The last four years in the United States and Europe have been a long, multi-faceted struggle over a single question: who will bear the suffering of a society in disintegration? Neoliberalism can no longer sustain itself, and no effort is being made to create a new logic of economic growth. The only way to sustain the illusion that neoliberal society remains a going concern, then, is to plunder stored up value in different parts of the system in order to keep the engine running. It’s like eating the seed corn in the midst of a famine. And as everyone knows, it’s not the rich people who die in a famine.
Those groups that are least able to defend themselves are the ones being sacrificed so this farce can go on. This is obvious enough as the list of casualties from the turn to austerity grows longer: the poor, suffering brutal cuts to food stamps; the unemployed, cruelly cut off from relief in the midst of a job drought; public employees, robbed of their right to collective bargaining. The latest victims are retirees—Obama has been trying to cut Social Security for several years (the only thing stopping him is the ultras in the Republican Party). Private companies have been reneging on pension obligations for years. Now public employees’ pensions are increasingly under attack, from Detroit to Illinois to California.
State and local governments in the US are supposedly being bankrupted by “overly generous” pension commitments. I don’t doubt that the politicians who imagine themselves to be making “tough, responsible decisions” as they tear up the sacred contract actually believe this. But only by disembedding the entire problem from history and from our political economy is such an understanding tenable (admittedly, politicians are not known for their ability to conceptualize history or the totality).
As long as neoliberal growth remained robust, pension commitments seemed to be sustainable. What has changed is not that we suddenly realized that all along we were spending beyond our means, but that the engine of growth has ground to a halt. The “pension crisis” is nothing more than a partial form of appearance of the crisis of neoliberalism. Reviving economic growth would immediately resolve it.
What is at stake is not whether government budgets will balance or not. The goal of the self-defeating austerity campaigns that swept the rich world after the financial crisis was, instead, to maintain the illusion that our political economy was still viable. All mainstream politicians and corporate leaders share a broad understanding of the way the world works: markets allocate resources efficiently and produce ongoing growth, which nurtures the welfare of the people. (This explanation for politicians’ behavior is at odds with the conventional wisdom on the left—I defend it here.) Our leaders believe that this social logic is rooted in human nature, so attempts to restrict it or overcome it are necessarily doomed to failure.
As long as neoliberalism produced growth, this understanding corresponded to reality (if only in a selective and one-sided way). But the increasingly extreme measures needed to hold things together during the financial crisis threatened to expose all of neoliberalism’s claims as false. As growth came to depend on continuous government intervention, as the value of debt increasingly diverged from any plausible claim on future revenues, as the system of incentives in the economy lost all connection to the lived experience of actual people, the entire worldview of the neoliberal elite (and not just the elite) seemed to be crumbling.
In short, and contra many on the left, the turn to austerity was not meant to simply redistribute resources from the poor and middle-income to the rich—though indirectly that has been the outcome. Rather, austerity was the policy program of the broader post-2008 project of reassembling neoliberalism. Its intent was not so much economic as it was to restore belief in the system—by imposing through policy that which once emerged organically from the logic of the economy: work incentives, the casualization of labor (especially in Europe), the elimination of the social safety net.
(Which is not to deny that the state played a central role in neoliberalism’s heroic period of the 1980s and 1990s, when it provided the muscle to rip apart the old Fordist regime of benefits and protections. Instead, I’m arguing that the roles have reversed: the economy once demanded the policy; now the economy lies prone and the policy is little more than a pitiful attempt to revive the corpse.)
People on the right, being rigid and unsophisticated in their thinking and therefore completely intolerant of the way that reality was departing from their ideology, led the charge. Mainstream neoliberals like Obama and Bernanke, more open to ambiguity and less moralistic in their beliefs, were willing to go further in bending the rules of the market. But ultimately they agreed that order had to be restored.
Yet austerity is not simply about ideology, it also has an urgent economic impetus. Because businessmen and investors share the neoliberal worldview, their hallowed “confidence” has been perpetually in danger of collapsing now that the world has descended into epistemological chaos. Obama and Bernanke, Merkel and Draghi, and all their colleagues have converged on an ad hoc fix: an elaborate Rube Goldberg machine of quantitative easing and asset bubbles underneath austerity campaigns seeking to restore the coherence of neoliberalism’s claims about reality. Only in this way can the desperate fantasies of investors be sustained. Namely, the fantasy that the world still works the way it used to.
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