#slobodian

In this engrossing historical account, Quinn Slobodian lays out how a few very rich men—yes pretty much men—and the neoliberal intellectuals upon whose ideas they fed, imagined and sometimes built their versions of utopia: “zones” free from the grasping hands of the many who want to tax their riches or impose rules in the name of the common good, free, that is, from democracy.   Crack-Up…

There’s something tragicomic, if not tragic, about capitalist revolutionaries Ms. Truss and Mr. Kwarteng laid low by the mechanisms of capitalism itself. Ms. Truss and Mr. Kwarteng may be the last of the Thatcherites, defeated by the very system they believed they were acting in fidelity to.

[...] As Thatcher herself put it, “Economics are the method; the object is to change the heart and soul.” Britain needed a leap of faith to restore itself.

In a passage much repeated in the hallways of think tanks, the British Austrian economist Friedrich Hayek said in 1949 that a necessary weapon in the arsenal of the war of ideas was “a liberal Utopia.”

The mini-budget that ended Mr. Kwarteng’s tenure as chancellor of the Exchequer and crashed the pound can be seen as a utopian gesture, an act of voluntarism designed to jolt the British people out of their post-pandemic torpor through its very boldness. Ms. Truss and Mr. Kwarteng seemed to have believed that by patching together all of the most radical policies of Thatcherism (while conveniently dropping the need for spending cuts), they would be incanting a kind of magic spell, an “Open sesame” for “global Britain.” This was their Reagan moment, their moment when, as their favorite metaphors put it, a primordial repressed force would be “unchained,” “unleashed” or “unshackled.”

But as a leap of faith, it broke the diver’s neck.

The outcome resulted in a divergence between the incentives of existing capitalism and the fairy tale of liberal utopia. Just as Brexiteers had discovered after the departure of the country from the European Union that the City of London actually didn’t want to be freed of the regulations that they were promising, the money markets were not waiting for an act of faith in Laffer Curve fundamentalism after all. This was “Reaganism without the dollar.” Without the confidence afforded to the global reserve currency, the pound went into free fall.

Since the 1970s, the world of think tanks had embraced a framing of the world in terms of discrete spaces that could become what they called laboratories for new policies. The mini-budget subjected the entire economy to experimental treatment. This was put in explicit terms in a celebratory post by a Tory journalist and think tanker claiming that Ms. Truss and Mr. Kwarteng had been “incubated” by the Institute of Economic Affairs in their early years and “Britain is now their laboratory.”

The framing captures the situation well. The scientists at the bench discovered that the money markets would not only punish left-wing experiments in changing the balance between states and markets, but they were also sensitive to experiments that pushed too far to the right. A cowed Ms. Truss apologized, and Mr. Kwarteng’s successor has reversed almost all of the planned cuts and limited the term for energy supports.

In the past few months, the world’s central banks, above all the US Federal Reserve, have rescued the global economy from complete collapse for the second time in a generation. Wading unto the breach and armed with the knowledge of how close capitalism came to a system failure in 2008, they have fired the “big bazookas” of monetary policy, pumping trillions of dollars into the world’s giant pool of money, effectively creating wealth out of nothing.

Since 2 March, the Fed’s total assets have leapt by more than half. Since 2008, its balance sheet has grown to 30% of the size of the US economy. Central bankers seem confident their actions will find public approval. “A firefighter has never been criticised for using too much water,” the governor of the Bank of Canada said.

This confidence is misplaced. Both left and right have reason to welcome the Fed’s emergency intervention, but new money flooded into private capital markets will inevitably flow into the deepest pockets. And without strengthening the democratic legitimacy of this policy, and using it for socially transformative ends, the reaction will strengthen those who are antagonistic to the practice of government – the populist right.

In his recent book, the French economist Thomas Piketty observes that central banks have become the only effectively functioning organs of government. He doesn’t mean this as a good thing. “Monetary activism” is financial triage against world economic collapse, but it’s also an avoidance tactic. It works by bracketing democracy and letting the technocrats take over. To make decisions about justice and distribution, discussions about taxation, policy and budgets are needed.

As the Fed chairman Jerome Powell put it, the central bank has the power to lend but not to tax and spend. It is up to elected officials to “make decisions about where we as a society should direct our collective resources”. In the last two months, he has all but begged Congress to be more proactive in shaping the direction and volume of the policy.

Progressives have reason to praise central banks for offering evidence that the “money printer can go brrr” without any clear limit. Economists see no sign of inflation on the horizon. Some have become concerned about inflation in recent weeks, but others worry about the opposite – deflation. All the extra liquidity has not managed to translate into meaningful growth.

The politics of money has a way of quickly becoming about other things. Last month, the German constitutional court concluded in a shock ruling that the European Central Bank may have exceeded its mandate in creating so much cheap credit, threatening the monetary response to the crisis. Within days, Viktor Orbán suggested that the Hungarian constitution might trump the decisions of the European Court of Justice in his country’s treatment of refugees.

What kind of political creatures could the money-printing of central banks spawn? [...] In Germany, another gold bug, a former precious metals consultant, Peter Boehringer, sits in the Bundestag. His party, the Alternative for Germany, was founded by economics professors in 2013 over the politics of money – they rejected the European Central Bank’s monetary policy and management of the eurozone crisis.

After the election of Donald Trump, the philosopher Cornel West wrote: “The neoliberal era in the United States ended with a neofascist bang.” The historian Samuel Moyn tweeted “RIP” neoliberalism.

But 25 years earlier, one Latin American politician deemed neoliberalism “dead” after the election of another US president – Bill Clinton. Elegies resurfaced in the wake of the Asian Financial Crisis in 1997, and returned again when left-wing leaders came to power in Latin America during the 2000s (Evo Morales declared “neoliberalism is dead” in 2003), and peaked in the wake of the financial crash of 2008. The Nobel Memorial Prize-winning economist Joseph Stiglitz declared neoliberalism dead that year, and again in 2016 and 2019.

Whence does neoliberalism derive its apparent immortality? It helps to start with definitions. From Tokyo to the Vatican, one thing critics of neoliberalism share is a belief that the last 40 years have borne witness to the total liberation of free markets. But the world economy was not set free from the 1990s in the sense of existing in an ungoverned space. Rather, it has been increasingly legalised, and moved from the oversight of governments to the oversight of law.

Deregulation has always meant re-regulation amid proliferating forms of multilevel governance. To name one example, bilateral investment treaties – intergovernmental agreements designed to protect foreign investors, and allow companies to sue national governments – have increased from 500 in 1990 to nearly 3,000 today.

The supposedly “flat world” of post-national globalisation pronounced by votaries of the free market, such as the New York Times writer Thomas Friedman, is in fact a thicket of trade law, arbitration courts and investor protection treaties.