The final paragraph from Luigi Zingales critique of the Paulson plan reads:
The decisions that will be made this weekend matter not just to the prospects of the U.S. economy in the year to come; they will shape the type of capitalism we will live in for the next fifty years. Do we want to live in a system where profits are private, but losses are socialized? Where taxpayer money is used to prop up failed firms? Or do we want to live in a system where people are held responsible for their decisions, where imprudent behavior is penalized and prudent behavior rewarded? For somebody like me who believes strongly in the free market system, the most serious risk of the current situation is that the interest of few financiers will undermine the fundamental workings of the capitalist system. The time has come to save capitalism from the capitalists.
Following – more loosely than I would like – the reporting of the financial crisis, I have found myself recurrently distracted by the ways in which capitalism is described – as an ideal and as an object of critique – and the ways in which the current crisis is being framed against the models provided by previous crises. I won’t be able to get at the things that have been interesting me – mostly likely not until the PhD goes in, at which point I wouldn’t mind tackling this situation systematically for a postdoctoral project.
But just to comment inadequately and in passing, several of the things that have caught my attention are expressed in the conclusion to the Zingales piece. One is a sense that – in a rough and inexact way – I don’t want to overstate the similarities, but they are there, and I can’t help but be struck by them: this same sort of framing might well have been used early in the 20th century, to set up for a critique of capitalism. The question “Do we want to live in a system where profits are private, but losses are socialized?” – in the quotation above, this sets up for the desired conclusion: no, we want a system where everything is privatised. Turn back time, and it could well have been the opening volley in an argument that everything should be social.
Saving capitalism from the capitalists – the language of gambling, of speculation, of irresponsible and reckless individuals – it’s all over the coverage. There are historical resonances here too – framings that were once used to push through the reforms of the welfare state. I’m also interested, though, in this specific distinction between “capitalism” and “capitalists” – this is a distinction that was, I think, quite important in Marx’s work: individuals as bearers of economic roles – individuals as beneficiaries and as more or less wilful and abhorrent exploiters of social circumstances – but capitalism itself having an ontological status that is in some meaningful sense externalised in relation to those individuals whose actions nevertheless perform the reproduction of capital. For Marx – and I’ll try to write more on this in the future – this externalisation opens up some important options for critique and transformation, while at the same time, and within current circumstances, operating as a form of domination of the collective consequences of social action over the actors. The passage above treats the externalised entity capitalism as distinct from its imprudent bearers – and this entity also becomes an ideal that must be preserved, at the expense of those bearers if needed. The capitalists can go – capitalism, no. The bearers are more contingent that the process they bear – the process is taken to carry, not simply hard force, but a distinctively normative power.
All of this needs more analysis than I can provide at present… But one interesting dimension of the current crisis is the rendering manifest of these distinctions in much more popular discussion than we’ve seen for some time, I think… Articulations can have their own hard power – as well as normative force: large-scale public discussion of capitalism – what it is, what it should be – has now opened up on a massive scale. What is articulated now will likely define a space of possibilities for the sorts of actions that lie ready to hand in the decades to come… Opening some potentials… Placing others farther out of reach… This is a time when theorising structural possibilities becomes… unusually impactful… The previous major structural transformation opened an experiential and interpretive gap into which flooded the interpretive systems and policies that have led us here. The question when confronting present and future transformations is how to open the potential for something other – for something that holds onto emancipatory promises that can otherwise be easily drowned out in reactive responses, conditioned by an environment primed to be receptive to ideals of capitalism as an end in itself…
hey there – I don’t have anything substantive to say (later, maybe) but just wanted to say that I’m glad to see you posting again, I’d gotten a bit concerned when you hadn’t in a while.
Hey… hello there… nice to see you back! A momentary break in the traffic, hey?
Nice post, NP. This ‘bailout’ stuff is truly extraordinary isn’t it. I like the piece you’ve quoted above – (just quietly) I’ve always held a certain respect for ‘true’ free marketeers…those who hold a firm belief (however misguided, IMHO ;-P) in the ‘logic’ of the invisible hand. It’s those who want it both ways that I can’t stomach.
And yes, large scale discussion of capitalism – and of Marxism… when was the last time you saw the word ‘Marx’ in a daily newspaper? Interesting times.
I was just looking for some interesting commentary on the market meltdown and I thought maybe if I looked here … and I was right.
It’s the classic analytical conundrum: the casual impact of agency vs structure, or perhaps more precisely personal avarice trumps structural antecedents of behaviour in the rush to explain the collective behaviour of stock market lemmings, I mean brokers.
Of interest to me is that this current disaster perhaps says less about capitalism and more about political economy. I don’t mean to split definitional hairs, but isn’t this precisely how the boom bust cycle works, creative destruction and market correction as ultimate regulators damn the social cost? But in this instance the combination of crony-capitalism and a corporatist but hollow and overstretched state seems to be in play.
What do you reckon?
[…I think N. Pepperell has been all over…]
The mainstream discourse is all misdirected–which is to say it’s all f**ked up! The debate seems to be between big government control of the economy (as though that is the necessary alternative) and the free market (as though beyond theory that exists). Framing it this way (to use your phrase) blinds from the real problem: that (as discerned by Marxism) the State functions in the service of the dominant class (to simplify it grossly). Ergo the deregulations that preceded the financial crisis and the present response to it–all these are moves that carry out one and the same strategy: first step was to privatize public services (as with private mercenary contractors such as Blackwater and the attempted privatization of social security, among other things), followed now by the finish: the transfer of private debt to public hands. All this of course covered up by the discourse that shifts the question to big government v free market, not to mention the shifting of the blame (as done by some conservative pundits) to all those poor people who bit more than they could chew (in trying to own a house)–as though they could account for 700 BILLION BUCKS, every single one of the SEVEN HUNDRED BILLION–rather than cracking down on those Wall Street magicians of greed. Strategic moves all this–shameless!
“The debate seems to be between big government control of the economy (as though that is the necessary alternative) and the free market (as though beyond theory that exists).”
I like Zizek’s response to this in a recent LRB article:
“The real dilemma is not ‘state intervention or not?’ but ‘what kind of state intervention?’ And this is true politics: the struggle to define the conditions that govern our lives.”
Yes, “the State functions in the service of the dominant class,” but what is at stake now is what kind of State interventions are made, and by extension who the dominant class really is.
For my money, Zizek’s article is capitalist apologetics dressed as radicalism.
“since markets are effectively based on beliefs (even beliefs about other people’s beliefs), how the markets react to the bailout depends not only on its real consequences, but on the belief of the markets in the plan’s efficiency. The bailout may work even if it is economically wrong.”
But of course markets aren’t effectively based on beliefs – economic reality has its influence too. Sensible objections to the bailout plan were nothing to do with “moral hazard” – the objection is that you can’t resolve a crisis caused largely by the collapse of consumer purchasing power in the ‘developed’ world by taking money from taxpayers and giving it to banks.
“Sensible objections to the bailout plan were nothing to do with “moral hazard” – the objection is that you can’t resolve a crisis caused largely by the collapse of consumer purchasing power in the ‘developed’ world by taking money from taxpayers and giving it to banks.”
Were most of the objections (largely made by the GOP) sensible in this way though? Over-whelmingly I heard Republican representatives complaining that the bailout mitigated the just fine-and-dandy free-market in action from doing its thing. The “moral hazard” argument as Zizek calls it is a variation/extension of this attitude.
Yes – to be sure – most of the GOP arguments against the Paulson plan were fuelled by 18 different flavours of free-market crack. The problem with the Zizek piece is that he links the right- and left-wing objections to this taxpayer-funded bailout (“That the criticism of the bailout plan came from conservative Republicans as well as the left should make us think”) and then uses this conflation to launch into an argument that comes straight out of the Bush administration’s sales pitch for the Paulson plan. Sorry to quote at length, but:
“The standard ‘trickle-down’ argument against redistribution (through progressive taxation etc) is that instead of making the poor richer, it makes the rich poorer. However, this apparently anti-interventionist attitude actually contains an argument for the current state intervention: although we all want the poor to get better, it is counter-productive to help them directly, since they are not the dynamic and productive element; the only intervention needed is to help the rich get richer, and then the profits will automatically spread down to the poor. Throw enough money at Wall Street, and it will eventually trickle down to Main Street. If you want people to have money to build, don’t give it to them directly, help those who are lending it to them. This is the only way to create genuine prosperity – otherwise, the state is merely distributing money to the needy at the expense of those who create wealth.
It is all too easy to dismiss this line of reasoning as a hypocritical defence of the rich. The problem is that as long as we are stuck with capitalism, there is a truth in it: the collapse of Wall Street really will hit ordinary workers. That is why the Democrats who supported the bailout were not being inconsistent with their leftist leanings. They would fairly be called inconsistent only if we accept the premise of Republican populists that capitalism and the free market economy are a popular, working-class affair, while state interventions are an upper-class strategy to exploit hard-working ordinary people.” [my emphasis]
This is, of course, absurd nonsense – because it implicitly accepts the preposterous right-wing idea that criticism of the Paulson plan = rejection of state action to minimise the damage caused by the implosion of neoliberal capitalism. Yes, sure, we need political intervention. That’s pretty obvious. But as NP is arguing in the post we’re commenting on, what’s at stake at a time like this – when capitalism is undergoing a massive crisis-hastened systemic transformation – is the kind of political intervention that’s going to get implemented. In an article supposedly arguing that “The real dilemma is not ‘state intervention or not?’ but ‘what kind of state intervention?’” Zizek trots out exactly the kind of apologetics for simple state appropriation and upward redistribution of wealth that we’re seeing on Fox News.
On moral hazard, here’s a nice conflation: “The resistance was formulated in terms of ‘class warfare’, Wall Street against Main Street: why should we help those responsible (‘Wall Street’) and let ordinary borrowers (on ‘Main Street’) pay the price for it? Is this not a clear case of what economists call ‘moral hazard’?” Apart from the fact that that’s not the point of the Wall Street / Main Street distinction, comments about moral hazard pretty clearly do not equal class warfare. Complaining about upward redistribution just isn’t the same as complaining about increased appetite for risk. (Plus, on the moral hazard argument in general, the idea that after the events of the last few weeks and months, capitalists are going to be insufficiently aware of the dangers of high-stakes gambling strikes me as… odd.)
But the strongest objection to the Paulson plan isn’t that it’s unjust. The strongest objection is that it won’t work – and isn’t working. Zizek again:
“The debate about the bailout deals with decisions about the fundamental features of our social and economic life, even mobilising the ghost of class struggle. As with many truly political issues, this one is non-partisan. There is no ‘objective’ expert position that should simply be applied: one has to take a political decision.”
Well yes, one has to take a political decision. But that decision needs to be informed by the objective economic circumstances. It is not just a matter of (market) opinion. And the circumstances, as I say, are that the economies of the ‘developed’ world, and most of all the US, have been driven to a far too great extent for far too long by debt-fuelled consumption: private debt, caused by stagnant lower- and middle-class wages; and public debt, caused by the ‘developed’ world’s declining geopolitical power, and thus declining ability to appropriate the rest of the world’s resources. One cannot borrow one’s way out of debt. Any solution based on, in the short run, borrowing to give to banks, and, in the longer run, taking that money from taxpayers, i.e. consumers, is a perpetuation by other means of the economic logic that’s produced the mess. It may prevent systemic collapse in the short term – or it may not – but it completely fails to address the problem.
Yet Zizek quotes Keynes – of all people! – on beauty contests, and thereby suggests that as long as we can make stock-brokers feel better about each other, we’ll be fine.
Also, just as a snarky aside, when supposed radicals start quoting John Gray to support their arguments, I think they lose some credibility.
Exactly the point, Joe Clement (about what kind of state intervention). As for Zizek making it, well, other people have made it too. That should probably be all that I say about it.
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Praxis, I appreciate your comments. Between yours and Jodi Dean’s, I have been thinking hard about what Zizek is saying in these clearly crucial passages (Jodi takes issue with the same trickle-down passage). I think what Zizek is getting across is that in most mainstream discussions about the bailout right up to its passage in the House, there were two options effectively at play: either the State intervenes or it does not. The Democrats and Republicans respectively championed these positions.
Highlighting this and apologizing for the Democrats’ actions does not come across to me as strongly as it does to you and Jodi as an apology for the IRREFUTABLE capitulation to Wall Street that this bailout IS. Trying to buttress this apology with his “Main Street cannot thrive if Wall Street isn’t doing so well” remark would have that effect on me if I saw it playing a bigger role in the essay. The point for Zizek is not the legitimacy of the rationale (Main Street depends on Wall Street), but the appearance of State intervention on behalf of The People (as opposed to the ideal of a free-market) it sustains. This is where it stops. If you can convince me that the essay depends on this element and its actual legitimacy, then I’ll be more sympathetic to seeing Zizek as just spouting bullshit.
I see Zizek’s point about “what kind of State intervention?” as opposed to “State intervention or non?” as the key to the essay. I don’t see why you think he “implicitly accept the preposterous right-wing idea that criticism of the Paulson plan = rejection of state action to minimise the damage caused by the implosion of neoliberal capitalism,” considering he never mentions the criticism against the bill. From one view, this is a problem with his essay. From another, the one I’m suggesting, it doesn’t serve Zizek’s point. Of course, there was LOTS of talk about alternative State interventions, many of which fully accepted the at least partial demise of Wall Street. Not many if any of these were seriously on the table, in terms of being taken seriously by the media or the disputes over the bailout the first time it was defeated. Does that make them not legitimate? Well, no, but it does mean these are not the operative terms of the discussion, for the sake of which Zizek is writing this essay in the first place:
As for what he says about markets, I don’t understand your disagreement. Of course, there are material economic factors at play that aren’t addressed by this bailout, but I don’t know where you get the idea that anyone argued for it on those grounds. Everyone knew that the intentions behind this bailout were propping up the speculative economy, whose most “real” element is the debt industry, an economic force dominated by belief. We have seen the Market rebound from the sheer thought of the bailout, of course not making any substantial over-all gains, and this is what Zizek means by how the “bailout may work even if it is economically wrong.” Did you think that Zizek meant that the bailout would – when it “worked” – get rid of the core economic problems? Ajrun Appadurai wrote an excellent article at The Immanent Frame, “Welcome to the Faith-based Economy” that deals with these issues in a more concretely economic conversation.
P.S. Brilliant comments at Lenin’s Tomb regarding Wolff’s video-lecture. While I didn’t form the strong opinion about them that you did, I was weirded out by his comments regarding minorities and exported jobs, and also thought the “core analysis” was sound and pretty articulate. I was put off by the almost anti-State “corporate guild” or syndicalist rip he went on for the last ten minutes, which didn’t really question the logic of Capital, profit and private property.
Hey Joe – thanks. We should probably agree to disagree about the Zizek piece :-). But cheers re: Wolff – I like what you said about his silicon-valley world as bourgeois socialism etc.
Meanwhile my new-economic-order resolution is to stop being so rude about everyone all over the blogosphere. Or at least to be rude about, you know, the right.