If We Can't Pry Our Politics Free of Neoliberalism, We're Screwed

Like it or not, neoliberalism is the prevailing economic orthodoxy in Canadian politics, the NDP included.  It's also the seed of our destruction as a nation and it's going to be a real bugger to kick our way free of it.

For years I've been writing on this blog that neoliberalism and free market capitalism do not work past a certain point at which a society starts running out of stuff and begins running into walls.  That's when you either descend into a form of economic neo-feudalism or else you transition into an allocation-based economy.  When there's not enough to go around, to meet basic needs, people expect pretty egalitarian solutions.

Which is why I was immensely pleased to find Oxford professor and economic historian Avner Offer's insights in Chris Hedges new book, Wages of Rebellion.

According to Offer, our ideology of neoclassical economics - the belief that, as E. Roy Weintraub wrote, 'people have rational choices among outcomes' that can be identified and associated with values, that 'individuals maximize utility and firms maximize profits,' and that 'people act independently on the basis of full and relevant information' - is a 'just world' theory.  'A just world theory posits that the world is just.  People get what they deserve. If you believe that the world is fair, you explain or rationalize away injustice, usually by blaming the victim.'

But, he warned, if we continue down a path of mounting scarcities, along with economic stagnation and decline, this neoclassical model becomes ominous.

'Major ways of thinking about the world constitute just-world theories,' he said. 'The Catholic Church is a just-world theory.  If the Inquisition burned heretics, they only got what they deserved. Bolshevism was a just-world theory. If Kulaks were starved and exiled, they got what they deserved. Fascism was a just-world theory. If Jews died in the concentration camps, they got what they deserved. The point is not that the good people get the good things, but the bad people get the bad things. Neoclassical economics, our principal source of policy norms, is a just-world theory.'

Offer quoted the economist Milton Friedman: 'The ethical principle that would justify the distribution of income in a free market society is, "To each according to what he and the instruments he owns produces."

'So,' Offer went on, 'everyone gets what he or she deserves, either for his or her effort or for his or her property. No one asks how he or she got this property. And if they don't have it, they probably don't deserve it. The point about just-world theory is not that it dispenses justice, but that it provides a warrant for inflicting pain.'

Offer... said that the effectiveness of an ideology is measured by the amount of coercion it takes to keep a ruling elite in power.  Reality, when it does not conform toi the reigning ideology, he said, has to be 'forcibly aligned.'

...As larger and larger segments of society are forced because of declining economies to become outsiders, the use of coercion, under our current model, will probably become more widespread.

...Offer argued that 'a silent revolution' took place in economics in the 1970s. That was a time when 'economists discovered opportunism - a polite term for cheating.  Before that, economics had been a just-world defence of the status quo. But when the status quo became the welfare state, suddenly economics became all about cheating. The invisible-hand doctrine tells us there is only one outcome, and that outcome is the best. But once you enter a world of cheating, there is no longer one outcome. It is what economists call 'multiple equilibria,' which means there is not a deterministic outcome. The outcome depends on how successful the cheating is. And one of the consequences of this is that economists are not in a strong position to tell society what to do.'

The problem, he said, is that the old norms of economics continue to inform our policies, as if the cheating norm had never been introduced.

'Let's take the doctrine of optimal taxation,' he said. 'If you assume a world of perfect competition, where every person gets their marginal products, then you can deduce a tax distribution where high progressive taxation is inefficient. This doctrine has been one of the drivers to reduce progressive taxation. But looking at the historical record, this has not been accompanied by any great surge in productivity; rather, it has produced a great surge in inequality. So once again, there is a gap between what the model tells us should happen and what actually happens. In this case, the model works, but only in the model - only if all the assumptions are satisfied. Reality is more complicated.'

...Our current economic model, he said, will be of little use to us in an age of ecological deterioration and growing scarcities. Energy shortages, global warming, population increases, and increasing scarceness of water and food will create an urgent need for new models of distribution. Our two options, he said, will be 'hanging together or falling apart.' Offer argues that we cannot be certain that growth will continue. If standards of living stagnate or decline, he said, we must consider other models for the economy.

Offer, who studied the rationing systems set up in the countries that took part in WWI, suggested that we examine how past societies coped successfully with scarcity. ...In an age of scarcity, it will be imperative to set up new, more egalitarian models of distribution. Clinging to the old neoclassical model, he argued, could erode and perhaps destroy social cohesion and require the state to engage in greater forms of coercion.

...However, if we cling to our current model - which Offer labels 'every man for himself' - then, he said, 'it will require serious repression.'

He concluded: 'There is not a free market solution to a peaceful decline.'

What professor Offer is arguing for is, essentially, social democracy as the only viable option to safeguard social cohesion and ward off serious repression necessary to continue today's status quo. What a great time for Layton and Mulcair to embrace neoliberalism and guide the NDP to abandon the Left.