In every culture, government must balance two tendencies. Conservatism holds that institutions are difficult to create and must be protected from pillage during social disruption. Liberalism recognizes that for their beneficial aims, institutions are allocated resources that are coveted by those motivated only by corrupt ambition. When greed succeeds in suborning our institutions, those resources must be reclaimed for public good.
The heterogeneity of European culture fostered institutional agility that allowed ambition to swallow the world. As there is no honor among thieves, those resources were turned to industrial warfare that twice destroyed the continent, making it impossible for them to continue to suppress the liberalizing ambitions in their colonies. Among American troops, the rigors of World War II dissolved social barriers, instilling receptivity to social change in the 50s and 60s.
The tool that allows us to moderate such upheavals is law. In the ancient world, law was considered legitimate only to the degree that it encouraged disputants to understand the social compact. Judges were to consider proportionality and harmony in crafting their decisions. As law harnessed the power of the state against the loser, harsh rulings could drive private violence, undermining the social contract.
Unfortunately, from the threat of punishment, lawyers acquire commercial leverage. The wealthy client confronting a reversal of circumstances is particularly susceptible, even to the extent of encouraging legislators to change the law to secure privilege. In promoting an exculpatory standard of “legality,” proponents suborn the authority of “justice” that was meant to protect the weak.
In “The Quiet Coup,” Mehrsa Baradaran elucidates the pendulum swing towards legalism following World War II, under the banner of “neoliberalism.” As the colonial powers receded, global corporations were threatened by the loss of resource extraction rights challenged by native governments. In America, fortunes created through wage exploitation and environmental degradation were threatened by claims for restitution. As a conservative counter-reaction, both parties funded neoliberalism.
Baradaran builds a case that the motivating philosophy was eugenics, eliding concerns regarding Russian imperialism and third-world development that dominates my recollection of the era. Regardless, the neoliberal movement reflected the dogmatism of market purists – economists such as Hayek and Greenspan – who held that redistribution of wealth would occur if only governments could avoid economic interference. Direct redistribution through taxation and aid would only serve to punish society’s most productive members, to our collective loss. As Baradaran makes clear, this prescription was grounded in delusions regarding the efficiency of markets. Worse, it made wealth accumulation the only measure of value, forgetting that a social contract can stand only if it creates opportunities for the weak.
Baradaran begins her story with Nixon’s use of pseudo-economic claptrap to derail investment in disadvantaged minorities, a cynical policy designed to secure Republican domination of Southern politics. Nixon’s conservatism also extended to support of American corporations that were disadvantaged globally by affirmative action and environmental regulation. Strongarming Lewis Powell, a top corporate lawyer, to accept a nomination to the Supreme Court, Nixon catalyzed the extension of rights in commerce that had previously been reserved to political activity.
With these accomplishments as inspiration, conservatives then cultivated legalism to sap vitality from social justice movements. The Federalist Society pushed textualism, a prohibition on considered the aims of those that wrote laws. Rather, legal claims should be resolved only by reference to the text of the law, a process that allowed lawyers to introduce dictionary definitions that had nothing to do with the matter under dispute. The second legalism was Law and Economy, a view of dispute resolution curated by Posner, who enshrined wealth as the measure of justice. In this theory, we are all economic actors engaged in narrow calculations of self-benefit, and thus all legal judgments should maximize aggregate wealth. The theory overlooks the flaw that this leads inevitably to concentration of wealth towards those that fail to account for environmental and social costs. In other words, it advantages grifters.
Despite their theoretical flimsiness, the federal judiciary was slowly populated with adherents by Republican presidents drawing names from short-lists prepared by the Federalist Society. In the case of Law and Economy, even liberal justices were receptive to a framework that allowed them to distance themselves from ugly sausage-making in the legislative branch. Perhaps in contrition, both the executive and legislative branches instituted “cost-benefit” analysis that was again weighted towards those that minimized the environmental and human costs of their profiteering. Missing, of course, was the linchpins of justice: proportionality and harmony.
Baradaran concludes her nightmare with deregulation of the financial industry. Recognizing that money is a social construct, she points out that banking activity allows money to be multiplied through lending and derivatives. When holders of loans and derivatives are unable to meet their obligations, the original deposits are insufficient to cover losses, and the financial system collapses. The Great Depression and the 2008 collapse were both symptomatic.
The hypocrisy of neoliberal theorists was exposed in their response to financial failures from 1985 until today. Whenever corporate stability was threatened by financial collapse, the Federal Reserve intervened to buy their undervalued assets. Those funds were not distributed downwards to the public, however, who instead saw their savings and equity evaporate, creating fire-sale conditions exploited by rescued financial institutions to consolidate ownership of real estate and stocks.
Well, what to do about this?
Baradaran shares her fears. Coming of age in revolutionary Iran, she saw the hope for liberty crushed by religious tyranny. Surveying the rhetoric of bomb-throwers such as Trump and Taylor-Green, she fears that revolutionary rage is building here in America. The pattern revealed in formerly communist states is that tyranny will co-opt the institutions of law, followed by seizure of wealth by the political elite. The aggrieved public will gain only a pyrrhic victory over our self-aggrandizing corporate executives.
Searching for a more hopeful outcome, Baradaran argues for micro-financial methods – neighbors investing in neighbors.
I find her arguments unconvincing. Baradaran grants neoliberalism hegemony over our legal landscape, failing to recognize the public hunger for simplifying compacts that cannot be guaranteed in a world turned upside down by ecological catastrophe – the dual crises of overpopulation and climate collapse. While derivatives are painted as only a means for enriching financial institutions, they were celebrated by Main Street as a method for controlling risk in commodity supply. Finally, the last decade of the 20th century saw the liberalization of economies in China, India, and Russia, doubling the pool of educated labor to the disadvantage of unionized workers in the First World. If we are awash in debt, it is because the alternative was a collapse in a standard of living previously secured by political, military, and economic collusion against the Global South.
But history suggests that neighborliness is how the common man survives. During Central Asia’s golden age, merchants ceded riches to their rulers, subject only to the demand that the Silk Road remain open. In Feudal Europe, serfs were granted legal rights because poverty traveled – just as we observe at America’s southern order. Finally, as Marx observed, all value (as opposed to wealth) is created by labor, and Communism failed because hunger and anxiety nurture indifference and incompetence.
When the collapse comes, it will become obvious that the “wealth” held by the financial elite is illusory. Cashing in on their billions is impossible because the only buyer is the Federal Reserve (though privatization of Social Security could be a temporary work-around). Billion-dollar yachts are not purchased with cash, but debt secured by equities. When we finally choose to trade with our neighbors (as realized with the regional currencies taking root in America), the flow of goods and currency into global markets will dry up. The unknown occupant of the gated Eden will find themselves on the outside looking in.
This reference to the Bible frames the most serious of Baradaran’s blind spots. While religion – first, in her experience, in Iran but also in America – has been coopted by ambition, it is only through religion that humanity has ever engaged with universal moral principles. Tolstoy abandoned the hypocrisy of the royal court and discovered faith in the company of his serfs, who turned away from law and toward the Bible when negotiating conflict. If money is the root of all evil, perhaps more respect must be given to those that taught “you cannot love both God and money.” Religion is not the opiate of the masses, but the spiritual glue that binds them together. Baradaran should apply her intelligence and determination to articulation of its challenges.
everdeepening 