Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown

459 Pages·2013·2.85 MB·English

by  Philip Mirowski

Never Let a Serious Crisis
Go to Waste
How Neoliberalism Survived
the Financial Meltdown
Philip Mirowski
To neoliberals of all parties
Contents
List of Tables
List of Figures
1. One More Red Nightmare
The Crisis That Didn’t Change Much of Anything
2. Shock Block Doctrine
Neoliberalism as Thought Collective and Political Program
3. Everyday Neoliberalism
4. Mumbo Jumble
The Underwhelming Response of the Economics Profession to the Crisis
5. The Shock of the New
Have Neoclassical Economists Learned Anything at all from the Crisis?
6. The Red Guide to the Neoliberal Playbook
Notes
Bibliography
Index
Copyright
List of Tables
4.1 Average profit per employee, United States
5.1 Economist salary differentials, by academic sector
List of Figures
1.1 Hilarity at the Federal Reserve
2.1 Growth of MPS-affiliated think tanks
2.2 MPS founding meeting, national representation
2.3 MPS 1991 membership, national
representation
2.4 Mentions of Friedrich Hayek in various English-language sources 4.1
Corporate profits/U.S. GDP
4.2 Index of world equity prices, Great Depression and current crisis 4.3 Index
volume of world trade, Great Depression and current crisis 4.4 Google
Trends search term: “toxic assets”
4.5 Fed projection misses the mark
4.6 American bank mergers, 1995–2009
4.7 The “Flash Crash” of May 6, 2010
5.1 Proportions of U.S. mortgages originated by various financial entities,
1953–2007
6.1 European ETS prices, 2011
6.2 European public and private debt, 2000 and 2010
6.3 U.S. public and private debt, 1920–2011
6.4 Total Over-the-Counter Outstanding
Derivatives
6.5 Google Trends for search term “financial innovation”
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One More Red Nightmare:
The Crisis That Didn’t Change Much of Anything
Conjure, if you will, a primal sequence encountered in B-grade horror films,
where the celluloid protagonist suffers a terrifying encounter with doom, yet on
the cusp of disaster abruptly wakes to a different world, which initially seems
normal, but eventually is revealed to be a second nightmare more ghastly than
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the first. Something like that has become manifest in real life since the onset of
the crisis which started in 2007. From the crash onward, it was bad enough to
endure house prices sinking under water, dangling defaults and foreclosures, the
collapse of what remained of manufacturing employment, the reduction of whole
neighborhoods to bombed-out shells, the evaporation of pensions and savings
accounts, the dismay of witnessing the hope of a better life for our children
shrivel up, neighbors stocking up on firearms and people confusing bankruptcy
with the Rapture. It was an unnerving interlude, with Nietzschean Eternal Return
reduced to an Excel graph with statistics from the Great Depression of the 1930s.
Fast forward to 2011. Whether it was true or not, people had just begun to
hope that things were finally turning around. Moreover, journalists in
mainstream publications bandied about the notion that academic economics had
failed, and hinted that our best minds were poised to rethink the doctrines that
had led the world astray. Yet, as the year grew to a close, it slowly dawned upon
most of us that the natural presumption that we were capable of rousting
ourselves from the gasping nightmare, that we might proceed to learn from the
mistakes and fallacies of the era of Neoliberal Follies, was itself just one more
insidious hallucination. A dark slumber cloaked the land. Not only had the sense
of crisis passed without any serious attempts to rectify the flaws that had nearly
caused the economy to grind to a halt, but unaccountably, the political right had
emerged from the tumult stronger, unapologetic, and even less restrained in its
rapacity and credulity than prior to the crash.
In 2010, we were ushered into a grim era of confusion and perplexity on the
left. It took a rare degree of self-confidence or fortitude not to gasp
dumbfounded at the roaring resurgence of the right so soon after the most
dramatic catastrophic global economic collapse after the Great Depression of the
1930s. “Incongruity” seems too polite a term to describe the unfolding of events;
“contradiction” seems too outmoded. Austerity became the watchword in almost
every country; governments everywhere became the scapegoats for
dissatisfaction of every stripe, including that provoked by austerity. In the name
of probity, the working class was attacked from all sides, even by nominal
“socialist” parties. In the few instances when class mobilization was attempted
by trade unions to counterattack, as in the recall petition for Scott Walker in the
state of Wisconsin, the birthplace of American progressivism, it failed. The
pervasive dominance of neoliberal doctrines and right-wing parties worldwide
from Europe to North America to Asia has flummoxed left parties that, just a
few short years ago, had been confident they had been finally making headway
after decades of neoliberal encroachment. Brazenly, in many cases parties on the
left were unceremoniously voted out because they had struggled to contain the
worst fallout from the crisis. By contrast, the financial institutions that had
precipitated the crisis and had been rescued by governmental action were doing
just fine—nay, prospering at precrisis rates—and in a bald display of uninflected
ingratitude, were intently bankrolling the resurgent right. Indeed, the astounding
recovery of corporate profits practically guaranteed the luxuriant postcrisis
exfoliation of Think Tank Pontification. Nationalist proto-fascist movements
sprouted in the most unlikely places, and propounded arguments bereft of a
scintilla of sense. “Nightmare” did not register as hyperbolic; it was the banjax
of the vanities.
The Winter of Our Disconnect
I remember when I first felt that chill shiver of recognition that the aftermath of
the crisis might be suspended in a fugue state far worse than the somnolent
contraction itself. I was attending the second meeting of the Institute for New
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Economic Thinking (INET) at Bretton Woods in New Hampshire in April 2011.
There probably would have been better places to take the temperature of the
postcrisis Zeitgeist and observe the praxis of the political economy than up in the
White Mountains, but I had been fascinated by the peccadilloes of the economics
profession for too long, and anyway had felt that the first INET meeting at
Cambridge University in 2010 bore some small promise—for instance, when
protestors disrupted the IMF platitudes of Dominique Strauss-Kahn in Kings
great hall, or when Lord Adair Turner bravely suggested we needed a much
smaller financial sector. But the sequel turned out to be a profoundly more
unnerving and chilly affair, and not just due to the caliginous climate. The
nightmare scenario began with a parade of figures whom one could not in good
conscience admit to anyone’s definition of “New Economic Thinking”: Ken
Rogoff, Larry Summers, Barry Eichengreen, Niall Ferguson, and Gordon
Brown. Adair Turner was summoned for a curtain call, reprising his previous
year’s performance, but offered only tired bromides on “happiness studies” and
rationality. The range of economic positions proved much less varied than at the
first meeting, and one couldn’t help notice that the agenda seemed more pitched
toward capturing the attention of journalists and bloggers, and those more
interested in getting to see some star power up close than sampling complex
thinking outside the box. It bespoke an unhealthy obsession with Guaranteed
Legitimacy and Righteous Sound Thinking. But, eventually, even the journalists
and the bloggers sensed the chill in the proceedings. Here were a few
contemporary responses:
University economists, of the sort gathered at Bretton Woods, are now under relentless pressure to
conform to a narrow, established paradigm. Inexplicably most supporters of that paradigm also feel
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that the crisis confirmed its validity.
The last great crash caused a revolution in economics. Why hasn’t this one? . . . None of those theories
appears to have appreciably shaped the economic policy proposals coming from the White House or
Congress, where lawmakers draw much of their economic inspiration from think tanks built on dogma
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. . . Neither party seems keen to search for orthodoxy-challenging economic answers.