Here is a review on Zombie Economics by John Quiggin and The Crisis of Neoliberalism by Gerard Dumenil and Dominique Levy. The review was published by Joshua Clover. Zombie Economics contrasts the current neoliberal, Reaganite, Thatcherist market liberalism guided by the blind faith in the efficient market hypothesis, which generates economic instability and growing wealth disparities between the rich and poor, with the Keynesian, WPA-supporting, Fordist-Taylorist capitalist model, which guarantees a solution. The reviewer doesn’t see this to be the solution. In the Crisis of Neoliberalism the authors argue that “ruling ideas arise not from their persuasive power or inner logic but from the interest of ruling groups.” I will proceed with further quotes from the article to characterize Dumenil’s and Levy’s argument. “In brief, they argued that if one filtered out certain capital-intensive industries (railroads, mining and the like), the economy had succeeded in recovering to boom levels of profitability sometime in the ’80s, largely through the artifice of depressing real wages and lowering corporate taxes. The neoliberal program, they concluded, had worked.
But worked for whom? The two argue (like David Harvey in his clarion A Brief History of Neoliberalism) that neoliberalism is not a collection of theories meant to improve the economy. Instead, it should be understood as a class strategy designed to redistribute wealth upward toward an increasingly narrow fraction of folks. This transfer is undertaken, they argue, with near indifference to what happens below some platinum plateau—even as the failures and contradictions of the economic system inevitably drive the entire structure toward disaster.” Market capitalism in its current form works if you belong to the right class of people, but undermines the structure of the economy. The authors adhere to Marx’ understanding of classes, but not to the Manichaean conception between workers and businessowner. They talk about a managerial class. “With the modern increase in size and complexity of enterprises, a managerial class came into being to run the show on behalf of owners. This new cohort is distinct from modernity’s legion of clerical staff, who are grouped with production workers into what the authors call (after the French tradition) the “popular classes.”
The new managerial class rests between that stratum and the capitalist class proper, and therein lies the tale. For Duménil and Lévy, the century is a story of shifting alliances. In the century’s first third, this tripartite formation comes into being under the auspices of a new breed of monopoly barons. In the period following the Great Depression came an alliance between the managerial and popular classes; this “compromise to the left” is the enabling condition for the Keynesian era, the Long Boom and eventually the cluster of political and economic failures that defined the 1970s. The last third of the century can thus be called “the neoliberal compromise”—a “compromise to the right” between the managerial and ownership classes, with its own restoration of capital’s power (hence the title of their previous book, Capital Resurgent) at the expense of the popular classes.”
More disturbing is their identification of four periods of structural economic crises in the US. “The book’s other seductively lucid schema concerns the history of structural crises, which follow an alternating pattern. The authors count four in the “long twentieth century”: the first “great depression” in the 1890s, the Great Depression, the 1970s collapse and the current morass. The first and third they identify as crises of profitability; the second and fourth, crises of “financial hegemony.” In these periods the profit rate is relatively stable, but the unchecked power of the upper echelons allows for unsustainable demands. They are gilded ages, perhaps; yet every such age gilds not the lily but the tulip: they are built out of bubbles. With the wealthy unwilling and the poor unable to support the mountain of social debt, the bubble eventually pops. This is, for our authors, the nature of the present crisis, and it is from here we must seek a way forward.”
One other finding is more disturbing. “This time, however, the managerial classes will not be a supplement to higher powers but will be the leading faction. This “neomanagerial capitalism” would be empowered to contain the volatilizing influence of the lords of finance without yielding economic ground to the popular classes.”
They propose a new New Deal or some form of accomodation to the center-right, which means the managerial class contains the excesses of the lords of finance (i.e. Wall Street) without giving grounds to the popular classes. There is, naturally, objection to the suppression of the popular classes. Whereas the New Deal suggestion sounds hopeful, the misery of the popular classes can not save the economy, or I don’t see this to be very productive. Following the author’s characterization of history in that the second (Great Depression) and the fourth (current recession) crisis have a similar background, and had no real opportunity to be overcome other than through the redistribution of wealth (actually it is a re-redistribution of wealth, since the wealth is also stolen from the middle and working classes characterized as popular classes in this article) and the conscious effort of government job creation, the historical parallels in terms of devising solutions should be fairly similar. The center-right corporatist accomodation promises no long-term improvement.
The reviewer ends on a condeming note on neoliberal capitalism.
“But the seeming restoration of profit by the financial sector proved illusory. The neoliberal strategy of opening new markets to sell more widgets, and internalizing more cheap labor into the growing empire of capital, arrived both at diminishing returns and at the limits of the globe. One could say that the ’70s crisis was a wound to the economy; the following decades provided a series of wrappings, poultices and painkillers. The blowout of 2008 was akin to their sudden removal—beneath which the old wound had only deepened and abscessed. Real profit was not restored, even if the profit rate briefly danced on air; it was a temporary fix to a permanent contradiction.
The current catastrophe is a rare creature, to be sure. But it is not a black swan; it is a zombie. It is the last crisis come calling, and the one before that and before that again—not just returned but fortified by the intervening years and the deferral of a reckoning. This crisis that keeps returning, now dressed in finery, now in rags, is evidently not a monster sprung from one particular deviation. Global crisis is, increasingly, the unnatural natural state of modern capital. It will not be laid to rest by fiddling with the alignment of parts, much less returning to a previous mode—these parts, these modes, are what set it shambling forward, hungry, blindly grasping, in the first place.”
The permanent contradiction- this seems to return the discussion to Marx, a pious scholar of economics and capitalism- that the relentless pursuit of capital accumulation into the hands of the few leads to ever lower demand, which can not even be compensated by he pumping up of the credit economy. 1 In fact, this forces Wall Street to be bailed out, but now the US federal government itself needs a bailout and sees no other way than raising taxes and slashing spending as a means to do that. Hereby, it goes without saying that the Wall Street barons are among the last ones to be able to comfortably absorb a tax increase, whereas the popular classes are drained to the brink of massive debt, bankruptcy, poverty, joblessness and homelessness. But as long as the country operates the theft will continue. This leads me back to the tragedy of the commons. The rich get richer despite destroying the fields from which their profits derive from. “The tragedy of the commons is a dilemma arising from the situation in which multiple individuals, acting independently and rationally consulting their own self-interest, will ultimately deplete a shared limited resource even when it is clear that it is not in anyone’s long-term interest for this to happen.” Long-term is key, and long-term means helping the little guy make a decent living.
Quoted from Clover, Joshua. “Swans and Zombies: Neoliberalism’s Permanent Contradiction.” The Nation. 06 Apr. 2011. Web. 26 Apr. 2011. http://www.thenation.com/article/159728/swans-and-zombies-neoliberalisms-permanent-contradiction?page=0,0.
1 Also watch the video by Marxist scholar David Harvey. http://davidharvey.org/2010/06/rsa-crises-of-capitalism-talk-animated/