Neoliberalism’s Zeitgeist: The Untethered Disposition of Capitalism

ABSTRACT

Recent observers from the financial world have described the current status of the economy as “unhinged” and traversing “unchartered territory.” These expressions reflect the unprecedented freeing of capitalism from established conventions, norms, practices, and regulations underway since the 1970s and the ascendence of neoliberalism; a process that is not captured by the allied concepts “unfettered” and financialization. Capitalism has been untethering itself from not just the regulations that curtailed action (“fettered” it) across the twentieth century, but also the established conventions, customs, and practices initially described by Marx in Capital I that guided action into the mid-twentieth century, such as acceptable debt levels and forms of financial manipulation. This essay suggests that we have entered a new phase of capitalism with crucial implications for the status of the state and its intervention in the economy and likelihood or not that the current capitalist hegemonic order can be maintained far into the future.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Fernand Braudel, Civilization & Capitalism, 15th-18th Century, Vol. II: The Wheels of Commerce (Berkeley: University of California Press, 1992), 360–79.

² Ibid., 400.

³ Ibid., 433.

⁴ Karl Marx, Capital, Vol. I, trans. Ben Fowkes (London: Penguin Books, 1976).

⁵ The use of the label “fabrication” is explained in detail in Robert Latham, “Contemporary Capitalism, Uneven Development, and the Arc of Anti-Capitalism,” Global Discourse 8, no. 2 (2018): 169–86.

⁶ A recent example is Geoffrey Underhill, and Xiaoke Zhang, eds, International Financial Governance Under Stress (Cambridge: Cambridge University Press, 2003).

⁷ Robert Latham. “Politics in a Floating World: Toward a Critique of Global Governance,” in Approaches to Global Governance, Theory, eds. Martin Hewson and Timothy J. Sinclair (Albany: Suny Press, 1999).

⁸ Speech by Mario Draghi, July 26, 2012,” available online at https://www.ecb.europa.eu/press/key/date/2012/html/sp120726.en.html.

⁹ Karl Marx, The 18th Brumaire of Louis Bonaparte, in Collected Works, Vol. 11, Karl Marx and Frederick Engels (London: Lawrence & Wishart, 1979), 99–197, 103.

¹⁰ Such a liberal view tied to economic codes and law appears clearly in James Willard Hurst, Law and the Conditions of Freedom in the Nineteenth-century United States (Madison: University of Wisconsin Press, 1956).

¹¹ With repression applying to those who challenge liberal order. Robert Latham, The Politics of Evasion: A Post-Globalization Dialogue Along the Edge of the State (London: Routledge, 2016), chap. 1.

¹² Karl Polanyi in the 1940s emphasized for us – what Marx had observed – just how dependent market-anchored openness and flexibility are on legally defined forms of agency. Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1944).

¹³ Karl Marx, On the Jewish Question, https://www.marxists.org/archive/marx/works/1844/jewish-question/.

¹⁴ C.B. Macpherson, The Political Theory of Possessive Individualism: Hobbes to Locke (London: Oxford University Press, 1965).

¹⁵ Marx, Capital, Vol. I, especially chap. 28.

¹⁶ Although as pointed out above Braudel argues the tension between constraint and flexibility is as old as capitalism itself.

¹⁷ Capital, Vol. 1, 344. All italics are mine in these quotes from Capital.

¹⁸ Ibid, 278.

¹⁹ Ibid, 167.

²⁰ Ibid, 182.

²¹ Ibid, 162.

²² Karl Marx, Capital, Vol. 3, trans. David Fernbach (London: Penguin Books, 1981), 486.

²³ Ibid., 666.

²⁴ Jonathan Macey and Geoffrey Miller, “Double Liability of Bank Shareholders: History and Implications” (1992), available at http://digitalcommons.law.yale.edu/fss_papers/1642/.

²⁵ Edward Yardeni, Predicting the Markets: A Professional Autobiography (New York: YRI Press, 2018), 384.

²⁶ Paul Krugman, “Invisible Bond Vigilantes” The New York Times, November 19, 2009, https://krugman.blogs.nytimes.com/2009/11/19/invisible-bond-vigilantes/.

²⁷ A mainstream U.S. economist’s take on the history and arguments for and against a gold standard is Barry Eichengreen, The Gold Standard in Theory and History (New York: Methuen, 1985). The only advocates of the gold standard are fringe “sound money” advocates associated with Austrian Economics.

²⁸ While accusations of manipulation and price gaming of metals and interest rates are often treated as conspiracy theory recent evidence has made it clear it is not; see Stein Duffie, “Reforming LIBOR and Other Financial Market Benchmarks,” The Journal of economic perspectives 29, no. 2 (May 2015): 191–212; and Andrew Verstein, “Insider Trading in Commodities Markets.” Virginia Law Review 102, no. 2 (April 1, 2016): 447–500.

²⁹ Some of that long history is profiled by David Leinweber and Ananth Madhavan. “Three Hundred Years of Stock Market Manipulation,” Journal of Investing 10, no. 2 (Summer 2001): 7–16. Marx in Capital, Vol. 3, chap. 25 engages the concept of “fictitious capital” which had been introduced in early 18^th century Britain to criticize financial capital circuit M-M' schemes. The size of contemporary hedging markets (considered derivatives) is estimated to be between $11 and $559 trillion US dollars depending on how you calculate it. Bank of International Settlements (BIS) “OTC Derivatives Statistics at End-December 2019,” https://www.bis.org/publ/otc_hy2005.htm.

³⁰ See for example Gary Shorter, Stock Buybacks: Concerns over Debt-Financing and Long-Term Investing (Washington, DC: Congressional Research Service, 2019); and Ozgur Orhangazi, “Financialisation and Capital Accumulation in the Non-Financial Corporate Sector: A Theoretical and Empirical Investigation on the US Economy: 1973–2003,” Cambridge Journal of Economics 32, no. 6 (2008): 863–86.

³¹ Michaely Grullon, “Dividends, Share Repurchases, and the Substitution Hypothesis,” The Journal of finance (New York) 57, no. 4 (2002): 1649–1684, 1677.

³² Ibid., 1678.

³³ Al Lewis, “The stock market boomed in 2019: Here’s how it happened,” CNBC, December 31, 2019, https://www.cnbc.com/2019/12/31/the-stock-market-boomed-in-2019-heres-how-it-happened.html.

³⁴ Two notable perspectives on this complexity are: Nicholas Dunbar, The Devil’s Derivatives (Boston, Mass: Harvard Business Review Press, 2011); and Donald MacKenzie, “Material Signals: A Historical Sociology of High-Frequency Trading,” The American Journal of Sociology 123, no. 6 (May 2018): 1635–83.

³⁵ For a recent formulation of this logic see William Robinson, Global Capitalism and the Crisis of Humanity (New York: Cambridge University Press, 2014).

³⁶ Michael Moran, The Politics of the Financial Services Revolution: the USA, UK and Japan (New York: St. Martin’s Press, 1991).

³⁷ Thomas Kaplan, “Congress Approves First Big Dodd-Frank Rollback,” May 22, 2018, available at

https://www.nytimes.com/2018/05/22/business/congress-passes-dodd-frank-rollback-for-smaller-banks.html.

³⁸ Notable portraits of Keynesian state action are Andrew Shonfield, Modern Capitalism (London: Oxford University Press, 1969); and Harold Wattel, ed, The Policy Consequences of John Maynard Keynes (Armonk, NY: M. E. Sharpe, 1986).

³⁹ Michael Bordo and Arunima Sinha, “A Lesson from the Great Depression That the Fed Might Have Learned: A Comparison of the 1932 Open Market Purchases with Quantitative Easing,” Working Paper (Washington DC: National Bureau of Economic Research, 2016), available at https://www.nber.org/system/files/working_papers/w22581/w22581.pdf.

⁴⁰ Steven Landefeld, “GDP: One of the Great Inventions of the 20th Century,” Survey of Current Business 80, no. 1 (2000): 6–14.

⁴¹ S.N. Alexander, The National Bureau of Standards Eastern Automatic Computer (SEAC), Managing Requirements Knowledge, International Workshop, Conference Proceedings (1951), available at https://www.computer.org/csdl/proceedings-article/afips/1951/50400084/12OmNvUsooB.

⁴² See for example Jerome Percus and Leon Quinto. “The Application of Linear Programming to Competitive Bond Bidding,” Econometrica 24, no. 4 (1956): 413–28.

⁴³ James Beniger, The Control Revolution: Technological and Economic Origins of the Information Society (Cambridge: Harvard University Press, 1986).

⁴⁴ Gareth Dale. “Double Movements and Pendular forces: Polanyian Perspectives on the Neoliberal Age,” Current Sociology 60, no. 1 (2012): 3–27.

⁴⁵ The book Greogory Millman, The Vandals’ Crown: How Rebel Currency Traders Overthrew the World’s Central Banks (New York: Free Press, 1995) portrays this transformation in a decidedly celebratory way.

⁴⁶ Mentioned in Frederick Strobel and Wallace Peterson. The Coming Class War and How to Avoid It: Rebuilding the American Middle Class (New York: ME Sharpe, 1999), 28–29.

⁴⁷ Christie, Rebecca and Corina Ruhe, “Cyprus Bank Deposits to Be Taxed in

$13 Billion Bailout” (2013) https://www.bloomberg.com/news/articles/2013-03-16/euro-area-takes-aim-at-depositors-in-cyprus-bailout.

⁴⁸ Jim Reid, Nick Burns, and Stephen Stakhiv “LT Asset Return Study: A Journey into the Unknown,” Deutsche Bank, Global Markets Research (2012), 3, available at http://www.johnbudden.com/wp-content/uploads/2012/09/ltassetreturnstudy2.pdf.

⁴⁹ Roel Beetsma and Harald Uhlig, “An Analysis of the Stability and Growth Pact,” The Economic journal 109, no. 458 (1999): 546–71.

⁵⁰ Susan George, A Fate Worse Than Debt London [England: Penguin Books, 1989).

⁵¹ Barry Eichengreen and Richard Portes, “The Interwar Debt Crisis and Its Aftermath,” The World Bank Research Observer 5, no. 1 (1990): 69–94, 81.

⁵² The pattern of the US debt-to-GDP ratio is charted here: https://fred.stlouisfed.org/series/gfdegdq188S.

⁵³ One example of such justification from 2010 is Manmohan S. Kumar and Jaejoon Woo, “Public Debt and Growth,” IMF Working Paper (2010), available at https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Public-Debt-and-Growth-24080.

⁵⁴ Sidney Homer and Richard Eugene., A History of Interest Rates, 4th ed., (Hoboken, N.J: Wiley, 2005); and Elena Holodny, “The 5,000-year history of interest rates shows just how historically low US rates still are right now,” Business Insider, September 20, 2017, available at http://www.businessinsider.com/interest-rates-5000-year-history-2017-9.

⁵⁵ Harald Hagemann, “L. Albert Hahn’s Economic Theory of Bank Credit,” Journal of Post-Keynesian Economics 37, no. 2 (2014): 309–335, 310.

⁵⁶ James Juniper, Timothy Sharpe, and Martin Watts. “Modern Monetary Theory: Contributions and Critics,” Journal of Post-Keynesian Economics 37, no. 2 (2014): 281–307.

⁵⁷ Christine Bogdanowicz-Bindert, “The Debt Crisis: The Baker Plan Revisited,” Journal of inter-American studies and world affairs 28, no. 3 (1986): 33–45, 37.

⁵⁸ Reflexivity about the situation even extends to strategies for financially thriving in a near zero interest rate environment. See, for example, Adam Strauss, “How to Invest in An Era Of $100 Trillion Financial Obligations: Part I,” Forbes, July 12, 2018, https://www.forbes.com/sites/adamstrauss/2018/07/12/how-to-invest-in-an-era-of-100-trillion-financial-obligations-part-i/?sh=158c61067ccb.

⁵⁹ When large amounts of money creation are channeled into financial circuits the velocity of money is low (that is, the exchange of money between individuals and organizations usually via purchases). See Yi Wen, “What Does Money Velocity Tell Us about Low Inflation in the U.S.?” (September 1, 2014) https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us.

⁶⁰ Sifma.org, “A Deeper Look at US Listed Options Volumes” (May 2020) available at https://www.sifma.org/wp-content/uploads/2020/05/SIFMA-Insights-Options_Final-for-Web.pdf.

⁶¹ The notion that “cheap imports” from China via global supply chains has tamped US inflationary pressures has certainly come under serious question. See for instance Raphael Auer and Andreas Fischer, “The impact of low-income economies on US inflation,” VoxEU, (2008) available at https://voxeu.org/article/how-much-do-cheap-imports-dampen-us-inflation.

⁶² See for example Gwynn Guilford, “U.S Producer Prices Rose Strongly in May, Adding to Inflationary Pressures, The Wall Street Journal, June 15, 2021, https://www.wsj.com/articles/producer-prices-inflation-may-2021-11623705627.

⁶³ William Lazonick, et al, “Why Stock Buybacks Are Dangerous for the Economy,” Harvard Business Review, (January 2020), available at https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-economy.

⁶⁴ The term is relatively widely used: for example, see Greg Ip, “Is This a Liquidity Crisis or a Solvency Crisis?” The Wall Street Journal (April 30, 2020) available at https://www.wsj.com/articles/is-this-a-liquidity-crisis-or-a-solvency-crisis-it-matters-to-fed-11588239001.

⁶⁵ An especially reflexive take on future trajectories by a financial capitalist is Artemis Capital Management, “The Allegory of the Hawk and the Serpent,” (January 2020) available at https://artemiscm.docsend.com/view/taygkbn.

⁶⁶ Hyman Minsky, Can “It” Happen Again? Essays on Instability and Finance (Armonk, N.Y: M.E. Sharpe, 1982).

⁶⁷ For such a view see Eric Helleiner, The Status Quo Crisis: Global Financial Governance after the 2008 Meltdown (New York: Oxford University Press, 2014).

⁶⁸ Alan Greenspan, Structural Change in the New Economy,” Federal Reserve Board (July 11, 2000) available at https://www.federalreserve.gov/boarddocs/speeches/2000/20000711.htm.