How to Waste a Crisis

Stuart Davis, Memo (1956) via Smithsonian

Philip Mirowski’s Never Let a Serious Crisis Go to Waste seeks to discredit economic explanations of the crisis, but in so doing discounts any possible political alternatives to neoliberalism 

In 1978, in a series of lectures at the Collège de France, philosopher Michel Foucault told the gathered students that they should start reading University of Chicago economists. Almost 30 years before management consultants like Tom Peters would start promoting the value of people measuring their own human capital, Foucault walked his audience through obscure journal articles on the economics of the self by the idea of human capital's intellectual progenitor, Gary Becker.

Decades before neoliberalism would become a widespread intellectual crutch word, Foucault declared, “Neoliberalism is not Adam Smith; neoliberalism is not market society.” So what is it then? What are the term’s stakes? And why does the condition it describes seem to lumber on despite the economic devastation of the past five years, which might have spelled its definitive end? This question forms the core of Never Let a Serious Crisis Go to Waste, the most recent book by economic historian and philosopher Philip Mirowski.

Mirowski’s book can be thought of as two long essays stitched together. The first is about defining what neoliberalism is and what it is not, as well as a background history on the institutions that have come to be associated with it. The second documents where the economics profession stands in the aftermath of the financial crisis: how it has resisted reform and may even be beyond it, despite economists’ embarrassing failures.

By now, the term neoliberal has likely been added to the “avoid jargon” list on numerous graduate-school syllabi. But it has become ubiquitous in left analysis because it has proved useful — too useful, in that it has been deployed in at least two distinct ways. One of these is the version popularized by geographer David Harvey, particularly in A Brief History of Neoliberalism. The upshot of his definition can quickly be summarized: class war. As Harvey writes, neoliberalism is “a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade.” What makes this "liberation" class war? Because the state that produces it enshrines a view of freedom that prioritizes “the interests of private property owners, businesses, multinational corporations, and financial capital.“

The idea that the past 30 years of economic policy have been shaped by and for capital holders was the core of Naomi Klein’s The Shock Doctrine, a history of power grabs with neoliberal alibis in places ranging from Iraq to Chile to Russia. It also undergirds Duménil and Lévy’s The Crisis of Neoliberalism, a heterodox economic reading of the changes in business structure that lead to increased instability.

There’s also a version of this definition of neoliberalism that liberals use as well, albeit in a less radical way. This story can be traced back to an eight-page memo written in 1971 by corporate lawyer (and future Supreme Court justice) Lewis Powell, titled “Attack on American Free Enterprise System.” Powell urges businesses to consolidate their rhetorical and political strategies and bundle their cash to attack their opponents “from the college campus, the pulpit, the media, the intellectual and literary journals … There should be no hesitation to attack the Naders, the Marcuses and others who openly seek destruction of the system.” This, according to many recent left-liberal economic narratives, like Winner-Take-All Politics by Jacob Hacker and Paul Pierson, prompted business interests to coordinate a class strategy in the 1970s that was then unleashed in the 1980s with the ascension of Reagan.

There is a seductive clarity to the class-war version of neoliberalism, but it is not the one discussed by Mirowski. Instead, he draws on Foucault’s notion of governmentality — how political regimes make subjectivity conditional on the subject’s being able to be ruled — to argue that the neoliberal project is less about the rich imposing an agenda from the top down and more a matter of forming subjects from the bottom up.

For Mirowski, neoliberalism is first and foremost a political doctrine, not a class strategy or commercial project. Unlike the classical liberalism of the 18th century or today’s waves of libertarianism and anarcho-capitalism, neoliberalism — though an anti-democracy project — nonetheless seeks to use the state rather than destroy it. But despite its reliance on state power, it stands in contrast with midcentury Keynesianism, which sought to assure full employment and attempted to lean against the indifferent barbarism of market economies. Neoliberals don’t see corporate power or inequality as problems to be checked through state intervention.

The neoliberal perspective, as Mirowski defines it, recognizes simply that society and markets are constructed through regulation. They are not self-organizing or “spontaneous”; they do not occur without government intervention and some established rule of law. As sociologist Loïc Wacquant puts it, the neo in neoliberalism is “the remaking and redeployment of the state as the core agency that actively fabricates the subjectivities, social relations and collective representations suited to making the fiction of markets real and consequential.” This emphasis — on making subjects who believe in frictionless markets as mechanisms for revealing truth and the social good — is what distinguishes neoliberalism from so-called classical liberalism, libertarianism, anarcho-capitalism, paleo-conservativism, and all the other reactionary, right-wing projects.

In neoliberal society markets don’t serve the pre-existing needs of subjects; subjects are fabricated to serve the market. The subject’s purpose in life becomes synonymous with the facilitation of economic growth. Entrepreneurship becomes the ethical model of how to live. For Mirowski, neoliberalism constructs a subject who “has to somehow manage to be simultaneously subject, object, and spectator ... the neoliberal self dissolves the distinction between producer and consumer.” The self thus becomes more a malleable set of economic relationships than a coherent and continuous whole. This coincides with policymakers’ calls for increased “flexibility” on the part of individual workers when it comes to labor’s vulnerabilities to the business cycle.

The individual is too fragmented to sustain broader forms of belonging,

If this is too theory heavy, consider Jennifer Silva’s recent Coming Up Short (2013), which interviews numerous working-class young people in the wake of the economic crisis. Silva finds that they define adulthood in the rejection of social groups and institutions and an embrace of an individualized, therapeutic, self, matching the theory remarkably well
let alone class solidarity, and this alienation from collective identity is matched by an ontological, even religious understanding of “risk” perceived as a given, one that isn’t to be mitigated but instead mastered. As economist Christopher Payne has noted, this entrepreneurial view of risk as spiritual calling replaces the Keynesian midcentury ideal of the “worker-saver,” for whom stability and risk mitigation were a combination of rewards and political goals rather than a presumed punishment.

Though Mirowski doesn’t bring this up, the neoliberal self ends up resembling the corporate firm as defined by Ronald Coase: an entity articulated by a loose set of contracts, with the primary purpose of minimizing its “transaction costs.” Like the Coasean firm, the neoliberal subject makes a fetish of efficiency and aspires to be able to reorient itself at a moment’s notice, to expedite the flow of goods, though it has no ontological cohesion outside an imperative to engage in the swirling needs of the marketplace. This is the self under neoliberalism, an executive function carved out by the entrepreneurial embrace of economic risk.


The second half of Never Let a Serious Crisis, on the economics profession, will be familiar to those who have watched economists squirm in films like Inside Job. Their projects of ignoring any possibilities that an unchecked financial sector could do anything but help the economy while collecting generous paychecks imploded alongside the rampant fraud and panic of the financial crisis. Pointing out the sheer corruption of the economics field’s elite is a worthy use of anyone’s time, but Mirowski is hunting bigger game. He wants to argue that the entire edifice of post–World War II orthodox economics policy is incapable of governing the economy without producing perennial crashes and human misery. But he never makes the case directly, perhaps because he has no path out of the dire situation he seeks to prove.

According to Mirowski, there was a moment after the 2008 crash when the economics profession could have performed some rigorous self-criticism and made an honest assessment of what had gone wrong. But the proposed technocratic fixes — addressing the “efficient markets hypothesis” in finance, adding so-called bounded rationality to microeconomic models to make them “behavioral,” and adding various bells and whistles to macroeconomic models — were particularly ineffective in reforming or even clarifying what is going on in financial markets. And the various “explanations” of the crisis that were brought up for debate in mainstream publications and through a network of economic policy “experts” ended up not serving any notion of scientific inquiry but instead were means of deflecting, confusing, and delaying any progress toward uncovering truth or consensus.

So how did the economists get away? According to Mirowski, they are protected through a web of prestige that stretches across the academy to quasi-accountable offices of the government like the Federal Reserve, as well as the network of policy think tanks that provide so-called expertise. This miasma of prestige has become too important to the actual logic of financial capitalism at this moment — elite economics dominates all these important international institutions, and there’s been a subtle wagon-circling at that level. Thus, like the banks, economists themselves are too big to fail.

But while Mirowski is on point about that, he doesn’t engage actual narratives that could explain why we had a housing bubble, collapse, and subsequent prolonged depression. His argument is predicated on a complete absence of such a story being told, but that story is developing. As a result of increased savings in Asia, likely due to harsh austerity imposed on countries like Thailand and South Korea by the IMF, a rush of capital flooded into the U.S. One part of financial sector — investment banks like Bear Stearns and Lehman Brothers — used dubious ways of managing risks for these investors that ended up promising that their money was safe in housing, with other parts of the financial sector — reinsurers like AIG — writing insurance on the economy as a whole. When housing prices fell, defaults skyrocketed. Between that and looming unemployment, creditors panicked, setting off a crisis when they began withdrawing investment and demanding collateral. Underwater homeowners started to hoard their earnings, leading to a drop-off in aggregate demand.

You can think this story of the crisis is right or wrong, and different people emphasize different parts of it. But for Mirowski it doesn't exist, and he leaves the crisis as a giant question mark. Indeed the financial crisis itself, on which Mirowski spends most of his time, has become one of the least interesting aspects of our current economic malaise. Gary Gorton pointed out that what happened in 2008 looked a lot like a bank run out of It’s a Wonderful Life, but instead of local townfolks it was various financial entities like the overnight repo lending market. (Mirowski dismisses Gorton for working for AIG when it was issuing credit default swaps. This should be no disqualification: Irving Fisher and, in his own way, Keynes were both gambling high right before the Great Depression and used their own experiences in the market help them try to figure out what happened.)

The bigger issues, like why the economy has become so dependent on bubbles to try to generate growth, sit on the sidelines. The parts of this story he does address he dismisses far too quickly. (His trolling tendency is to bring up such concepts only to scold you for showing interest in them.) Paul Krugman and Gauti Eggerston’s theory that a crushing housing debt burden explains high unemployment is also summarily rejected for not being a strong enough foundation to relaunch Keynesian macroeconomics. Perhaps. But it does provide a direction for the deeper empirical work that might lead there, or wherever Mirowski thinks the alternative to neoliberalism lies. (He notes that “In this book, I hold no brief for Keynesian economics as an automatic prescription for whatever ails us in the twenty-first-century.”)

Mirowski seems to want the academy to find a salvation through a mix of economic philosophy, history, and the political construction of markets. While useful in some ways, this sadly

It's clear that Mirowski is keen on bringing back a critique of how markets and economies are created through political power, a consistently suppressed body of knowledge he traces in endnotes and asides from early legal realists like Robert Hale through Karl Polanyi to current arguments from legal theorists like Bernard Harcourt over the "illusion" of free markets. Though crucial for the left to recover and embrace, it's not clear how this tradition can guide us on the macroeconomic problems of perpetual unemployment and unused capacity that happens when you put all those markets together.
 misses the wave of post-Keynesian thought that has been building in small heterodox departments, amplified by blogs and comments sections, that has been given a new life by those on the Internet looking for an alternative to the mainstream. Ranging from debate about the nature of monetary systems through looking at the sectoral balances of the economy, the dominant move for those challenging the mainstream has been to try and reboot the macroeconomics of the first Keynesian era.


Given that Mirowski wants Never Let a Crisis to be a definitive statement on where neoliberalism stands today, his dismissal of Harvey’s version of the story (“neoliberalism as the simple deployment of class power over the unsuspecting masses”) prevents productive dialogue between his approach and that of more traditionally Marxist approaches. That’s unfortunate, because a stronger imbrication of the two might help us better understand what to make of neoliberalism after the financial crisis. Mirowski is keen on watching a “neoliberal thought collective” of interlocking institutions advancing an ideological agenda, but this political project has evolved in odd directions in recent years that are hard to assimilate to either definition of neoliberalism alone.

Having successfully resisted either nationalization or a substantial dismantling of finance after the 2008 bailouts, the American neoliberal collective Mirowski identifies has focused on battles over subsidized health care and fiscal austerity. From Mirowski’s perspective, Obamacare is entirely consistent with a neoliberal approach to governance: It builds a quasi-universal system of health insurance through the private market, with the government’s role limited to establishing the background conditions and compelling participation in the market through legal force. It reorients the basic welfare-state plank of social insurance toward individuals managing their own risks, neutralizing its danger as a rallying point for resistance to a neoliberal order while allowing the state to largely abdicate its role in mitigating citizens’ health risks. It assures that we experience the process of ensuring against the worst risks as an inherently market-driven transaction rather than a right.

Yet the entirety of right-wing think tanks and movement infrastructure has spent the past several years assaulting this addition to health-care policy. It’s also called for hard money and austerity across the board in the midst of a Great Depression, cutting government employment and funding to a bare minimum while also calling for a dismantling of federal government by rolling its various pieces to the states, where it will be easier to starve.

Listening to the movement’s complaints, you see old-school reaction: Undeserving people are getting free things they don’t deserve, the job creators need to have any pretense of a burden removed from them to succeed. The rich do not want to pay higher taxes to improve social well-being, and rank-and-file petit bourgeois don’t want to see the poor with the same type of social insurance they have.

In what sense is this neoliberal? Some of this could be viewed as an attempt to create market citizens, and an ideological story can be told about how the right's current program fully shifts risks to the individual and makes them an even more conscious participant in managing their own risks. But on its face, it looks a lot like class war, full stop. Mirowski never explains why the ideological project of market subjectivity serves any other purpose but class war, or why, even when neoliberal tenets about embracing precarity as liberation have taken hold broadly, the movement continues to fuel itself with reactionary ressentiment. If neoliberalism is not class war, why hasn’t it been content with winning?

Mirowski’s myopia, combined with a aggressive yet obtuse writing style designed to alienate casual readers, cuts off discussions of potential alternatives out of the current morass, and ironically paints too positive a picture of where orthodoxy stands at the current moment. Never Let a Crisis provides a detailed description of neoliberal thought as it stands on the eve of the crisis. Yet its lack of engagement with actually existing theories of what has happened and what could happen going forward, as well as the conflicting definitions of what a neoliberal project entails, would have moved the conversation much farther forward. Because the class war doesn’t show any sign of stopping soon. Elites are fighting on terms that, for all their effect on subjectivities, are far more about dismantling what remains of the public and taking what is left for themselves.