The Finance Curse. Nicholas Shaxson

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СКАЧАТЬ moneylenders from the temple of international finance.” Another related goal was to keep Europe growing and keep communist influences out. Curbing finance was then—and should be today—treated as a matter of national security.

      The Bretton Woods system was leaky and troublesome, but it held together for roughly a quarter century after World War II. With finance bottled up in its national compartments, governments felt free to act in their countries’ best interests, without fear that all the money would flee overseas. Taxes for the wealthy were high, sometimes very high: average top income tax rates fluctuated around 70–80 percent in the United States between the 1950s and 1970s (and in Britain, having reached 99.25 percent during the war, stood at 97.5 percent for most of the 1950s, falling to 80 percent only in 1959). Domestic financial regulations were amazingly robust too: the New Deal in the United States, combined with vibrant anti-monopoly laws, split up mega-banks and hedged bankers with all kinds of restrictions. Massive government-led technological developments during the war were also unleashing waves of industrialization, and governments continued to invest aggressively in research considered too risky for the private sector.¹⁰ Health services and government-funded welfare provision blossomed across the Western world; labor unions were mighty; and developing countries successfully nurtured infant industries behind trade barriers. It is hard to imagine now, but investment bankers weren’t paid outrageously more than teachers.¹¹

      Amid all this massive, coordinated government intervention and in some cases astonishingly high tax rates, economic growth in both rich and poor countries was collectively higher—much higher—during this period than in any other age of human history, before or since. Western economies grew at an average 5.5 percent a year during 1950–73: astonishing by modern standards. Trade flourished, even as speculative capital flows were repressed. The era is now often known as the Golden Age of Capitalism.¹² As growth powered ahead, economic inequalities fell, inflation was tamed, debts shrank, and financial crises were small and infrequent. The history books are full of references to France’s trente glorieuses (glorious thirty), Italy’s miracolo economico (economic miracle), Germany’s and Austria’s Wirtschaftswunder (economic wonder), and plenty of others. “Most of our people have never had it so good,” purred British prime minister Harold Macmillan in 1957. “Go round the country, go to the industrial towns, go to the farms and you will see a state of prosperity such as we have never had in my lifetime—nor indeed in the history of this country.”¹³ Growth in developing countries picked up too. This was the American dream on a global scale. Rebuilding after the destruction of war was a part of the story, to be sure, as was a large shift of women out of unpaid work at home into the paid workforce, but controlling global financial flows was an essential ingredient, preventing crises and speculative attacks on countries that tried to put in place progressive economic policies. The Bretton Woods system was a vast, explicit, brassy administrative and political antidote to the curse of overweening finance and to the freewheeling policies of the earlier robber-baron age. Finance would be society’s servant, not its master. Keynes never got to see his ideas so thoroughly vindicated—he died in 1946. But Keynes’s ideas would not go uncontested for long. A counterrevolution determined to shackle governments and unleash the full power of money and finance again was already well under way.

      This pushback from the banks was organized around a simple idea that had come in a “sudden illumination” in 1936 to an Austrian economist called Friedrich Hayek. Within a couple of years this idea had a name: neoliberalism. For many people, “neoliberalism” isn’t a serious term but a political swear word brandished by people on the Left against anyone to their right whom they don’t like. (It’s also not to be confused with the term “liberal,” which some in the United States seem to wield as a term of abuse against anyone to their left whom they don’t like.) The word “neoliberalism” has a particular history and meaning, which in terms of its practical effects has meant financial deregulation, privatization, and globalization actively promoted and protected by governments that have fallen under the sway of these ideas.

      Neoliberalism is an outgrowth of classical liberalism, which dates back a couple of centuries. There’s political liberalism, which is all about citizens having equal democratic rights in a system of sovereign law, and there’s economic liberalism, which starts from Adam Smith’s “invisible hand,” by which free exchanges or trade in properly functioning—that is, unsabotaged—markets are supposed to make society better off overall. The more liberal (or free) the exchange, in this view, the better for society as a whole; government’s role is to provide basic functions like defense, to enforce property rights, and to keep a watchful eye out for monopolies, but otherwise to get out of the way. Political and economic liberalism are fairly separate realms, but in each case freedom is foremost.

      Neoliberalism put these ideas on steroids and gave them a rather large twist. Its starting point was the theory that government inevitably amasses ever more power and heads toward tyranny. At the time Hayek had his sudden illumination, this fear was understandable. The Nazis loomed over Europe, and Soviet totalitarianism was just over the hill. The Thought Police from George Orwell’s hit novel Nineteen Eighty-Four, published in 1949, also hung like a leering specter over Western culture. Hayek began with the idea that competition in markets delivered efficiency and collective benefits for all. Then he took a giant leap of faith and argued that this conclusion could be, and even should be, true not just of markets and commercial exchange but of other aspects of life. What if you could reengineer society and laws into a giant market or set of markets, he wondered, using government scissors to cut the social fabric into separate fragments, then pitching these fragments into competition with one another? The simplest example of this is privatization, where governments sell off state assets to the private sector in the hope that they will compete and become more efficient. If you can achieve this, Hayek argued, then the market can become a tool for finally taming government, the handmaiden of tyranny.

      Hayek’s most famous book, The Road to Serfdom, laid this all out. Competition and the price system were the only legitimate arbiters of what was good and true, he said. And this soon became a neoliberal mantra. Cut taxes, deregulate, privatize, and launch all these pieces into competition with one another, then let it all rip. Not just banks or companies, but also health services, universities, school playing fields, environmental protection bodies, prisons, military capabilities, regulators, lawyers, shell companies, and the kitchen sink—all of it could be, should be, must be, shoehorned into the same competitive framework, to be sorted and judged by the only true test of virtue: the test of the market. In this framework, explained the writer Stephen Metcalf, humans are transformed from being “bearers of grace, or of inalienable rights and duties,” into ruthless profit-and-loss calculators, sorted into winners and losers. Society is no longer a space for political debate or collective action but a universal market that harnesses the benefits of competition to work as a giant, all-knowing mind, a sort of organically emerging intelligence in which the market constantly figures out the best way to distribute scarce resources among competing priorities to deliver the greatest good for all. Government is, in this view, not necessarily weakened but instead reengineered as an agent for making markets penetrate as deeply into society as possible. Things like citizenship and traditional notions of justice and even the rule of law are swept aside and replaced with technocratic measures like productivity, risk, and returns on capital. Neoliberalism is “the disenchantment of politics by economics,” as the British political thinker Will Davies put it: “an attempt to replace political judgement with economic evaluation.… [T]hrough processes of competition it becomes possible to discern who and what is valuable.” By doing so, he concludes, “competition, competitiveness and, ultimately, inequality, are rendered justifiable and acceptable.”¹⁴ This was a wholly new notion of justice. A more revolutionary idea is hard to imagine.

      The neoliberal revolution was born in earnest at a historic meeting of American and European intellectuals at Mont Pèlerin near Geneva in 1947, just a few years after the Bretton Woods summit. The meeting was attended by Hayek and many other famous economists and thinkers, including Milton Friedman, Ludwig von Mises, George Stigler, Frank Knight, Karl Popper, and Lionel Robbins. The meeting was financed by Switzerland’s СКАЧАТЬ