Hamstrung by Ideology

Americans generally believe that business and government are somehow in opposition; that government can only “interfere” in the workings of business and markets, and that “the economy” is something totally separate and distinct from the rest of society, including from political decisions and social cohesion.

The reason they think this is because of the pervasive libertarian ideology promoted by conventional neoclassical economics. And by libertarian, I’m referring to the systemic bias that pervades all conventional capitalist economics, not just the radical extremist ideology that goes under that name. Neoclassical and classical economics fosters the belief that “economics” must be kept wholly separate from every other aspect of society.

The Chinese, coming from a Marxist—and Confucianist (although in this case, Legalism is probably the better fit)—perspective, believe no such thing. They know that business and government are really the same thing, and always have been, and they make no bones about it. They are free from the Western delusion that there is some sort of “pure” capitalism, free from the taint of government intervention, or the delusion that such a thing is even possible. They do not have the ideological commitment to the”invisible hand,” or the blind faith that anarchic markets will automatically lead to beneficial social outcomes.

I had that thought reading the following paragraph by Adam Tooze:

As Trump’s trade warriors point out, the range of instruments that China deploys in industrial competition makes a nonsense of trade policy as defined by the WTO. Complexity and opacity are key to the success of China Inc. As Blustein shows in an illuminating cameo about tractor tyres, the network of state support for Chinese industry extends from central and local government grants and tax exemptions to subsidised land deals, cheap electric power and a raft of subsidised low interest loans, from the government as well as public and private banks. When rubber prices surged in the early 2000s Beijing devised a scheme to supply it at a reduced price and gave a set of inducements to rubber producers. The arrangements are all-encompassing yet almost entirely deniable, as the American lawyers retained by Chinese firms demonstrate when they face unpleasant questions from the US Department of Commerce.

Whose Century? (London Review of Books)

“Trump’s trade warriors,” as Adam Tooze calls, them, represent that standard American perspective that government should “butt out”, i.e. “not pick winners and losers.” That markets should be free to run themselves and that government should not “interfere.” This comes from a blind commitment to libertarian ideology.

The Chinese know that this is nonsense. They know that production and governance are inseparable. True, it’s no longer centrally planned as in the old days. But the myopic faith in an anarchic market to achieve ideal outcomes is a flaw that the Chinese do not posses. It’s an advantage of coming from a non-Western perspective free from the blinders imposed by neoclassical economic thinking as developed in the West. Of course the government manages the commanding heights of business and trade. What else would you expect?

The Chinese view is the more historically accurate one. In the West, the fairy tale is told of plucky businessmen succeeding despite being frustrated at every turn by petty government bureaucrats. This tale was further enhanced by fabulists like Ayn Rand, who peddled this nonsense for ideological reasons while having no knowledge of economic history, or even any experience in the actual business world.

Marxists, by contrast, have always been fully aware of how the state creates and sustains the capitalist economy, and has always done so. From the passing of laws, to issuing and regulating the supply of currency, to the establishment of limited liability corporations, to the building of infrastructure, to the selling off of formerly public lands to private interests, to the implicit assumption of risk, to the issuing of bonds, to intellectual property laws, to publicly-funded research, to numerous subsidies, to a basic social safety net, to K-12 mass schooling, to the provisioning of police and military to enforce contracts and property rights—the list of how government and business interests are intertwined—not opposed—goes on endlessly. There is no “great wall” dividing a self-contained intellectual abstraction called “the economy” from all the other aspects of human life in this world.

It seems the ideological blinders conferred to us by libertarian classical and neoclassical economists are—ironically—causing the West to fall behind at the game it supposedly invented, especially the U.S.

And, speaking of ideology, it was also ideology that has made globalism such a problem in the U.S., specifically the frontier ideology of  self-reliant “rugged individualism,” where honest, hard-working people never require outside help or “handouts.” This ideology insists that, rather than letting “the government” take of you, you should just bootstrap your way out of your circumstances through grit and pluck.

This, of course, is absolute nonsense, but it’s the dominant ideology of the Republican Party and conservative philosophy more generally. In the U.S., it manifests itself in the idea that “welfare” is inherently a bad thing, and that anything the government does to help its citizens is “communism”. This is the reason why the “China Shock” was so uniquely bad in the U.S. compared with other countries that were just as exposed to the neoliberal globalism. The reason you didn’t see the same backlash to “free trade” in other countries as compared to the U.S. is because those countries decided to care of their citizens instead of just throwing them under a bus:

Every advanced economy in the world – Japan, South Korea, European countries (Italy in particular) – felt the ‘China shock’. But only in the US has it led to the kind of political crisis we have witnessed since 2016. It is this that requires explanation. …Given the resources of American government, a shock on this scale could have been cushioned through spending on welfare, education, reinvestment and relocation. But that would have required creative politics, which is precisely what has been obstructed by the Republicans. Instead the problem wasn’t addressed, unleashing a pervasive status anxiety among lower-middle-class and working-class white Americans, especially men. It was in the counties where the highest number of jobs were lost because of the China shock that Trump scored best in the 2016 election.

Since the Clinton era, the Democratic establishment has held up its side of the bargain, deflecting opposition to globalisation from trade unions. What it did not reckon with was the ruthless cynicism of the Republican Party in opening its doors to xenophobic, know-nothing white nationalism, inciting talk of a nation betrayed and swinging over to protectionism. The Democrats also didn’t take into account the dogged refusal of the Republicans to co-operate in their efforts to patch together America’s welfare state, even, or especially, when it came to fundamentals such as unemployment insurance and health coverage…

In other words, if we hadn’t been so wedded to the “government bad” and “society owes you nothing,” attitudes, and if the elites had been even a little less rapacious, we would not have seen entire swaths of the country reduced to sub-third-world status, and hence the rise of authoritarian right-wing populism. In the U.S., for example, even health care is tied to a having a job, and instead of dealing with that problem, the politicians of both parties chose a politics of distraction and misinformation that has led us to where we are now.

Due to an ideological distaste for “big government solutions” and “government handouts,” inherited from libertarianism, the only other avenue for aspiring populist politicians was to promise to somehow “bring the jobs back,” so that workers could head back into the factories and “earn” the basics of life like health care and the money to pay for food and shelter. But, of course, this will not work. U.S. manufacturing continues to expand output, even while shedding workers. It was China’s low wages that made them predominant—low wages that would not work with the high fixed costs of food, education and housing in the U.S. High-wage manufacturing jobs were replaced with the “service economy”, and the ideological conception that what we earn is entirely down to our own personal “marginal productivity” (again promoted by neoclassical economists) led to opposition to any efforts to raise the bar for wages.

In both of these cases, we can see where hidebound ideological blindness prevented the U.S. from taking the steps that other countries have effectively taken, which has led to the creation of much more successful 21st century societies outside the U.S.—whether it it’s Europe’s social democracy or China’s state-managed capitalist/communist hybrid. Since both of these options are effectively off the table due to our ideological commitments, all Americans can do cry to the heavens that the imaginary libertarian world that “should” exist is nowhere to be found as we continue to circle the drain of history.

“China under the control of the CCP is, indeed, involved in a gigantic and novel social and political experiment enrolling one-sixth of humanity, a historic project that dwarfs that of democratic capitalism in the North Atlantic.”

It’s a long piece, worth reading in full: Whose century? (London Review of Books)

BONUS: To prove the point made above:

Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups.

The figure compiled by The Times comprises a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars.

A looming question is whether the companies are moving toward self-sufficiency — as Dolev believes — and whether they can slash development costs before the public largesse ends.

Elon Musk’s growing empire is fueled by $4.9 billion in government subsidies (L.A. Times)

8 thoughts on “Hamstrung by Ideology

  1. Hipcrime, I’ve been trying to think of some way to talk intelligently about the economy under the Covid epidemic. I hear politicians and the media talk about getting the economy working again, but there seems to be no recognition that circumstances have changed, that what people need from the economy is not even close to what they needed 6 months ago. The economy, clearly, exists to meet the material needs of individuals and society. But it seems that politicians and the media see the economy as something more than that, something that has its own purposes somehow independent of individuals and society. Any thoughts on that?

    1. I think people are trained to think of the health of “the economy” as directly connected to them. Why? It’s a Pavlovian response. Think of the experience of most people. They hear that it’s a “good economy.” They get a raise. Maybe they get a better job. Optimistic feelings reign. Then they hear that it’s a “bad economy.” They don’t get a raise. They’re afraid of being fired. They cling to the job they have.

      It’s basic psychology 101 that people will come see whatever’s happening in “the economy” as a symbol of whether or not their own lives are doing better or doing worse, just like Pavlov’s dogs associated the bell with whether they would get fed of not.

      How to dismantle that connection? That’s a though question. It’s hard to disassociate these phenomena when they are so tightly connected in people’s minds. And it’s just constantly reinforced.

      But you understand the problem. It’s important to destroy this myth that there is some sort of thing as “the economy” which can be doing better and better even while the majority of people in it get worse and worse off every year, to the point of shortening life expediencies.

  2. I’ll do you one better. Here’s a neoliberal propaganda outlet pushing the idea that any wage increase, even if decided on by a private firm without government intervention, is explicitly “artificial.” The only obstacle to full time work and its attendant benefits is, you see, that some workers are earning too much:

    https://fee.org/articles/why-millions-of-us-workers-aren-t-collecting-unemployment-during-the-covid-19-pandemic/

    This is the state religion of capital at work in real time.

    1. The “Foundation for Economic Education?” Geez, just the name strikes me with terror. What’s behind these guys?

      The Foundation for Economic Education (FEE) is a libertarian economic think-tank dedicated to the “economic, ethical and legal principles of a free society.”…Founded in 1946 by Leonard E. Read, Henry Hazlitt, David Goodrich, Donaldson Brown, Leo Wolman, Fred R. Fairchild, Claude E. Robinson, and Jasper Crane, the foundation is the oldest free-market think tank in the United States….(Wikipedia)

      Oh…I see…

  3. It’s an article of faith that anything that isn’t owned will go to rack and ruin, the so-called ‘tragedy of the commons’. For example: the air we breathe is polluted /because/ no-one owns it. It would be much better, so the story goes, on a pay-per-breath basis.

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