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Hoodwinked by Hayek

by Martijn Konings on October 6, 2014

MirowskiIn an interview with the New York Times, evolutionary theorist Daniel Dennett reflected on the notoriously uncompromising character of his critique of religion: ‘There’s simply no polite way to tell people they’ve dedicated their lives to an illusion’. A similar sentiment—if you’re going to offend people anyway, you might as well say what you really think—seems to have motivated Philip Mirowski’s critique of the kind of thinking with which the Western intelligentsia have confronted the event of the financial crisis and its aftermath. Mirowski does not intend his analysis as just another contribution to the public and scholarly discussion as it has evolved since the onset of the crisis, but instead stages a harsh and successful assault on the nature of that very debate and the conceptual parameters that govern it. Never Let a Serious Crisis Go to Waste offers a distinctive and compelling answer to the question of “how neoliberalism survived the financial meltdown,” as the subtitle of the book puts it. Whereas initially many commentators saw the financial crisis as ushering in a break with neoliberal thought and policy and celebrated the advent of a new consensus about the need for a post-neoliberal philosophy of governance, in the current conjuncture, amidst a resurgent austerity politics and the failure of post-crisis initiatives for regulatory reform, it seems that neoliberal practices and ideas are more powerful than ever before.

Mirowski’s intervention comes in a context where it has become a sign of academic good taste to say that we should use the concept of neoliberalism cautiously, acknowledging that there is no grand design behind the shape of the present and that pro-market sentiment has only been one among many contending forces in the making of the contemporary political economy. Mirowski has little time for such arguments and views them as ignoring ample evidence for the existence of a well-defined neoliberal project that has been dramatically successful in remaking modern society since the 1970s. Drawing on his earlier work on The Road from Mont Pèlerin with Dieter Plehwe, Mirowski argues that the ‘neoliberal thought collective’ over time developed a remarkable capacity to translate its ideas into politically consequential practice.

MontFor Mirowski, the key difference between classic liberalism and neoliberalism consists in the latter’s distinctive approach to knowledge and its connection to practice. Neoliberalism does not see economic order as springing naturally from market principles that merely need to be given room to develop, but as requiring active production through continuous cultural, discursive and political interventions. Neoliberal theory is not just descriptive or prescriptive, but has always conceived of itself in an activist mode; it was always meant to be allied to practical resources allowing for its actualisation. Far from representing simple free market euphoria and a naïve belief in the self-regulating properties of markets, neoliberalism is at its core a constructivist project, taking responsibility for effecting the transformations it wants to see.

This understanding of neoliberalism as a constructivist project brings Mirowski into conversation with the performativity paradigm that has emerged during the past decade in such interdisciplinary fields as social studies of finance and cultural economy. Mirowski is sympathetic to the performativity theme but his approach nonetheless differs in important respects from that of authors such as Michel Callon in The Laws of the Market and Donald Mackenzie in An Engine, Not a Camera: How Financial Models Shape Markets and the way they have introduced the concept into social studies of finance. As Judith Butler has argued in Journal of Cultural Economy, if performativity was originally proposed as a pragmatic way to think the discursive and semiotic logics of finance, over time the concept has accrued rather essentialist valences, at times verging on a “hagiography of knowledge”—as proposed by Dick Bryan and others in Economy and Societyan exaggerated fascination with cognitive models and professional knowledge. Mirowski avoids this idealist trap by emphasising not the constitutive effects of knowledge but the affectively charged interaction of knowing and not-knowing, documenting the ways in which the neoliberal project has brought the speculative engagement of the unknown into the heart of governmental reason and social construction.

An important role is played in this respect by Hayek’s thought, which Mirowksi seems to take as a guide to the rationality of neoliberalism. It is of course hardly the case that earlier work on neoliberalism ignored Hayek, nor has it ever been a secret that the Austrian school of economics with which he was associated was highly critical of neoclassical economics and its unrealistic assumptions about knowledge and penchant for pointless formalisation. But existing approaches nonetheless often fail to do justice to the distinctiveness of Hayekian neoliberalism, viewing his epistemological conception of economy as just an additional argument in the pro-market, anti-state case. In Mirowksi’s perspective, one cannot understand neoliberalism if one does not appreciate Hayek’s distinctive understanding of knowledge: if the central point of Hayek’s work is to underline the necessarily speculative character of our practical commitments, this was precisely not a detached theoretical observation but a lesson that he and his colleagues took to heart. At the core of its project is, in Mirowski’s words, the ‘injunction to act in the face of inadequate epistemic warrant’.

FoucaultMirowksi places considerable emphasis on the logic of ‘exception’ embedded in Hayek’s work: although Hayek’s central argument was that only the evolutionary logic of competition allows for economic coordination, he fully supported non-spontaneous ordering and arbitrary state intervention when this was intended to impose a pro-capitalist regime. In some respects the analysis parallels a critique of neoliberalism in the fold of Giorgio Agamben and Mirowski is critical of Michel Foucault’s tendency to set too much store by neoliberalism’s anti-state pretensions, for example in The Birth of Biopolitics. Often, however, such Agambenian critiques of the neoliberal state of exception have a tendency to invoke quite problematic and essentialising notions of sovereignty, attributing to the state precisely the kind of capacities for seeing and knowing that both Hayek and Foucault argued against. Mirowksi’s concern with the uses of the limits of knowledge goes far in avoiding this problem: the political strength and capacities of the neoliberal project are seen to derive above all from its intuition of the generative character of uncertainty, the recognition of speculation as a productive impulse.

Neoliberalism, then, is an agnotological project, promoting ignorance and valorising not-knowing. It views ignorance ‘as a status to be produced rather than a state to be mitigated, according to Mirowski. Neoliberal performativity is rhetorical, not in its modern pejorative sense, as a purely cognitive procedure that seeks to hide things or mislead, but in its classic sense, as a set of communicative devices attuned to the bodily substratum of speaking and hearing, commanding emotional force by activating a complex economy of subjective dispositions and associations. From this angle, the recent tendency among social scientists to question the relevance of the concept of neoliberalism because the world does not look like a free market seems almost naïve, a mode of thought that is simplistically absorbed by the need to observe a correspondence between ideational intentions and material outcomes. Hayek’s claims are to be read as performative wagers, statements intended to produce certain kinds of effects.

Mirowski stresses that agnotological practices have been extraordinarily effective in an affect-based politics that is capable of generating unexpected sources of legitimacy. Key here are the democratic and populist credentials that they confer on the neoliberal project, allowing it to plausibly claim to represent according to Mirowski, ‘a radical leveling philosophy, denigrating experience and elite pretentions to hard-won knowledge instead praising the “wisdom of crowds”’. This emotionally charged logic gives neoliberalism a paradoxical degree of resilience that cannot be grasped through mainstream notions of legitimacy, cast in a rationalist mold as consensus or approval. Neoliberalism is not weakened by its continuous failures but precisely draws strength from it, ‘offer[ing] more, better, neoliberalism as the counter to a sputtering neoliberalism’.

All this means that neoliberalism is a much more complex and sophisticated project than can be appreciated through any engagement with neoclassical economics. Orthodox economics, to Mirowski’s mind, is a bizarre collection of curious formalisms and borrowed (if heavily outdated) techniques that provides neither insight nor practical application, offering no meaningful reflection either on or of contemporary capitalism. His critique of the economics profession and its response to the crisis is entertainingly scathing, but I am not sure that the abject failure of this community to reflect critically on this event is responsible for the book’s acidic tone. The absence of any substantive engagement with the event of the crisis by mainstream economics is rather unsurprising, and Mirowski seems to feel contempt rather than anger. Those who look to mainstream economics either for intelligent commentary or even just impulses for reform are just barking up the wrong tree.

What seems to annoy Mirowksi much more than the failure of neoclassical economics in and of itself is that more critically inclined commentators forever seem unable to stop doing just that, appear programmed never to lose faith in the ability of mainstream economics to rectify itself and the possibility of reforming a fundamentally bankrupt enterprise. We should recall here the intense excitement among progressive intellectuals during the onset of the crisis about the changes in mainstream economic thinking that the crisis would trigger, and the way this would feed into more enlightened forms of policymaking. Of course, all this was little more than critics pretending that things had suddenly changed in order not to spoil the crisis-induced good mood and newfound community, as I have argued in ephemera). But if such acts of hopeful not-knowing were performative, they were decidedly infelicitous, unable to tap into any mechanisms that might permit such imaginary projections to be transformed into facts.

BlythSuch idealist credulity and political haplessness contrast starkly with neoliberals’ capacity to grasp the performative character of knowledge and to translate it into effective institutional strategies, for which Mirowski has a grudging admiration. In an important sense, then, the progressive engagement with the crisis has consisted in an unreflexive participation in neoliberalism’s agnotologically structured discourses. And the all-too predictable shift from speculative hoping to moralistic lament that has accompanied the revival of neoliberal austerity politics (see John Quiggin, Zombie Economics or Mark Blyth Austerity: The History of a Dangerous Idea) should be seen as firmly part of that logic too. The prominence of a mode of thinking that takes itself to be critical yet is forever mired in ineffectual calls for more balance, pluralism and dialogue can be seen as a primary symptom of neoliberal neural cramp.

The awareness that early readings of the crisis were above all misreadings has only motivated a further retreat into a style of thought that is singularly incapable of critically penetrating the workings of neoliberalism: the more apparent the tremendous affective force that neoliberalism derives from a politics of ignorance, the more progressive scholarship and commentary retreats into a fantasy of social critique as a kind of neutral, depoliticized fact-checking exercise. That is, the more neoliberalism is capable of making productive use of the limits of knowledge, the more its critique becomes invested in the notion of positive knowledge and of uncertainty as an external limit to it, thereby foreclosing the possibility of critically engaging neoliberalism’s ability to make speculation productive. This is what accounts for the paradoxical sense in which the progressive-liberal attachment to objective facts and neutral debate is so moralistic: it disavows the very speculative operations from which neoliberalism derives its strength. That is Hayekian agnotology at work.

The more critique seems like an unviable enterprise, the more toning it down further seems to be the only option. The result of this pre-emptive self-policing is something like knowledge without insight, with the critique of neoliberalism oddly mimicking the neoclassical penchant for making itself irrelevant. As Benjamin Cohen has pointed out in International Studies Quarterly, political economy scholarship has become boring, merely offering massive amounts of data organised neatly into tables and systematised according to unobjectionable but uninsightful algorithms (a concern that applies equally to a related field such as economic sociology). Cohen’s proposal is to remedy the problem by publishing more review essays and symposia, spaces where scholars can freely opine and moralise, but the sheer implausibility of this solution hints at the real problem: the banality of what passes for conceptual creativity in much of contemporary political economy and economic sociology.

It is probably true that there is no situation where telling someone “your beliefs are wrong” will elicit a non-defensive response. But I imagine that Mirowski, unlike Daniel Dennett, knows this well enough, and one gets the impression that he is not really trying to convince the people he takes to task but is instead trying to start an altogether new conversation that would treat existing ways of talking about neoliberalism as mere symptoms. There is something salutary about the fact that this call comes from someone who is not known to be affiliated with any specific political perspective, as it underlines the fact that developing a critique of neoliberalism does not have to be motivated by a particular set of political commitments but is necessary even if our interest is just in thinking and seeing straight.

This contribution also featured earlier in Journal of Cultural Economy.

Martijn Konings
Martijn Konings works in the Department of Political Economy at the University of Sydney. He is the author of The Development of American Finance (Cambridge University Press, 2011) as well as The Emotional Logic of Capitalism: What Progressives Have Missed (Stanford University Press, 2015). He is currently working on changing patterns of financial governance with specific reference to the role of the Federal Reserve.
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  • October 6, 2014 at 10:16 am

    Great essay, thank you! It’s interesting that Hayek partakes of a kind of pastiche decisionism. And that Benjamin Cohen has something in common with Richard Bronk’s Romantic Economist.
    Best regards,

  • declank
    October 6, 2014 at 10:24 pm

    Very sharp review – great read. Particularly liked the insight that there is a “paradoxical sense in which the progressive-liberal attachment to objective facts and neutral debate is so moralistic… [in disavowing] the very speculative operations from which neoliberalism derives its strength.” I think what the New Materialists have termed ‘correlationism’ is a useful concept to unpick this strength. Once we accept that knowledge is not a disembodied, cognitive property nor a function of social structures in the abstract, the question becomes which devices, bodies and materials are needed to speculate successfully. Planning is still required for climate-fucking coal mines, electricity infrastructure and the stuff of the economy about which Hayekians are so doggedly agnostic. This is what I see as a greater problem for the left: the fixation on representations makes a politics of materiality even harder to articulate. Pointing out the contradictions between ‘free marketeers’ and their state-corporate planners is a good start, but I think Mackenzie and Callon have the tools to take it further, as the likes of Tim Mitchell have in his exemplary work on ‘Carbon Democracy’, which has the kind of ruthless disregard for the boundaries between ideas and matter that makes for true conceptual innovation.

  • October 7, 2014 at 1:24 am

    I’m one of those naive folk who question whether neoliberalism is a relevant term any more …

    One question: why is it Hayek’s thought / ideas etc that have been so “powerful”, while others have not? Is it credible to assume that one person’s ideas have had such an overwhelming influence, rather than assume that neoliberalism is a plethora of (often contradictory) ideas, policies, arguments, etc.? We can, for example, place the German social market economy side-by-side with Chicago School economics as versions of neoliberalism. In either case, was Hayek the dominant thinker?

    Another question: specifically relating to Mirowski’s book (which I largely enjoyed), why is it that the influence flows from insiders (i.e. Mont Pelerin Society members) to outsiders (e.g. from Joe Schmoes to corporate execs) and not the other way around? It is possible to make the reverse argument, for example; namely, neoliberals (Hayek and/or otherwise) have simply swung behind certain ‘outsiders’ because they know which side their bread is buttered (i.e. they get lots of funding from the corporate world if they help support corporate concentration/monopoly).

  • Martijn
    October 7, 2014 at 4:56 pm

    Hi Kean,
    You’re probably right to say that Mirowkski overstates the influence that Hayek and the thought collective had on capitalists and policymakers. I think it is more the case that their ideas were just in sync with a wider movement and came to prominence in this context. In my review I decided to focus on other aspects of the book, because while it is true that Mirowksi overstates the autonomous influence of the thought collective, objecting that it didn’t matter quite as much hardly seemed very interesting. (Elsewhere, however, I have made that point with respect to mainstream political economy theories, who have adopted an instrumentalist and conspiratorial perspective that views post-crisis reform as having been thwarted by regulatory or even cognitive ‘capture’.) What is interesting to me about Mirowksi’s book is its suggestion that Hayek’s thought reflects the substantive rationality of neoliberalism to a degree that other perspectives do not, and that his critique of reason and insistence on not-knowing are helpful tools when it comes to describing and understanding neoliberalism. This is in sharp contrast with, say, Friedman’s monetarism or discourses of deregulation, which really do not grasp how neoliberalism works.

  • November 5, 2014 at 1:33 am

    I also found (find?) Mirowski’s discussion of agnotology (i.e. ignorance) to be interesting stuff. It’s a nice way to critique market thinking; no one needs to find anything out or even bother themselves with learning about the world because the market will sort it out for them anyway. And, into the bargain, it’s actually better for people to be ignorant because any of their attempts to gain knowledge of the world will end in wrong-headed attempts to plan. Therefore deliberate attempts to obfuscate are actually beneficial for the workings of the market!

    Anyway, I have a paper in the works on neoliberalism as a contract-based order (cf. market-based one) which I will send your way if it gets accepted for publication. It might be an embarrassing nonsense, however!

    PS I enjoyed the review, by the way – just in case that didn’t come across!

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