Books That Challenge the Consensus on Capitalism

(Bloomberg Opinion) -- We live in an age of political earthquakes: That much, at least, seemed clear from newspaper headlines nearly every day of 2018. But intellectual tectonic plates were also shifting throughout the year, with ideas once dismissed as the ravings of the loony left breaking into the mainstream.

A Western consensus quickly formed after the collapse of communist regimes in 1989. It was widely believed by newspaper editorialists as well as politicians and businessmen that there was no alternative to free markets, which alone could create prosperity.

The government’s traditional attempts to regulate corporations and banks and redistribute wealth through taxes were deemed a problem. As the economist Milton Friedman put it, “The world runs on individuals pursuing their separate interests.”

Neither individuals nor companies needed to worry much about inequality or social justice. In Friedman’s influential view, “There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits.”

Political fiascos in the West, following its largest financial crisis — events accompanied by the emergence of China, a Communist-run nation-state, as a major economic power, as well as an unfolding environmental calamity — have utterly devastated these post-1989 assumptions about free markets and the role of governments.

Confessions to this effect come routinely from disenchanted believers. Take, for instance, Olivier Blanchard, former chief economist of the International Monetary Fund, who recently posed the once-blasphemous question: “What comes after capitalism?”

Blanchard was commenting on the recent demonstrations in France against President Emmanuel Macron. He rightly described a global impasse: “Given the political constraints on redistribution and the constraints from capital mobility, we may just not be able to alleviate inequality and insecurity enough to prevent populism and revolutions.”

Nor, for that matter, can we work towards a greener economy. In any case, Blanchard’s admission confirms that we inhabit, intellectually and culturally, a radical new reality — one in which “neoliberalism,” a word previously confined to academic seminars, has entered rap lyrics, and stalwarts of the establishment sound like activists of Occupy Wall Street.

Thus, Martin Wolf, respected columnist for the Financial Times, recently concluded, if “reluctantly,” that “capitalism is substantially broken.” This year, many books with titles such as “The Myth of Capitalism: Monopolies and the Death of Competition” and “Winners Take All: The Elite Charade of Changing the World” blamed an unjust economic system and its beneficiaries for the rise of demagogues.

It is becoming clear that the perennial conflict between democracy, which promises equality, and capitalism, which generates inequality, has been aggravated by a systemic neglect of some fundamental issues.

In “The Value of Everything: Making and Taking in the Global Economy,” Mariana Mazzucato bracingly focuses our attention on them. Mazzucato has previously written about the innovative role of governments in the modern economy. In her new book, she asks us to distinguish between people who create value and those who merely extract it, often destroying it in the process.

Her targets range from pharmaceutical companies, which uphold a heartless version of market rationality, to internet companies with monopoly power such as Google and Facebook. Her most compelling example, however, is the workings of the financial sector, and its Friedman-style obsession with “shareholder value maximization,” which has infected the corporate sector as a whole.

Reading Mazzucato’s book, it is hard not to wonder just how “neoliberal” ideas and values, which uphold the rationality of the market and exclude notions of the common good, came to shape the conduct of individuals and institutions.

In the conventional account of neoliberalism, Friedman looms large, along with his disciple Ronald Reagan, and Britain’s Margaret Thatcher. Much has been written about how the IMF’s structural adjustment programs in Asia and Africa, and “shock-therapy” for post-Communist states, entrenched orthodoxies about deregulation and privatization.

In these narratives, neoliberalism appears indistinguishable from laissez-faire. In “Globalists: The End of Empire and the Birth of Neoliberalism,” Quinn Slobodian briskly overturns this commonplace view. Neoliberals, he argues, are people who believe that “the market does not and cannot take care of itself,” and indeed neoliberalism is a form of regulation — one that insulates the markets from vagaries of mass democracy and economic nationalism.

Beginning with the breakup of the Hapsburg Empire, Slobodian’s lucidly written intellectual history traces the ideas of a group of Western thinkers who sought to create, against a backdrop of anarchy, globally applicable economic rules.

Their attempt, it turns out, succeeded all too well in our own time. We stand in the ruins of their project, confronting political, economic and environmental crises of unprecedented scale and size.

It is imperative to chart our way out of them, steering clear of the diversions offered by political demagogues. One can only hope that the new year will bring more intellectual heresies of the kind Mazzucato’s and Slobodian’s books embody. We need them urgently to figure out what comes after neoliberalism.

To contact the editor responsible for this story: Nisid Hajari at nhajari@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Pankaj Mishra is a Bloomberg Opinion columnist. His books include “Age of Anger: A History of the Present,” “From the Ruins of Empire: The Intellectuals Who Remade Asia,” and “Temptations of the West: How to Be Modern in India, Pakistan, Tibet and Beyond.”

©2018 Bloomberg L.P.