Robert Kuttner’s review of Adam Tooze’s book, Crashed: How a Decade of Financial Crises Changed the World — “The Crash That Failed,” in the November 22, 2018, The New York Review of Books https://www.nybooks.com/articles/2018/11/22/financial-crash-that-failed/ — provides a useful example of the critical limitations of America’s liberal commentariat.
In the guise of criticizing the emperor’s neoliberal clothes, liberal intelligentsia repeatedly fail to see the emperor’s nakedness. Indeed, while seeming to critique, liberals embrace the boundaries of the emperor’s hegemony! The result is superficiality and —worse — intensification of the hegemony. The Broadway extravaganza “Hamilton” illustrates this: actors “of color” celebrate the architect of the foundational U.S. alliance with capitalism — an alliance incorporating both Black slavery and confiscation of Native lands!
The following ten comments on Kuttner’s review of Tooze aim at demonstrating liberal complicity with neoliberalism. I conclude with a suggestion about the focus of a deep critique — “radical” — going to the roots.
KUTTNER: “The crash …should have led to the disgrace of neoliberalism…. Instead, the old order reasserted itself…”
COMMENT: The fact that the reassertion of the old order occurred under the banner of ‘change we can believe in’ produced widespread disillusionment, especially among young voters who were so enamored of identity politics as to be blind to structural critiques of political-economic “order.” Rather than the disgrace of neoliberalism, we saw the disgrace of Obama, the hoped-for transformative leader, whose liberalism turned out to be neoliberalism. Without a deep critique, that difference is invisible.
KUTTNER: “Parties such as the German Social Democratic Party, the British Labour Party, and the French Socialists disgraced themselves as co-sponsors of the neoliberal formula that brought down the economy.”
COMMENT: Why doesn’t Kuttner also say the U.S. Democratic party disgraced itself? That is in fact the case, notwithstanding his assertion that “Progressives have been gaining influence in the Democratic Party.”
KUTTER: “…the collapse came, it was ‘a financial crisis triggered by the humdrum market for American real estate.'”
COMMENT: But in Kuttner’s next sentence, the real estate market appears not so “humdrum”: “The US housing bubble was pumped up by subprime mortgage derivatives that allowed lenders to sell off high-risk loans homeowners were unlikely to pay back. These were invented on Wall Street beginning in the 1980s, accepted by US regulators, and disseminated like financial toxins….”
KUTTNER: “Had the authorities just stood by….”
COMMENT: Why does Kuttner pose doing nothing — “standing by” — as the alternative to the global banks bailout described in his next paragraph? As a rhetorical move, Kuttner’s phrase plays right into the notion that economic chaos is the only alternative to private ownership of the state (what he refers to as “The state had been hijacked by private finance”).
KUTTNER: “Using deposit guarantees, loans to banks, outright capital transfers, and purchases of nearly worthless securities, the Fed and the Treasury recapitalized the banking system.”
COMMENT:This is not new! In fact, as Colin Woodard explains in American Nations (2011): “[Banker Robert] Morris and his protege Alexander Hamilton took control of federal financial policy, rigging it so as to literally turn their friends’ worthless paper into silver and gold. Under Morris and Hamilton, the federal government would buy back the bonds for face value, plus 6 percent interest, paid in precious metals raised by assessing new federal excise taxes designed to fall most heavily on the poor people who’d been forced to take the worthless congressional scrip in the first place.” [pp. 158-159]
A radical critique of U.S. political-economy will at every juncture remind the reader that the “hijacking” of the federal state was accomplished at its inception! Instead, Kuttner follows his description of federal machinations to support banks with this statement: “The crisis, Tooze writes, ‘was a devastating blow to the complacent belief in the great moderation, a shocking overturning of the prevailing laissez-faire ideology.’ And yet the ideology prevailed. Homeowners, both those defrauded by subprime mortgages and millions of others whose houses were suddenly worth less than their debt, were the real victims of the collapse.” Kuttner (and, apparently, Tooze) writes as if the “the great moderation” and the “prevailing laissez-faire ideology” were not only and always new clothes for the emperor.
KUTTNER: “Tooze reminds us of the Hamilton Project, a small unit at the Brookings Institution created in 2006 by Robert Rubin, former co-chairman of Goldman Sachs and Clinton’s treasury secretary, and his protégés.”
COMMENT: But Kuttner (and apparently also Tooze) fails to discuss the deep roots and significance of the “Hamilton Project”!
KUTTNER: “Greece, a nation hit by severe recession and loss of private investor confidence, had no choice but to pursue austerity to reassure creditors. A central bank with the prerogatives of the Federal Reserve might have prevented this outcome.”
COMMENT: Yet again, Kuttner writes as if the “prerogatives” of the U.S. central bank are the only alternative to “doing nothing” —”no choice.”
KUTTNER: “…there are some aspects of the story that are omitted or glossed over. For example, the ideal of liberalized trade, and the use of trade treaties to promote deregulation or privatized regulation of finance, is a major element of the story of how neoliberal hegemony promoted the eventual collapse. But except for a passing reference, trade and globalized deregulation get little mention….”
COMMENT: Kuttner shares these omissions and glosses! Thus, to say, “Neoliberal hegemony promoted the eventual collapse,” is to ignore the fact that the ingredients of economic collapse are built into neoliberal political economy.
KUTTNER: “Yellen, a left-liberal economist specializing in labor markets, was the only left-of-center Fed chair other then FDR’s chairman Marriner Eccles. She also believed in tough regulation of banks. The extension of quantitative easing well beyond its intended end was substantially due to Yellen’s concern about wages and employment, and not just price stability, since low interest rates can also help promote recovery.”
COMMENT: Kuttner offers Yellen as an example of something Tooze glosses over; but Kuttner’s description of Yellen and her actions as “left-of-center” is wholly bounded by the hegemonic assumption that neoliberalism is compatible with helping workers — in short, that neoliberalism can save itself. Or, as he puts it, “government oversight of capitalism prevented the disasters of laissez-faire policies.”
KUTTNER: “The political in ‘political economy’ demands to be taken seriously.”
COMMENT: Indeed! And this final line of Kuttner / Tooze deserves to be the first line of a deep critique, focused on Hamilton’s original project for linking the federal state to capitalism. A deep critique includes an analysis of how Hamilton’s project was linked to federally controlled land speculation under a legal regime based on the doctrine of “Christian discovery” (i.e., the notion that Native Peoples could not own their own lands because they were heathens, and therefore their lands were subject to unilateral confiscation by the U.S.). Federalist Chief Justice John Marshall [born the same year as Hamilton] announced the doctrine in an 1823 Supreme Court case, Johnson v. McIntosh.