Philip Mirowski is a
historian who has written a great deal about both the history of
economics as a discipline and about neoliberalism. He knows much more
about the history of both subjects than I do. I was therefore
somewhat dismayed that, in responding
to some comments on his 2014 paper “The Political Movement that
Dared not Speak its own Name: The Neoliberal Thought Collective Under
Erasure” (pdf),
he chose to start by making some comments on my recent blog post
discussing neoliberalism.
He didn’t like it, for two main reasons. First, he disagrees with
my definition. I have no problem with that, because I would never
have the nerve to try and offer a definitive summary of the term. As
I wrote in that post, I was just saying what I mean by the term when
I use it. I’ll come to why he thinks that it was - to use his own
words - ‘untutored’ later.
The second “more glaring error is to counterpose the beliefs of
orthodox economists, who judiciously accept or reject various
doctrines on the basis of their empirical relevance without bias, to
those of the Neoliberals, grounded as they are in an impetuous
‘ideology.” In particular, he takes objection to my suggestion
that economics can be used to critique neoliberal ideology. Here
unfortunately there seems to be little correlation between his
criticism and what I actually wrote.
He suggests that what he calls the ‘Neoliberal Thought Collective’
(NTC) has many more representatives in the economics profession than
I could imagine. But how does he know what I imagine? At no point do
I say that all economists are free of neoliberal ideology, and in the
past I have argued
exactly the opposite. But the fact that some economists might be
neoliberal in outlook does not mean that economics cannot be used to
critique neoliberalism. It is a category error that anyone who
understood economics should not make. More on this below.
He also rather oddly says that I provide no example of how economics
can be used in such a critique. It is odd because I give an example
in the post. What he might be suggesting is that this
actual/potential critique has not been effective politically, but
that is something very different. It may just reflect that economists
tend to be ignored when what they say is inconvenient, which is
something I have talked about elsewhere.
Having said all that, in a tit for tat style, let me revert to Daniel
Dennett’s rules,
and say that I actually agree with some key points from Mirowski’s
paper
referenced above. First, we both agree that neoliberalism exists!
Second, one of the key points I wanted to make in my post was that
neoliberalism was not the same as mainstream economics. On page 8 of
the paper he writes: “First, and this cannot be
stressed enough, however much they sound alike, Neoliberalism and
neoclassical economics are two completely different schools of
thought.”
The way he sometimes describes it the NTC can sound like a great
conspiracy, but another way of putting it would be to say that many
neoliberal thinkers see themselves as part of a very political
project. That is a third area of agreement: in my post I described it
as a political movement or ideology. Fourth, I also agree that the
lack of any self-identified group calling themselves neoliberal is
not an issue.
What about definitions. In the paper (page 22) he outlines 11 ideas that the
NTC believes in. I suspect one problem he had with my short
definition (“hates ‘big’ government, dislikes any form of
market interference by the state, favours business interests and
opposes organised labour.”) is that it sounds libertarian. But I
put ‘big’ in inverted commas for precisely that reason:
neoliberals can be quite happy to use state power to achieve their
objectives. They are not libertarian, which is a fifth point we agree
on.
I have no wish to argue with his 11 statements, partly because I do
not see neoliberalism as being particularly “coherent and
consistent”. If there is a difference of emphasis between us, it is
that he stresses support for the market and I stress dislike of the
state interfering in (or undertaking what could be) market
activities. One reason I would give for this difference is the
corporation itself. It is possible (although not desirable, for
reasons outlined many years ago by Ronald Coase) to set up ‘internal
markets’ within corporations, or even break up corporations into a
set of markets activities. This is not part of the neoliberal agenda:
item (9) of his list of neoliberal beliefs is “Corporations can do
no wrong—by definition.”
Another reason may be more personal, and that is austerity. Once you
use basic macroeconomic theory (theory which Mirowski describes in
his response as “just a sequence of faddish enthusiasms”) to see
why the various reasons used to justify austerity make no sense, you
are left with two explanations for why neoliberals would want to
champion it. One is a dislike of the idea that state action might be
needed to ‘mend’ the market, and the other is what I call
‘deficit deceit’: using austerity to shrink the state. At least a
majority of academic macroeconomists, and possibly a clear majority,
now view 2010 austerity outside the Eurozone periphery as a mistake,
which does not fit well with the idea that economists are part of the
heartland of the NTC?
Austerity is an example of where economics is really important to any
critique of neoliberalism. It is here where I fundamentally disagree
with Mirowski. Indeed, it is difficult for me to see how any
effective critique of neoliberalism could not be based at least in
part on economics. Take Mirowski’s second neoliberal belief: " “The
market” is an information processor, and the most efficient one
possible—more efficient than any government or any single human
ever could be." Any economist should distinguish between an ideal
market and any actual market. An important part of economics involves
outlining the conditions under which markets are ideal in organising
exchange, and the consequences of any departures from that ideal.
That distinction is something an ordoliberal would recognise (at
least in the case of the degree of competition/monopoly), but is
generally ignored by neoliberals.
So if you want to analyse, for example, why setting up internal
markets in the NHS, or privatising NHS activities, might or might not
work, you need economics to understand when markets work well and
when they do not. They might not work well, for example, if
information about quality is difficult to obtain. (Economics is not
the only discipline you would require: you would want to talk about
motivations, and how a market ethos can damage shared goals, for
example.) More generally the idea that you can critique an ideology
which puts such faith in all markets without using the discipline
that studies market efficiency seems strange to me.
Another example concerns the minimum wage. The neoliberal view would
be that this a bad policy which will only reduce employment. It is
economists who have both gathered the evidence and developed the
theory to show otherwise. If economists were hopelessly embroiled in
the NTC, why would this happen? I’m not arguing that it is not
possible for economists to be influenced by neoliberal or ordoliberal
ideology (the apparent opposition of most economists to the
introduction of the minimum wage in Germany might be a case in
point), but just that it has not happened to the extent Mirowski
imagines, and it certainly has not become embedded in economic
theory. When he says at the end of his response here
that “it seems likely that opposition to neoliberalism will not
arise from within modern economics, either” he almost has to be
wrong.
Let me end with the example I gave in my original post and he
appeared to ignore: capital requirements for banks. A substantial
increase in capital requirements is a simple way of avoiding another
financial crisis, and furthermore, because of its simplicity, a way
that can hope to survive against relentless political pressure from
banks. That the idea makes sense in terms of basic theory means that
even economists like John Cochrane support
it. In his time at All Souls in Oxford he would certainly have talked
to the economist who has recently been pretty vocal
in his calls for higher capital requirements in the UK. Mirowski
overestimates the extent to which neoliberal ideas have become
“embedded in economic theory”, and underestimates the power that
economic theory and evidence can have over even those academic
economists who might have a neoliberal disposition. If the tide of
neoliberal thought is going to be turned back, economics is going to
be important in making that happen.
