majority of workers who are wildly underpaid relative to their economic contribution.

In other words, the implied point of neoliberalism was to concentrate and stratify economic power. That concentrated political and economic power is invisible in liberal social theory makes it the preferred ideology of oligarchs. ‘Merit’ is the claim that in a perfectly ordered universe, the just fruits of labor land where they belong. Missing from this theory is what happens when the inevitable happens, and the universe isn’t perfectly ordered. In fact, the conditions of this perfect ordering are the realm of academic economists. Merit ties to Social Darwinism and other regressive theories of the political right through the conceit that social welfare is to take from those who merit it to give it to those who don’t.

Of note is that ‘qualifications’ are the corporate quantum of merit. That college-educated Blacks possess this quantum of merit, but aren’t benefiting from it in measurable ways, is interpreted to indicate mal-intent— racism. Assume for the moment that this is true and replace the people who would be hired in a racist hiring system with college educated Blacks. Because both groups possess qualifications, hiring qualified Blacks would mean firing, or not hiring, qualified Whites. Were diversity to be achieved, the problem of a dearth of good jobs would still exist. Conversely, were there plentiful good jobs, diversity would be irrelevant.

And more to the point, through the extreme economic stratification that neoliberalism has produced, economic vulnerability, as defined by both relative economic power and resources, now defines Western economic relations. With the experience of differentiated mortgage interest rates outlined above, this vulnerability becomes the basis for corporate profits. Jamie Dimon might take a knee against racism, but he isn’t going to negotiate mortgage interest rates that are lower than what people are willing to pay.

In the circumstance where there are more qualified workers than jobs, employers hire fewer workers than social necessity dictates, and they hire workers with more qualifications than they are willing to pay for. Lest this not be evident, this is the flip side of mortgage pricing by economic vulnerability. When there are more workers than jobs, it is logically impossible to infer that those without jobs don’t merit jobs— without jobs there is no test of merit. To the extent that qualifications quantify merit, over-qualified jobholders aren’t being compensated based on ‘merit.’ The ideological solution to this is through tautology (circular logic).

The way that the tautology of economic power = merit works is, again, shared between the cultural left and the neoliberal right. The premise that all exchange is voluntarily undertaken defines it. This implies that all labor exchanged for wages is voluntarily undertaken, in turn meaning that the wage equals the value of the labor provided. As long as this relationship holds— and there are no conditions short of putting a gun to someone’s head that would render it inoperable, there is no coercive power in the relationship. Jamie Dimon taking a knee is in response to the racists standing over there in the corner, not to the fact that Blacks were charged predatory interest rates because of their relative social vulnerability.

Earlier in this piece I mentioned the mid-1970s as analog to current conditions. The difference is that much of the country has been through four plus decades of neoliberal ‘reforms’ since then. The idea on the Left that liberals see this as a problem, or are even cognizant of it, is misplaced. This is partly a function of the invisibility of power in the liberal worldview. It is partly a function of highly sectioned-off economic experience. And it is partly a function of positive and negative propaganda. This means lies in the service of power plus the disappearing of relevant information to prevent alternative (from the official line) information and ideas from being brought forward. If you want to know how peoples and nations decline, you’re living it.


Rob Urie is an artist and political economist. His book Zen Economics is published by CounterPunch Books.