Thoughts on Slouching Towards Utopia

I’m going to digress from my ongoing survey of the roots of the 21st century crisis of capitalism to discuss a great new book with a similar theme — Brad DeLong’s Slouching Towards Utopia. Brad tells the economic history of the “long 20th century” from 1870 to 2010, from the advent of the modern mass production economy to the dispiriting aftermath of the Great Recession. In other words, his narrative encompasses both humanity’s solving of the economic problem and the haunting arrival of the permanent problem.

This isn’t me putting words in Brad’s mouth: Keynes’s essay from which this blog takes its name is used as a framing device in the book’s opening and concluding chapters. (I’ll just note for the record that I came up with the idea of a blog by this name some months before I got my hands on Brad’s book. The fact that we both decided to allude to Keynes in discussing our present discontents is a wonderful coincidence – and a testament to the enduring relevance of Keynes’s sparkling, prescient essay.) Here’s how Brad sums things up:

And for all the economic progress that was achieved during the long twentieth century, its history teaches us that material wealth is of limited use in building utopia. It is an essential prerequisite, but far from sufficient. And this is where Keynes’s comment about the most permanent problem being how “to live wisely and agreeably and well” comes in once again. His speech was an important moment because he perfectly expressed what the essential difficulty has proved to be….

The shotgun marriage of Friedrich von Hayek and Karl Polanyi, blessed by John Maynard Keynes, that helped raise the post–World War II North Atlantic developmental social democracy was as good as we have so far gotten. But it failed its own sustainability test, partly because a single generation of rapid growth raised the bar high, and partly because Polanyian rights required stability, the treating of equals equally, and the treating of perceived unequals unequally in ways that neither the Hayekian-Schumpeterian market economy of creative destruction nor the Polanyian social democratic society of universal egalitarian social insurance rights could ever deliver.

There’s a lot to unpack in this passage, as it employs the main analytical devices that Brad uses to make sense of the long 20th century. Brad begins with the proposition that a great watershed in human history was crossed around 1870, with the simultaneous development of the industrial research laboratory, the modern business corporation, and a globe-spanning division of labor. With this trio of innovations, humanity was able to dramatically expand its productive capacities and thereby escape the Malthusian trap of mass poverty. Brad then explores the high intellectual and political drama that ensued as people and nations reacted to and tried to channel the immense forces of dynamism that had been unleased. Previously, “economic history remained a slowly changing background in front of which cultural, political, and social history took place.” But now the fundamental driver of history was rapid economic development and the cultural, political, and social shock waves it created.

Brad casts the drama of the long 20th century as a contest between the ideas of two of that century’s seminal thinkers, Friedrich Hayek and Karl Polanyi. He playfully but usefully reduces their complex and nuanced ideas to a pair of bumper stickers. For Hayek: “The market giveth, the market taketh away; blessed be the name of the market.” And for Polanyi: “The market was made for man, not man for the market.” The Hayekian doxology conveys the insight that the market is an immensely powerful engine of social progress, but it has a logic all its own, quite distinct from human conceptions of fairness and justice, and if people go too far in defying the market’s logic they will lose the great bounty it provides. The Polanyian response is: yeh, that’s not gonna work. People believe they have other rights besides those accruing to the ownership of valuable property, and if those rights are trampled they will surely push back.

Brad judges that Polanyi’s critique of “market fundamentalism” is unanswerable, but that it raises more questions than it answers:

“The market giveth, the market taketh away; blessed be the name of the market” was not a stable principle around which to organize society and political economy. The only stable principle had to be some version of “The market was made for man, not man for the market.” But who were the men who counted, for whom the market should be made? And what version would be the best making? And how to resolve the squabbles over the answers to those questions?

Some of the answers that were put forward — by Mussolini and Hitler, by Lenin and Stalin and Mao — proved catastrophically wrongheaded, leaving corpses stacked up in their tens of millions. It turned out that Hayek was in possession of a vital if partial truth: the wholesale substitution of centralized command for the spontaneous market dance of prices, profits, and production is flatly incapable of producing modern industrial prosperity, and the flailing attempts to force a solution will sooner or later bring tyrants to power.

Brad’s guided tour through the twists and turns of the Hayek-Polanyi dialectic is a joy to read, with brief but masterful distillations of the descent from the Belle Époque “El Dorado” into the carnage of world war, the stumbling attempts to rediscover El Dorado in the war’s aftermath, the rise of fascism and really-existing socialism, the global Great Depression, and the relapse into world war on an even more colossal scale of butchery. After these cataclysms and titanic ideological struggles, the path to Utopia once more emerged into view — in Brad’s telling, by virtue of “the shotgun marriage of Hayek and Polanyi blessed by Keynes in the form of post–World War II North Atlantic developmental social democracy.”

Postwar social democracy produced another “El Dorado,” the trente glorieuses in which the triumvirate of Big Government, Big Business, and Big Labor presided over the creation of something entirely new under the sun — mass affluence, enabling the vast majority of people to take for granted the fulfillment of their basic material needs.

But like its Belle Époque predecessor, it didn’t last. This time El Dorado ended, not with a bang, but with a whimper. No great conflagrations, no new secular religions — as Brad tells the story, just a tail-off in the pace of growth from torrid to stately, combined with a decade of moderately high inflation punctuated by a pair of big spikes in oil prices. What followed was, in Brad’s phrasing, the “neoliberal turn,” in which policies tacked in Hayek’s direction and gave markets freer play at the expense of Polanyian rights. The move did succeed in taming inflation, but it did not restore the vibrant growth rates of the postwar years; rather, it restored vibrant growth rates to the affluent and rich while income advances for everybody else slowed to a crawl. And in the first decade of the 21st century, the long 20th century reached its guttering conclusion: with a global financial crisis and the near-miss of another Great Depression; with growth rates tumbling yet further; and with fear of terrorism leading the United States to overreact in Iraq and undermine its position of global leadership. The rise of authoritarian populism and the election of Donald Trump form the grim postscript.

It's clear that Brad isn’t satisfied with the way he ends his story. As he confesses, one problem is that he was in the middle of it. The neoliberal era covered his professional lifetime, in which he was an active scholar, commentator, and policymaker. He served in the Clinton administration as deputy assistant secretary of the Treasury — on the bridge, as it were, as the neoliberal turn was being executed. Returning to academia, in the 21st century he became a blogging pioneer and an outspoken critic of the Republican Party’s precipitous intellectual and moral decline, which first botched policy and then undermined democracy itself. There, in the middle of the fray, waging intellectual battles while the outcome remained unknown, it’s hard not to see everything as contingency and chance. If fewer chads had hung in Florida, if Obama had been bolder, maybe things could have been different…

As Brad acknowledges, his position as an insider may have blurred his perspective. “But others see not contingency, but necessity. They see not choice, but structure…. And I also think that future historians’ judgment will probably be in accord with theirs, rather than mine.”

So I don’t think Brad can take too much offense that I find his account of the final few decades of the long 20th century to be unsatisfactory. His somber tone is spot on, I think, and this passage in particular captures the essence of our current predicament:

Is there anybody in any previous century who would not be amazed and incredulous at seeing humanity’s technological and organizational powers as of 2010? Yet they would then go on to the next question: Why, with such godlike powers to command nature and organize ourselves, have we done so little to build a truly human world, to approach within sight of any of our utopias?

Yet I believe that the roots of our disappointment go much deeper than Brad’s narrative captures.

I agree with Brad that the postwar social-democratic decades were “as good as we have so far gotten” in the search for Utopia — for white people in the rich democracies, that is. But the rejection of the social-democratic industrial social order was simultaneously much more broad-based, and much more radical, than he avers. That rejection began, not in the stagflationary 70s, but in the booming 60s, and it began on the left, not the right. Social democracy failed its sustainability test not just because dissenters from the shotgun marriage of Hayek and Polanyi somehow managed to get the upper hand, but first of all because the children of that marriage pronounced the union to be sham.

“We are people of this generation, bred in at least modest comfort, housed now in universities, looking uncomfortably to the world we inherit.” So began the 1962 Port Huron Statement, launching Students for a Democratic Society and announcing the arrival on the scene of a New Left. Student radicalism and the counterculture, which started in the U.S. but spread swiftly to Europe, looked out at postwar prosperity and saw, not the approach of Utopia, but something closer to dystopia – a soul-deadening, bureaucratized “technocracy,” a “clockwork orange,” using materialism to stupefy dissent and instill “repressive tolerance.”

Thinking that problems of material want were mostly in the rearview mirror, the New Left moved the focus of egalitarian concern from “have nots” to “belong nots” — groups excluded from full participation in the social mainstream and full acceptance by the cultural mainstream. The oppression of blacks and women, gays and lesbians, criminal suspects and prisoners, American Indians and migrant workers – these became the hot-button issues of those concerned with creating a more inclusive society. The general condition of the working classes faded as a priority, replaced with a narrower focus on social exclusion inside “pockets of poverty.”

Noticeably absent from the New Left’s priorities was any concern for increasing the stock of useful ideas or uplifting the general standard of living in material terms — the developmental aspect of what Brad calls “developmental social democracy.” Production and plenty were simply taken for granted when they were not viewed with outright hostility. Between the threat of the bomb and the dawning recognition of the massive environmental harms inflicted by industry, the New Left parted company with the Promethean impulses that had propelled the left since Marx. Increasing human mastery over nature was no longer part of the program.

And the idea of concentrated government power as an engine of progress, integral to the social-democratic vision, also fell into disrepute. In the arms race, in Vietnam, in the sheriff’s offices of the South, in the third degree administered in police station back rooms around the country, in the injustices of urban renewal, and in public-sector complicity with polluting industry, government power was the problem, not the solution. Even as a resurgent right-wing libertarianism was fueling the Goldwater candidacy, a left-wing libertarianism was remaking liberalism. Led by idealistic activists like Ralph Nader, the idea of “public interest liberalism” was to return “power to the people” through the courts. Instead of amassing power to serve broad public ends, the new vision was to make sure that public power was checked by progressive second-guessing at every turn.

The postmaterialist shift of the New Left and the deep-seated suspicion of government inherent in public interest liberalism quickly permeated the larger center-left. As a result, even before its encounter with the neoliberal challenge, social democracy was spent as a truly progressive force. With no strong commitment to or concrete vision of a brighter material future made possible by muscular government, the defense of social democracy became a rearguard, conservative stance — hang on to our current jobs, preserve our existing entitlements.

At the same time, as I argued in my last essay, the reorientation of the left from primarily economic to primarily cultural concerns ended up splintering the old social-democratic political coalition. Yes, this reorientation yielded great strides of social progress – the victories of the civil rights movement, the birth of feminism and the gay rights movement, the rise of environmentalism, and more. But by introducing a major new axis of political conflict, it made uniting the working classes on behalf of their economic interests much, much harder to achieve. This fracturing of social democracy’s political foundations preceded the economic crises of the 70s — and created an anti-left political coalition far broader and more powerful than anything that could be mounted by unreconstructed Hayekians alone.

The neoliberal turn, meanwhile, was not in my estimation the fateful wrong turn that Brad portrays it to be. This isn’t to say that the partisans of “free markets” and “small government” — in whose ranks I spent most of my professional life — didn’t suffer gaping blind spots and commit serious errors. We did, and I have written about them here. But even in the United States, where the free-market gospel was taken far more literally than elsewhere, the record of the neoliberal era contains important successes as well as missteps and missed chances. Inflation was subdued, as Brad notes, and anticompetitive price-and-entry regulations in transportation, energy, and communications were dismantled. Most notable, though, was the one-two punch of the personal computing and Internet revolutions: these occurred in the low-tax, deunionized United States, not in significantly more social-democratic Europe, which basically missed out on the 90s productivity boom. If anywhere in the world still qualified as “the furnace where the future is being forged,” to borrow Trotsky’s assessment of America, it was still America — or at least that tiny patch of it just a stone’s throw from Brad’s Berkeley campus.

Meanwhile, look at the rest of the world. The collapse of the Soviet Empire, and the emergence of relatively successful market economies in central and eastern Europe, all occurring with virtually no bloodshed — this was a miracle that I certainly never expected to see in my lifetime. And although dynamics internal to the Soviet bloc were doubtless paramount, the general neoliberal climate of opinion — in contrast to expectations of “convergence” that were widespread among the smart set a few decades before, imagining that the West would further socialize and the East would democratize and everybody would meet in the middle — helped to midwife the process.

And on an even grander scale, the East Asian miracle and accelerated growth in India helped to make “slouching towards utopia” a truly global phenomenon. While France looks back on 1945-1975 as its trente glorieuses, for humanity as a whole the honor surely goes to 1985-2015, as extreme poverty rates plummeted, a global middle class emerged, and what had been two humps of the global distribution of income merged as they shifted to the right. All of this hinged on East Asia’s discovery and exploitation of export-led growth – a growth strategy that was available only because the rich markets of the United States and Europe opened and remained open. Here again, neoliberal impulses were pushing in the right direction.

Finally, look at western Europe. There, despite neoliberal reforms, much of the old social-democratic structure remains intact: taxes are still high, social spending is still expansive, and unions have weakened but not collapsed. The reforms there focused on unwinding state ownership of industry and liberalizing labor markets to combat high unemployment in the wake of deindustrialization — reforms that I, and I believe Brad, consider salutary. So if embracing neoliberalism was indeed the decisive wrong turn that Brad takes it to be, Europe veered off course much less dramatically than we did. But what do they have to show for it? Yes, inequalities are less stark there, and ordinary people are much better shielded against the financial vicissitudes of life. Still, though, innovation and productivity growth are lackluster, and most people are stuck in low-quality, no-future jobs. Europe, meanwhile, has had its own anti-immigrant backlash, its own rise of authoritarian populism. The future is not being forged there.

In sum, I agree with Brad that something went wrong with the rich democracies in or around the 1970s — and that, as a result, relative mastery in handling the economic problem no longer translated into progress on cracking the permanent problem. But I don’t think that the partial renegotiation of the terms of the Hayek-Polanyi marriage in Hayek’s favor bears the blame.

Social democracy wasn’t the answer to solving the permanent problem; it was a way station, a relatively successful adaptation to the peculiar circumstances of industrial capitalism. It facilitated the transition from mass poverty to mass affluence, whereupon its vision of the good life was rejected — again, not just by ideological outsiders, but by the system’s most favored beneficiaries.

Neoliberalism wasn’t the answer, either. To its credit, it successfully globalized the solving of the economic problem. But as to the permanent problem, its basic approach was to pretend it didn’t exist as a distinct challenge; in the neoliberal vision, the economic problem is all there is. It’s no surprise that the permanent problem still vexes us.

What does deserve the blame for what went wrong in the rich democracies? And what can be done to put things right? This blog is my extended meditation on those questions, so I can’t hope to offer a full-blown alternative narrative within the confines of this review essay. To get my take, you’ll just have to bear with me and keep on reading.