Capitalism and the law

My previous post – the ten books a well-educated social science student ought to have read – generated a lot of terrific comments with other suggestions, which I’ll mull over and compile into an alternative list at the weekend.

Meanwhile, I’ve read by Brett Christophers. I greatly admired his previous book, , and this new one has the same compelling combination of analysis and historical detail. The theme this time is capitalism as a constant balance between competitive markets and market power, these two forces applied by laws and their enforcement. Anti-trust laws are enacted or enforced with greater rigour when monopoly power gets out of hand. Intellectual property laws are strengthened after periods of cut-throat competition. In contrast to those – often Marxist – writers who have seen a single direction of travel toward ever-greater monopoly power, Christophers argues here that there is a cycle. He cites , but also Marx’s dialectics: “Monopoly produces competition, competition produces monopoly,” Christophers quotes Marx as writing in a letter of 1846.

[amazon_image id=”0674504917″ link=”true” target=”_blank” size=”medium” ]The Great Leveler: Capitalism and Competition in the Court of Law[/amazon_image]

The book starts with three chapters setting out Christophers’ analytical framework and explaining in more detail the dynamic to and fro between more and less market power for businesses. It is very interesting to see an analysis of this kind in terms of the legal framework. While law has hardly been ignored by economists, this big picture, historical perspective provides much food for thought. As Christophers puts it in the introduction, modern political economy has tended to focus more on the sphere of production, whereas competition and IP law concern the sphere of exchange. Yet many of the flash points in public policy today concern exactly competition and intellectual property, precisely because the basic productive structure of the economy is being changed by technology. The two spheres meet.

This means is an important contribution to understanding some of the most acute modern policy – and political – questions. The analysis of the first half is followed by two chapters looking at the historical experience of the US and UK from the late 19th century, and a final chapter on 21st century monopoly. Recent decades have seen the phase of the cycle where enforcement of competition diminishes and enforcement of IP protection increases. Christophers links this to the Chicago School of economics, with its powerful impact on public policy on both sides of the Atlantic. He sees little sign that this has changed even now: “Post-Chicago developments have certainly entailed meaningful changes in antitrust thinking and practice, but such changes ultimately amount to small beer compared to the changes that the Chicago revolution itself heralded.” The ‘post-Chicago’ work of economists such as Jean Tirole, Christophers argues, have concerned specific business practices or mergers rather than the framework of competition law as a whole.

As for policy approaches to intellectual property, there is little sign of any recent redressing of the balance, for all the forceful concerns many people – academics and regulators – have voiced about excessive protection, from the TRIPS clauses to copyright madness. Indeed, this chapter argues that strong IP protection was deemed pro-competitive by Chicago-flavoured thinkers (I’m afraid Christophers does use the adjective ‘neoliberal’, although it obscures rather than clarifies matters, given that so many non-economists use it to describe all economists, as if there were no differences of opinion or political philosophy in my professsion). He underlines the irony that ‘pro-market’ can mean either pro-competition (citing early Mont Pelerin economists such as Lionel Robbins) or ‘pro-business’ (ie anti-competition), as – he argues – many law-and-economics  ‘neoliberals’ are today.

The book concludes: “Political economy never sits still.” This is a terrifically interesting book, one for anybody interested in political economy, or just in the narrower canvas of law and economics.

There’s no doubt the plates are shifting again now, although who knows where they will take us – the political and economic forces undermining the post-1980s structure are powerful, yet there is no alternative intellectual framework, in contrast to the preparedness of the early Chicago School in the mid to late 20th century. I was much struck by Daniel Stedman Jones’s account in of the systematic preparation of that earlier generation of economists to change the public philosophy – decades-worth of research and influencing. It’s clear – especially after reading – that the balance ought to tilt back now away from monopoly protection toward competition enforcement, as the dominant model of capitalism is self-undermining. But who knows how or whether that will come about? Christophers ends with Lenin’s prediction that the future is capitalist monopoly on the international stage, monopoly imperialism. I have more confidence in self-correcting mechanisms. We will see.

PS. Christopher May, much cited in The Great Leveler, is the author of , published in paperback last year. I haven’t read it, but it offers an explanation of why global politics so often seems to turn on legal issues. “In accessible terms, Christopher May argues that we can no longer merely use the idea of the rule of law without question but rather must appreciate its multifaceted and contested character if we are to begin to understand how and why it is now seen as a ‘good thing’ across the political spectrum,” according to the blurb.

[amazon_image id=”B00ZY8G016″ link=”true” target=”_blank” size=”medium” ]The Rule of Law: The Common Sense of Global Politics by Christopher May (2014) Hardcover[/amazon_image]

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Not all economists are neoliberal, honest

It was because of a tweet linking to her LSE lectures that I decided to read Wendy Brown’s . My relationship with the concept of neoliberalism is an uneasy one, in that I don’t really know what it means. Often, radical writers use it to mean ‘most of economics’ – Philip Mirowski’s Never Let A Serious Crisis Go to Waste is a good example of this –  making an exception only for certain Marxist or otherwise unimpeachably heterodox economists. I understand the idea well enough to know is not neoliberal. However, writing off all the rest of economics makes it an unhelpful concept in my book. Of course there are ideologically right wing economists but there is a wide range of views about both politics and economics within the profession.

[amazon_image id=”1935408534″ link=”true” target=”_blank” size=”medium” ]Undoing the Demos: Neoliberalism’s Stealth Revolution (Zone Books Ner Futures)[/amazon_image]

I thought Brown’s book was going to be subtler. Here is her definition: “neoliberalism is not about the state leaving the economy alone. Rather, neoliberalism activates the state on behalf of the economy, not to undertake economic functions or intervene in economic effects, but rather to facilitate economic competition and growth, and to economize the social, or as Foucault puts it, to ‘regulate society by the market’.” She adds that neoliberalism entails “the dramatic curtailment of public values, public goods and popular participation in political life.” This definition makes sense to me – and makes neoliberalism a political ideology, one that uses its claim about the primacy of markets to extend a certain political order into more and more areas of life. It is similar to Michael Sandel’s argument in .

However, Brown goes on to list all the neoliberal economists who include Milton Friedman, Friedrich Hayek, Gary Becker – but also Joseph Stiglitz. Wait – Joe Stiglitz in the same camp as Becker?! Barack Obama also gets labelled as neoliberal, along with Reagan and Bush. So this is back to vacuous.

It’s a shame because the argument that the primacy of the market has been extended into inappropriate domains needs to be taken seriously. People regard ticket scalping as unfair – this includes many economists – so those of us who do economics have to respect the fact that some values other than economic efficiency might have to win out. Freedom, civic cohesion, fairness are all important values. Where it is appropriate to prioritise efficiency, or to use market processes to achieve either efficiency or other outcomes, should always be a matter of public and political debate. Most of the economists I hang out with – applied micro people – think it will depend on both people’s political choices and on the exact circumstances: the US trade in SO2 emissions works well, the EU market in carbon emissions does not; ‘s matching markets for kidneys or medical jobs are magical (and no money changes hands). My kind of economists tend to be pragmatists, unlike those in politics who argue the market is always best.

There are some real dilemmas. Later in the book, Brown gives short shrift to the idea that ‘governance’ is ever more important than politics, and argues that independent, technocratic bodies such as central banks should not take decisions with political consequences – and no doubt the many critics of the ECB and the right-wing critics of the Fed would warmly agree. It does not seem so obvious to me. Central banks take ‘better’ decisions when they are independent in the specific sense that growth is less volatile and inflation lower. Yet of course they need legitimacy – answering to parliament, fulfilling a remit set by the government. And the Greek crisis has indeed demonstrated that central banking is political at times of great stress. Perhaps Brown is right but I don’t think she argues the case well, when there are areas of policy in which expert advice or decisions made by technocrats delivers good outcomes. Surely this is debatable.

Anyway, is an interesting book even though I ended up disagreeing with much of it. I will say that whenever anybody next tells me economics is an abstract, wholly theoretical subject, I will make them read this. But it still helped me understand Michel Foucault’s almost totally incomprehensible , which I read recently. And I do think it’s important to push back against the political stance that disguises ideological projects with the claim that market are always right.

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What has Bill Clinton been reading?

To my surprise (especially when I saw the crowd gathered there), I was invited to hear Bill Clinton speak at the ‘Inclusive Capitalism’ conference in London yesterday.

Bill Clinton speaks

Bill Clinton speaks

His speech urged the gathered City folk to behave better, which struck me as worthy but a bit motherhood and apple pie – and therefore not very political. Still, it was interesting, and I noted that he cited three books: Amartya Sen’s ; E.O.Wilson’s ; and by John Bogle. I hadn’t heard of the last of these but for obvious reasons like the title.

[amazon_image id=”0141027800″ link=”true” target=”_blank” size=”medium” ]Identity and Violence: The Illusion of Destiny[/amazon_image]  [amazon_image id=”0871403633″ link=”true” target=”_blank” size=”medium” ]The Social Conquest of Earth[/amazon_image]  [amazon_image id=”0470398515″ link=”true” target=”_blank” size=”medium” ]Enough!: True Measures of Money, Business, and Life[/amazon_image]

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It’s the power, stupid

What’s not to like about a book with the title . This is a book of essays by Occup Wall Street activist and LSE anthropologist David Graeber, author of the tome . Well, various things. Just like his previous book, I enjoyed the read, strongly disagreed with some points and strongly agreed with others. That makes for quite good entertainment.

[amazon_image id=”B00MKZ0QZ2″ link=”true” target=”_blank” size=”medium” ]The Utopia of Rules: On Technology, Stupidity, and the Secret Joys of Bureaucracy[/amazon_image]

The book is a series of essays, ostensibly about bureaucracy, but really about the iniquities of neoliberal capitalism, which is not at all an arena of individual liberty but on the contrary a highly circumscribed system of exploitation. ‘Bureaucracy’ does service as a catch-all term for the set of rules through which the oligarchy in cahoots with the government restrict the options of the great mass of people.

There is certainly something in this portrayal of a society of rich people and large organisations able to act as they please while the great majority experience a highly regulated life. Think about wanting to open a small cafe or a two-person plumbing business, and the extent of certification and inspections that are needed. Or opening a bank account. Graeber writes that we spend hours entangled in paperwork to apply for licences or pay taxes or open accounts, and: “The paperwork we do exists in this sort of in between zone – ostensibly private, but in fact entirely shaped by a government that provides the legal framework, underpins the rules with its courts and all the elaborate mechanisms of enforcement that come with them but – crucially – works closely with the private concerns to ensure the results will guarantee a certain rate of provate profit.” All the more so in these days of outsourcing of state functions such as determining eligibility for benefits. There has been, he says, a gradual fusion of public and private power into “a single entity, rife with rules and regulations.”

So I think there is something in this. Matt Taibbi was onto the same point in when he argued that all the people who seem crazy to support Tea Party policies actually do have an arbitrary and unfriendly government controlling their lives.

Where I strongly disagree with Graeber is in his analysis of how to respond. The good part of his argument is about experimenting with other kinds of association and collective organisation, not government but not for profit, perhaps idealistic but worth trying. However, he also writes: “Do not underestimate the importance of sheer physical violence,” drawing on the experience of protests like the 1999 Battle for Seattle riots against the WTO.

He also has a long excursion into technology, arguing that the pace of change peaked in the 1950s or 60s, and that current technological change is not delivering things people might actually want such as flying jet packs. The high hopes of the 1960s as manifested in Star Trek, say, have not materialized. No beaming up, no holodecks etc. Instead, technology has been diverted to military causes. Apart from the fact that the military have always influenced technological research, this is a fact-free essay. I’d want to see some kind of evidence, because if you look at things like either price declines (or how many hours of work are needed to purchase a unit of computer power, or light), or the character of post-1960s discoveries  (medical advances, compelling technologies such as mobile telephony) then there seems to me to be decent evidence for no slowdown. Why can’t computers think yet? Well, give them time. Economic historians like Paul David and David Landes have pointed out how long and variable and unpredictable are the lags between discoveries and their economic and social impact. The dreams and fears about electricity probably peaked more than 60 years before its use had become widespread.

Still, disagreements don’t really matter with a book like this. It’s enjoyable to read something thought provoking with lots of interesting material. I enjoyed the Star Trek riff (“The Federation is Leninism brought to its future absolute cosmic success… a happy conjuncture of material abundance and ideological conformity”) and the potted history of the German Postal system of the 19th century and its influence on future ideal societies, and his review of the third Batman movie and its political interpretation. This book is also less than half the length of , Bureaucracy having a shorter history I suppose. Although actually the one thing this isn’t really about is bureaucracy, but instead another Graeber take on power.

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After neoliberalism?

My journey back yesterday from the Royal Economic Society annual conference in Manchester was delayed for ages because some poor soul had thrown themselves under a train along the line. At least I managed to finish  by David Kotz.

[amazon_image id=”B00SR5FNSY” link=”true” target=”_blank” size=”medium” ]The Rise and Fall of Neoliberal Capitalism[/amazon_image]

I’m a bit allergic to the word ‘neoliberal’, probably because it’s so often used as generic and blanket abuse of (among other things) all of economics. I’ve been accused of neoliberalism myself (to which the only sensible response is that the accuser needs to get out more if they think I’m an ideologue…..)

Certainly Kotz signals his own ideological views by using the term as his descriptor of American capitalism, but he does have a far more precise and meaningful definition than is the norm. He defines it as a specific “social structure of accumulation”, a “particular configuration of economic and political institutions, as well as dominant economic theories and ideas.” This is interesting, and I buy the general approach – it’s similar to (for example) Michael Best’s use of the concept of “production systems” in , but ranging wider beyond the economic institutions of production.

Kotz sees the 1950s and 60s as a golden age of ‘regulated capitalism’ with strong unions and well-paid jobs for (male) breadwinners. He accepts that it had its own crisis, with sustained declines in profitability through the 1970s. Hence the scope for the arrival of ‘neoliberal capitalism’ from 1979/81 with Thatcher and Reagan.

Much of the book describes the development of the ‘neoliberal’ system after that turning point in terms of the broad outlines of the US economy – profit rates and shares, declining union membership, stagnant median real wages, the rise in household indebtedness etc. It does not cover globalisation to any great extent, which seems an important omission, nor does it mention technology or environmental sustainability at all, so the prism is quite narrow. Deindustrialisation is described more in terms of an attack on organised labour than the consequence of several deeper economic trends. However, the book’s analysis of the 2008 crisis in terms of the preceding financial bubble, and the way consumption was supported by debt, is surely not controversial.

Kotz does mention the role of ideas in economic theory and – more important in the long term – political received wisdom (the theory has moved on, but the policy world view far less so). He describes neoliberal ideology as “very strong” – clear, simple, apparently logical. Daniel Stedman-Jones’s  gives a much fuller account of the effort it took to cement the ideology over a number of decades prior to 1979, and highlights how much organisation it will take to change the prevailing world view. For I think this is a question of political and social organisation more than one of economic or political theorising.

Kotz argues here that the US and by extension the western economic system is in a state of crisis that will give way to a new “social structure of accumulation” whose shape is yet to be determined – it could be a revived neoliberal system. It will not be his preferred socialist system without a broad social movement, as at moments of crisis in the past such as 1945.

I would agree with Kotz that the prevailing production system or social structure is in crisis, but would emphasise more the fundamental role of technology and globalization. Not that a class-based perspective isn’t important. He concludes: “The path that will be followed in the years ahead cannot be predicted …. The economic changes – or lack of changes – that lie ahead will be the outcome of struggles among various groups and classes in the coming years, which will occur in the realm of ideas, politics and culture.” And surely the realm of the work place, public space and policy corridors too?

So all in all, I agreed with quite a lot of the analysis here while thinking it an incomplete picture. Still, the book irked me, no doubt because of my allergy to ‘neoliberalism’, along with its slightly plodding style. Reading it did feel a bit like being in a political meeting where you are washed over by a wave of abstract nouns. I know economists are on average pretty clunky writers so one should be used to it, but I did nod off over the book as my train trundled veeeery slowly through the countryside.

I wonder what Professor Kotz would have thought of the arrangement at dinner at the Royal Economic Society conference. There were two options for each course, and staff served each one to alternating places at the table. If you preferred the other, you had to exchange. Perfectly efficient and logical – surely only an economist could have thought of it? I’m tempted to do this every time I invite people round for a meal in future, unless that would be a bit neoliberal.

Instructions at the bottom - side payments not ruled out.

Instructions at the bottom – side payments not ruled out.

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