Alternatives to Neoliberalism

Henry Farrell, as quoted criticizing Matt Yglesias:

To put it more succinctly – even if left-leaning neo-liberals are right to claim that technocratic solutions and market mechanisms can work to relieve disparities etc, it’s hard for me to see how left-leaning neo-liberalism can generate any self-sustaining politics.

Kevin Drum agrees:

If the left ever wants to regain the vigor that powered earlier eras of liberal reform, it needs to rebuild the infrastructure of economic populism that we’ve ignored for too long. Figuring out how to do that is the central task of the new decade.

But Matt Yglesias responds:

So I really, strongly, profoundly agree with this. The moment someone comes up with a workable idea on this front, please sign me up. But if there’s no idea to debate, then there’s no idea to debate. Debating the desirability of devising some hypothetical future good idea seems kind of pointless to me.

But this completely misses the point. Neither of his critics are primarily saying that neoliberal policy ideas are bad. They are saying that neoliberalism is bad politics – not because it can’t win an election, but because it is based on running on good ideas, winning elections, and then implementing those good ideas. And that’s not a self-sustaining politics. From a more traditional left-wing perspective, you don’t start with good ideas – you start with ideas for how to establish enduring power bases.

Broadly speaking, the alternatives to liberalism reject the goal of finding the best policy, meaning the policy that will benefit the most people, in favor of promoting policies that may hurt more people than they help, but that shift the balance of power in favor of the group you’re seeking to represent.

I think what both Matt and his critics are talking about is how to make things better for working-class Americans. If I were starting from that premise – how can I reliably improve conditions for working-class Americans – and I accepted a critique of liberals (neo or not) as naive about policy, I’d say: working-class Americans will be unable to secure a better economic deal until they wield more power. And what strengthens the hand of labor more than anything is tighter labor markets.

Now, Matt might well agree with this, and say that the best way to get to tighter labor markets is to have looser monetary policy. But you can get to tighter labor markets either of two ways: you can increase the number of jobs, or you can restrain the growth of the labor force. Historically, all sorts of legislative initiatives had as at least part of their purpose the goal of restraining the growth of the labor force – child labor laws and mandatory public schooling (no labor competition from underage workers) and immigration restriction (no competition from immigrants from lower-wage countries) are some obvious examples, but Jim Crow laws and pervasive discrimination against women also worked to restrain the growth of the (white male) labor force.

I hope nobody would seriously argue today for driving women out of the workforce as a way of reducing the labor pool and increasing the clout of working-class men (by, among other things, reducing women to a state of abject dependence on said men). But that feminism – which yielded huge benefits for women and substantial net benefits for society as a whole – didn’t involve tradeoffs in the past with other goals. One could certainly argue that the same is true today when it comes to trade or immigration. Liberal policies could authentically be more beneficial for humanity in general – they could even be more beneficial for Americans in general – while also having consequences that are negative for the power of organizations devoted to advancing the economic interests of working-class Americans specifically.

Looking at the other side of the ledger – increasing the number of jobs – may be more ideologically congenial. Matt may be right that the single thing that would most efficiently improve the jobs picture is looser monetary policy. (As I’ve written many times, I think our status as a substantial debtor nation and sponsor of the world’s reserve currency raises questions about whether this is true or not; Japan, by contrast, whose monetary policy Ben Bernanke criticized in his academic work, was a massive foreign creditor all through their “lost decade” of the 1990s.) But viewed from the perspective of power, the question to ask isn’t whether looser monetary policy is a good idea in general but whose interests are served by tighter versus looser monetary policy. Clearly, up to a point (nobody benefits from a depression), tighter monetary policy is in the interests of creditors, just as, up to a point (nobody benefits from an inflationary spiral), looser monetary policy is in the interests of debtors. So the question then becomes: why is the Fed more responsive to creditor interests than to debtor interests, and how could that balance be changed? Allow me to suggest that the communications problem alone involved in making monetary policy as such – rather than the more obvious manifestations of clout by large financial institutions – is a pretty serious one. It may well be that efforts to combat unemployment directly – by employing people – while substantially less-efficient, would both garner more public support and create a base of support for the continuance of such programs (as in: people who don’t want to be laid off). This is the same kind of argument Matt himself makes when it comes to the stimulus bill and fear of “waste” – sometimes there are higher priorities than efficiency.

Playing politics means making choices, setting priorities. Yglesias’s priority for the incoming Obama Administration was a carbon-pricing scheme that (he hoped) would at least slow the progress of climate change. The priority of the Democratic Party was passing health-care legislation establishing, in principle, a right to health care (and, hence, an individual obligation to purchase it – individual rights are just the obverse of individual obligations, after all). That choice didn’t reflect any analysis of which problem – health care or climate change – was more important; it reflected some combination of a calculus about what could be accomplished (the votes were never there for a carbon-pricing law) and a calculus about what would enduringly improve the balance of power between labor and capital (a carbon tax would be vastly easier to repeal than the health care law, for one thing; for another, the health care legislation would give the government an enduring lever to bend American health care in the direction of more economically equal outcomes; for a third, battles over benefits for legacy employees arguably have derailed the American labor movement for a generation; I could go on). Someone to Yglesias’ left might say that EFCA was more important than the health-care bill, and should have been a higher Administration priority.

The broad point is: alternatives to neoliberalism won’t be as liberal. They be less-likely to prioritize efficiency. They will also be less-likely to prioritize positive-sum solutions. They will also be less-likely to prioritize basic fairness or democratic principles or whatever else. They will assign a higher priority to increasing the economic and political power of the people they are trying to represent (or their designated representatives). That’s not Matt’s starting point, and that’s why he comes to different conclusions.