Neoliberalism, Austerity, and the Global Crisis of Legitimacy

The world is not simply in the midst of a deep economic slump. This is but one aspect of the crisis of legitimacy that confronts almost all of the political and economic institutions that comprise the capitalist world system today. The ongoing revolt in the Arab world against political corruption and socioeconomic exclusion is unquestionably the most dramatic manifestation of this phenomenon, but the crisis of legitimacy is not confined to that region alone. The grievances that have fueled street protests and revolutionary movements from Morocco to Iran are shared in greater or lesser degrees by people all around the globe - the indignados of Puerta del Sol, the aganaktismenoi of Syntagma Square, students and public sector strikers in the U.K., and the hundreds of thousands of protesters who, for a brief time, turned Madison into a Midwestern version of Tahrir Square.

In her invaluable 2003 book Forces of Labor, Beverly Silver identifies what she calls the "fundamental contradiction of historical capitalism," the tension between the system's drive to attain maximum profitability and its need to maintain legitimacy in the eyes of those it oppresses and exploits. She writes:

One type of crisis can be resolved only by measures that eventually bring about the other type of crisis. This alternation creates a tendency for a periodic oscillation between historical phases characterized by a move toward the de-commodification of labor and the establishment of new social compacts and phases characterized by the re-commodification of labor and the breaking of old social compacts.

This passage captures at a somewhat abstract level the transition from the postwar Keynesian settlement between labor and capital to the neoliberal regime that governs the global political economy today. By reorganizing itself politically and smashing the power of the organized working class and its allied political parties in the 1970s, the capitalist class was able to restore profitability and consolidate its political power. But in doing so, it also sowed the seeds of the contemporary economic crisis and the crisis of legitimacy that the slump has triggered. Capital's attack on the working class has recoiled upon itself. It lost sight of the fact that the system's stability depends on the existence of a working class with a modicum of power in the workplace, in politics, and in the labor market. In bringing the working class to its present state of abjection, the system has placed barriers in the way of its own growth. And when growth slows to a crawl, the system's claim to legitimacy is called into question.

Zbigniew Brzezinski, National Security Advisor under Jimmy Carter and one of the leading organic intellectuals of the U.S. national security state, recently gave an illuminating interview on MSNBC that shows that the ruling class, or at least a comparatively enlightened section of it, is aware that its position may become increasingly unsettled.

To date the working class and the poor have been rather quiet in the face of the economic crisis, but Brzezinski and his cohorts have every reason to fear that such a state of affairs will not last indefinitely. The global economy is stuck in a deep economic malaise that shows no signs of abating any time soon. The European Union's sovereign debt crisis threatens to tear the Eurozone apart, with dire implications for the global economy. Here in the U.S., the situation is dismal. The economy created only 18,000 jobs in June, a poor performance by any standard but an especially dreadful one at a time when over 14 million people are looking for work. State and local governments are cutting thousands of jobs and slashing core public services as tax revenues remain low and federal aid dwindles. Last year, $2 out of every $10 of personal income in the U.S. came from government payments, and much of that aid will dry up by the end of the year. Workers have been completely cut off from the fruits of the very shaky "recovery." Since June 2009, when the recession ended in a narrowly technical sense, 88% of national income growth has gone toward corporate profits, while only 1 percent has gone toward wages and salaries.

The political class has shown itself to be unwilling and unable to do much of anything to confront this untenable situation. The hot topic of debate in Washington is not how to confront the jobs crisis or the fiscal crisis of state and local government but rather how far and how fast to cut Social Security, Medicare, and Medicaid.

The depth and severity of the economic crisis has pointed up the crisis of the liberal democratic state under neoliberalism. It doesn't matter that majorities in country after country oppose the drive to austerity. In the nominally liberal democratic polities, popular sovereignty has been definitely displaced by the sovereignty of bankers, bond markets, and ratings agencies. The center-left parties of Europe and North America, complicit as they have been in the neoliberal offensive of the last 40 years, have to date been utterly unable to offer an alternative to the drive to austerity and are themselves caught up in the crisis of legitimacy. One only needs to consider the fact that the savage Greek austerity program - opposed by 80% of the country's population - is directed by the sitting president of the Socialist International to understand how deep the rot goes.

Brzezinski recognizes some of the aspects of this emergent crisis, but he confuses symptoms with causes. Let's unpack one of his central claims:

When you have stagnation, when you have a rather severe case of unemployment, the sense of social injustice can be terribly demoralizing, and politically in the long run very dangerous. It can politicize social-economic issues, create radicalism, class conflict, extremism. And I think that's a real risk in our society, especially since so many of those who have made so much money recently produce very little wealth for others, they essentially pocket the money. They are engaging in financial manipulations but not enhancing productivity and increasing employment.

The main problem with this formulation (there are others) is that Brzezinski views unemployment, a lack of social mobility, and widespread social injustice as the cause of politicized social-economic conflict when the relationship runs the other way. Inequality and social injustice is on the rise precisely because most social-economic questions have been depoliticized and organized out of the political system by economic elites and the parties they own and control. Demands for universal health care, the right to organize unions, or any other reforms that would improve the lot of the working majority are simply not, as the pundits put it, on the table. Neoliberalism, at its heart, is class war from above waged under the guise of rational, technocratic management of an economy that must - as neoliberals claim - be shielded from the corrosive influences of democratic politics. But if inequality and social injustice is to be reversed, we need more politicization, more class conflict, not less, but the broken machinery of the liberal democratic state cannot accomodate such a development. This is why the discontented around the world have attempted to bypass the system through the direct manifestation of popular sovereignty in public spaces like Puerta del Sol or Syntagma Square. It's instructive to reflect on the fact that such interventions have succeeded in overthrowing dictators in the Arab world but have failed to stop austerity programs in the supposedly democratic West, even when massive in scope and supported by vast segments of the population.

The crisis of legitimacy will not necessarily prove to be a boon for the political fortunes of the Left. Center-right and far-right parties are on the march (especially in Europe), and significant portions of the population remain wedded to the neoliberal discourse surrounding taxes, spending, and the role of the state. It appears as if at the moment electoral interventions as well as mass protests will not succeed in turning the tide. With the established parties of the center-left everywhere in retreat, and with the union movement here in the U.S. seemingly breathing its last, an alternative is going to have to be built from the ground up. In this respect we should consider following the example of the Spanish indignados, who have fanned out from their protest encampments to organize against home foreclosures, and with increasing success. In themselves, these efforts will not be nearly enough to bring the austerity drive to a halt, much less end the rule of capital. But it's these kinds of intensive organizing projects that might allow the Left to reestablish an organic connection to the poor and the working class, stimulate the working out of a counterhegemonic common sense to neoliberalism, and to serve as a platform from which larger and more ambitious interventions might be launched.

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