This article was originally published in the Oxford Left Review.
We are living through a very peculiar period in world politics. The rules of the game for the last forty or fifty years have been discredited by the events of the last few years. But by following these rules we have created a world where we cannot realistically conceive of an alternative to the status quo. And when you begin to reason this through, things start to get surreal – for example, Presidential hopefuls in the U.S. line up to threaten China with expulsion from the international community unless it agrees to “play by the rules”, even as these rules change from day to day. Rather than seriously debating our interpretation of the values underpin- ning the old rules, in order that we might create new and better ones, we seem to be doing one of only two things – rushing blindly towards reinstating the status quo, or stagnating as we wait for a hegemon to emerge with the political will to coercively impose a new settlement.
So much for the bizarre hall of mirrors that is global economic governance today. A useful framework for analysing the microfoundations of the present economic situation – and the unimaginative responses emanating from governments on both sides of the Atlantic – is the tripartite model of human behaviour elaborated by Thomas Risse . At the most basic level, in deciding which course of action to pur- sue, both the amount of time spent and the effort exerted will vary; but it seems reasonable to suppose that most people will choose which action they believe will serve their interest. If the choice situation renders this criterion insufficient for a determinate choice, we might instead opt for what we believe we ought to do; that is, what choice best conforms to some social role that we identify with. Finally, if we find that roles and rules will not make the choice for us, we may be compelled to re-define these to fit with the situation – but as they are essentially social con- structs, we require the consensus of others to validate such changes.
This helps to make sense of the present. We constructed an economic system – the “rules of the game” – based on the notion that in reality people only operate at the level of calculating interest and/or following rules. The mainstream economic theories that have dominated the profession in recent decades – most notably, the ‘efficient markets hypothesis’ – were premised on the notion that private markets were superior to public institutions at calculating and managing risks. This was held to be so because price signals in efficient markets were seen as the most re- liable measure of people’s true desires and preferences. Consumer preferences changed, but usually in altogether unpredictable ways. General customs and traditional roles in society were also expected to change over time, but these were only thought of as influencing individuals’ decisions when circumstances made the determination of self-interest too difficult. Therefore, at the level of both self-interest and rule-following, market mechanisms were regarded in mainstream economic theory as at least as good as and usually superior to, political processes in allocating society’s resources for maximum output at minimum risk.
There is another crucial aspect of the mainstream economics profession that has its origins in the “rational expectations revolution” of the 1980s. Most economists pride themselves on building theories that assume that the individuals whose behaviour it purports to explain share the same information as the economist who is doing the theorising – including the knowledge of human behaviour described in the preceding paragraph. It follows that the doctrines lending a veneer of intellectual respectability to “neo-liberal” policies were premised on an expectation that most people, as rational agents, would come to see democratic politics as an ineffective – even unsafe – decision-making procedure. They would accordingly shun the prospect of political commitment and choose to define themselves as free consumers. The New Right always had a more subtle and sophisticated con- ception of human behaviour than many critics on the left have acknowledged. “Neo-liberalism” neither assumes nor requires that people always act out of self-interest. The ideology of the era can easily accommodate apparent acts of altruism, even at the expense of self-interest, with theories of “bounded rationality” which make explicit the cognitive constraints on our instrumental reasoning.
What it can not accommodate is Sartre’s “bad faith” – scenarios in which neither self-interest nor rules and roles are reliable guides to action; instances where one adapts a rule or a tradition to the demands of the situation with only the “presumed consent” of other participants in the discourse. This type of everyday self-deception was the blind spot of neo-liberalism and its eventual undoing, because it eroded the credibility of a system that prided itself on its rules-based neutrality. It is an inherently self-reinforcing pathology, because one cannot acknowledge one’s own bad faith without recognising the same capacity for self-deception in others. To recognise the problem is simultaneously to fall into despair at the prospects for organising a collective solution – at least as long as political issues are framed only in terms of self-interest and rule-following, rather than liberation or self-actualisation. Liberal democracies drained of real democratic accountability and popular sovereignty were sustained by cognitive dissonance; that is, the sensation of uncomfortable tension which comes from holding two conflicting thoughts in the mind at the same time. This feeling is at its most powerful when we act in ways that we know, on reflection, conflict with our self-image. For example, to imagine one’s self as “simply following the rules”, even when one knows that the rules are under-specified and a leap of imagination is required to identify the underlying intent of the rule-makers. And the most basic fact about cognitive dissonance is that we long to escape it – to do so is in our self-interest in the most immediate sense, even if it requires altering our most deeply-held beliefs and values.
This is where the contradiction at the heart of how we have governed ourselves is at its most stark. We have neglected the public spaces and institutions which we need to be able to credibly disclose ourselves to each other, and to continuously negotiate, contest and re-negotiate the set of values for which our laws and our institutions are mere allocating devices. As rational beings, we encounter choice situations that we cannot evade and that we must somehow rationally justify to ourselves, but where prescribed roles and personal utility provide no traction. We routinely re-define our social roles, and the rules that govern them, to provide a satisfactory solution to choice situations like these. But under present political conditions, this causes a sense of unease because we lack warranted confidence that our particular conception of a role is the one that our fellow citizens would reasonably agree with. In such a state, to the extent that the public sphere is eclipsed by the mass citizenry, there exists a tendency to populism and demagoguery. It is fuelled by people’s immediately felt need to break out of the tension of cognitive dissonance by uniting around some organised core of shared belief. This process is not symptomatic of the “irrationality of crowds”, it is the opposite – it is the likely outcome of rational people living under an irrational system of society (where the rationality of a social system is not an ahistorical question).
It has been said that economic crises are ineradicable cyclical features of capitalism because eventually the last man who remembers the last crisis passes away, and with him go the lessons that his generation promised to learn. But the other lesson that recent generations were supposed to have learned was that politics with a capital-P was dangerous, dirty, explosive stuff that doomed all who came within its orbit to disappointment or worse. The younger generation in the post-Soviet states and in post-Maoist China epitomised this – student activists who witnessed the brutal repression of the demonstrators in Tiananmen Square made their peace with the status quo and discovered designer clothes and pop-rock. One such student lamented that ‘getting involved in politics always does more harm than good. It will eat you up and destroy you.’ As a mantra for the ideology of contemporary developed societies, this seems about right. The lessons from modern history were allegedly that material affluence satisfies our desires, whilst principled and substantive political activity will at best only frustrate the fulfilment of these desires. (“Symbolic” gesture politics – politics of plain moral postures has always been tolerated, even actively encouraged, especially by mainstream economists who held a simplified view of politics, like Jeffrey Sachs. This was because it functions to salve our conscience and all too often draws public attention away from underlying structural causes.) The idea that less popular sovereignty could mean more demagoguery, or that mass political actions could be functionally equivalent to retail therapy – these were alien to the general elite consensus, before and after the global financial crisis got underway.
If we are to find a way out of this morass, and if those of us on the Left want to return to something better than we had before, we must keep at the forefront of our mind that the roots of the economic crisis are political. I want to emphasise this point, at a time when parties of the Left across Europe seem to be focussed on restoring credibility to left-wing analyses of economics. I do not deny the pressing need for this effort (on the contrary, I maintain that the Left needs a less naive interpretation of neoliberalism, because our attacks will cause the most damage to the self-confidence of the Right when they ring true), but because I don’t want us to swing too far in the opposite direction. Here I cannot hide my inner methodical Marxist, as wary of economic models that can’t encompass all three of Risse’s decision-making levels as I am of political campaigns comprising nothing more than vacuous moral slogans. I don’t even need to reach for Marx – social democrats like J. K. Galbraith and Will Hutton have made careers out of analysing the seamless binds of economic and constitutional reform.
The central case that I have argued here is nevertheless quite distinct from theirs. I have argued that the steady erosion of democratic accountability and the extended reach of the marketplace in developed democracies have generated inevitable contradictions over the course of recent decades. In particular, as the public sphere has shrunk, so too have the opportunities for substantive deliberation about what are our social values and priorities.
This structural change, in conjunction with our unchanging need for communal identity and validation, has embedded bad faith deep in our culture. These tensions have rendered the state of public opinion increasingly volatile and malleable, which has in turn only made politics appear more irrational and inefficient in the public imagination. These were the political conditions that enabled the banks to feel safe taking insane risks, on the assuming that the state would swiftly intervene to shore up the status quo. As events have shown, our febrile political culture can no longer tolerate uncertainty, however fleeting, and we demand the quickest response available, as if speed was the only criterion that mattered. Unfortunately, the fastest solution is often attempting to restore an unviable status quo that we are all most familiar with.
Even having the most carefully-argued, “credible” and morally persuasive economic plan will never be enough to change the world for the better unless we also reform our political system and create an inclusive national forum in which we can meet the fight for the authoritative allocation of value. Only when the concrete political terrain exists will it be consequential for the left to have a credible economic battle-plan, although any left-of-centre political economy worth its salt ought to achieve progress on both of these fronts.