Doing Too Little

Joseph Stiglitz | Progressive Capitalism, or Ordoliberalism? | Factoids | Elsewhere

Photo by Vidar Nordli-Mathisen on Unsplash

The road to authoritarianism is not paved by government doing too much but too little.

| Joseph Stiglitz, Time is up for neoliberals

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Progressive Capitalism, or Ordoliberalism?

Joseph Stiglitz, the Nobel laureate in economics, wrote an impassioned call for what he calls ‘Progressive Capitalism’, and in passing, excerpts his newest book, The Road to Freedom: Economics and the Good Society.

His case is fairly straightforward. The neoliberalism that was introduced to overthrow the social economic policies of the post-WWII West has not turned out as advertised:

We’ve now had four decades of the neoliberal “experiment,” beginning with Ronald Reagan and Margaret Thatcher. The results are clear. Neoliberalism expanded the freedom of corporations and billionaires to do as they will and amass huge fortunes, but it also exacted a steep price: the well-being and freedom of the rest of society.

Neoliberals’ political analysis was even worse than their economics, with perhaps even graver consequences. Friedman and his acolytes failed to understand an essential feature of freedom: that there are two kinds, positive and negative; freedom to do and freedom from harm. “Free markets” alone fail to provide economic stability or security against the economic vagaries they create, let alone allow large fractions of the population to live up to their potential. Government is needed to deliver both. In doing so, government expands freedom in multiple ways.

The road to authoritarianism is not paved by government doing too much but too little.

Stiglitz employs Isaiah Berlin’s positive and negative freedoms, and later threads the needle: neoliberalism believes only in ‘freedom to do’, and disparages the need of government to constrain corporations and the wealthy for the good of the rest:

Champions of the neoliberal order, moreover, too often fail to recognize that one person’s freedom is another’s unfreedom — or, as Isaiah Berlin put it, freedom for the wolves has often meant death to the sheep.

He states that economics is all about trade-offs, ‘the bread and butter of economics’.

The climate crisis shows that we have not gone far enough in regulating pollution; giving more freedom to corporations to pollute reduces the freedom of the rest of us to live a healthy life — and in the case of those with asthma, even the freedom to live. Freeing bankers from what they claimed to be excessively burdensome regulations put the rest of us at risk of a downturn potentially as bad as the Great Depression of the 1930s when the banking system imploded in 2008. This forced society to provide banks hundreds of billions of dollars in the largest bailout ever. The rest of society faced a reduction in their freedoms in so many ways — including the freedom from the fear of losing one’s house, one’s job and, with that, one’s health insurance.

We are living in a polycrisis of neoliberalism’s doing. We are unfree in the face of climate change, economic inequality, and the right to provide for ourselves without exploitation and precarity. This security is only available to the well-off in countries with neoliberal economies, like the U.S., and shrinking for the middle- and working-class. And that leads to the inevitable next step:

Neoliberal capitalism has thus failed in its own economic terms: It has not delivered growth, let alone shared prosperity. But it has also failed in its promise of putting us on a secure road to democracy and freedom, and it has instead set us on a populist route raising the prospects of a 21st-century fascism.

Neoliberalism’s enormous influence is illegitimate, on its own terms. So we need to reject it, and those who continue to press for neoliberal policies should not be listened to.

He offers this in closing:

There is an alternative. A 21st-century economy can be managed only through decentralization, entailing a rich set of institutions — from profit-making firms to cooperatives, unions, an engaged civil society, nonprofits and public institutions. I call this new set of economic arrangements “progressive capitalism.” Central are government regulations and public investments, financed by taxation. Progressive capitalism is an economic system that will not only lead to greater productivity, prosperity and equality but also help set all of us on a road to greater freedoms.

There is however, a less showy, and more historically-grounded term for what Stiglitz is calling for: Ordoliberalism, as was pointed out by Thomas Remington, a visiting professor at Harvard University, and author of The Returns to Power: A Political Theory of Economic Inequality.

Mr. Stiglitz called for a progressive capitalism to counter the neoliberal doctrines fueling an antidemocratic backlash around the world. The economic success of postwar Germany suggests that Americans need not start from scratch.

In the previous century, a group of anti-fascist German scholars devised a philosophy they named “ordoliberalism.” It was rooted in two key ideas: Competition is more important than efficiency and a well-functioning market economy must serve the ends of social justice and individual freedom.

They began to develop their views in the 1930s, as fascism was gaining ground in Europe, Soviet communism ruled Russia, and Western capitalism was dominated by giant cartels and trusts. These conditions meant they never lost sight of the dangers of concentrated economic power, which could be exercised both by government, as in a totalitarian regime, or by big corporate interests. And while some ordoliberals were arrested or driven into exile during the Nazi dictatorship, others continued working underground, and their ideas influenced postwar German reconstruction.

Remington traces the influence of ordoliberal thinking on German and E.U. laws, particularly strict controls to maintain healthy market competition through regulation, unions, and taxation.

The 1949 Basic Law for Germany states, ‘Property entails obligations. Its use shall also serve the public good.’ This is an echo of Berlin’s two freedoms: businesses are free to enter markets to sell their goods, but the markets must be tightly constrained to avoid cartels and concentrations of market power in the hands of industrialists and banks. These controls support a strong education system and safety net for working- and middle-class people, and the redistribution and predistribution of wealth from corporations and the wealthy to support it.

Remington, again.

While ordoliberalism is a German creation, it is also part of a larger intellectual tradition with roots, and present-day expressions, in the United States. The philosophy was heavily influenced by turn-of-the-century American progressives, particularly Justice Louis Brandeis, an antimonopolist who has returned to fashion as a key influence on modern-day critics of laissez-faire economics such as Tim Wu and Lina Khan.

Power concentrations will always arise and attempt to suppress threats to their economic advantages and influence over government. As the ordoliberals recognized, freedom and social justice are linked. When monopolists abuse the market economy, both freedom and social justice are weakened. When government vigorously protects competition, then the economy can truly serve society.

And of course, we in the U.S. have the spectre of Trump’s growing dreams of authoritarianism that Stiglitz warns us about, Germany has its own challenges with a rising hard right. Ordoliberalism alone may be insufficient on its own, but may be a necessary precondition for Stiglitz’s progressive capitalism.

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(In my recent writings, I’ve signaled advocacy for a socialist humanism, which might be better called humanist social democracy, ideas that conform I think to ordoliberal views. (I will go back at some point and update the references.))

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Factoids

That’s a lot of chips

The [AI] industry spent $50 billion on chips from Nvidia to train AI in 2023, but brought in only $3 billion in revenue.

| Sequoia cited by Christopher Mims

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Two things converging.

Transportation is the largest single contributor to greenhouse gas emissions in the United States, accounting for about 30 percent of the total; 60 percent of that comes from cars and trucks.

| Megan Kimble

Recently, Mr. Lawrence said, customers have been snapping up used Teslas for a little over $20,000, after applying a $4,000 federal tax credit.

“We’re seeing younger people,” Mr. Lawrence said. “We are seeing more blue-collar and entry-level white-collar people. The purchase price of the car has suddenly become in reach.”

Regarded by conservative politicians and other critics as playthings of the liberal elite, electric vehicles are fast becoming more accessible. Prices are falling because of increased competition, lower raw-material costs and more efficient manufacturing. Federal tax credits of up to $7,500 for new electric cars, often augmented by thousands of dollars in state incentives, push prices even lower.

| Jack Ewing, who also reports that cars and trucks with 400 mile range will cost less than gas-powered vehicles in 2030.

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Not a great trend.

46% of British adults now support “a strong leader who doesn’t have to bother with parliamentary elections”, a figure which rises to 65% of those aged 18-35.

| Aris Roussinos

Apropos of Stiglitz warning us about authoritarianism.

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