During his second presidential campaign, Donald Trump stated that he had found a way of bringing down unemployment and housing prices: Deportations of “illegal migrants” would solve these economic problems. Experts rushed to debunk his claims, but they echoed widely across the public sphere. What made Trump’s statements plausible? Were they credible because public life is shaped by the idea that we are part of a mechanism we can neither understand nor change: The Market? Is this the reason why deportations, not expanded rent controls or large-scale public jobs programs, seemed reasonable to so many people? Put differently, can “illegal immigration” become an “economic problem” because we are not used to thinking about work and prices as malleable forms of collective organization? If this is the case, a robust response to MAGA requires cultivating economic knowledge that make the world more intelligible and more malleable.

For neoliberals, markets are not objects of analysis but legal structures they are entitled to design

Such a response will come up against neoliberal forms of organizing public knowledge. The historian Philip Mirowski and his collaborators have documented how neoliberals created a universe of institutions that is structured like a Russian doll. The doll’s inner layers comprise think tanks that strive to reshape governance. For neoliberals, markets are not objects of analysis but legal structures they are entitled to design. These high-powered intellectual hubs propose market-based solutions to pressing concerns: Carbon offset markets, for instance, are mechanisms for buying and selling units of the right to pollute. Setting up such markets is the only legitimate form of governance for neoliberals; they dismiss almost everything else as fascism or communism.

The Market is the All-Knowing Processor of Information, and prices the everyday manifestation of its Truth

In contrast to the Russian doll’s inner layers, the organizations that comprise its outer layers address a broader audience. Far from considering markets as legal structures, they celebrate a “spontaneous” order. The Market is the All-Knowing Processor of Information, and prices the everyday manifestation of its Truth. Therefore, whatever income we receive or wealth we have is just. And the public should not ask who sets the prices of pharmaceuticals or what legal arrangements shape the cost of housing. We should not ponder whose contributions we might undervalue or consider how to end unemployment or the housing crisis: The Supreme Information Processor invariably outstrips human capacities for computation and knowledge. Steeped in the idea that people are too ignorant to take part in shaping collective life, the Russian doll’s outer layers deny the possibility of valid knowledge that goes beyond accepting “market signals.” From the perspective of everyday life, broader social processes are not knowable except through the data The Market Oracle processes and dispenses.

Neoliberal forms of organizing public knowledge do not require enthusiastic approval of the Price-Revealing Oracle. They only require that enough people become insecure about their capacity to ask questions about The Market. Sowing doubt is a documented aspect of neoliberals’ practices, comparable to the efforts of tobacco firms and global heating deniers. These campaigns are more subtle than conventional propaganda because they do not seek to persuade people: Instead, they produce doubt about the very possibility of knowledge.

Paulo Freire’s work illuminates situations in which people doubt their capacity to know the world. Beginning in the early 1960s, Freire led literacy campaigns during which thousands of people learned to read. He was struck when he realized that these people, many of whom lived in rural situations of landlessness and impoverishment, were convinced that they could not understand the social order. Because they doubted their capacity to know, they saw themselves as objects not subjects of history. Therefore, Freire refused to see alphabetization as a mechanistic practice in which students learn by rote—he thought such a process would reproduce learners’ self-understanding as objects, not humans who learn to “read the world.” Literacy became a collective practice of making the world more knowable, a recognition of people’s capacity to know.

Freirian campaigns are necessary because a world that appears unknowable is a world characterized by violence. Freire wrote that “any situation in which some individuals prevent others from engaging in the process of inquiry is one of violence. The means used are not important; to alienate human beings from their own decision-making is to change them into objects.” From a Freirean perspective, neoliberal beliefs about the All-Knowing Market not only foster inequality and exclusion: They are a violent denial of what it means to be human. Therefore, neoliberal forms of organizing knowledge can only create temporary situations of dehumanization—they are aberrations, not the end of history.

Prices determine people’s life prospects yet they seem out of reach. They shape whether and what people can afford to eat

What might post-neoliberal forms of knowledge look like? The question of price formation is one area for cultivating such knowledge today because prices are similar to landlessness and landownership in Freire’s context. Prices determine people’s life prospects yet they seem out of reach. They shape whether and what people can afford to eat. They regulate who can live where, who has a roof over their head, and who can afford life-saving treatments and medication. Prices are at once at the center of everyday concerns and appear as spontaneous manifestations of The Market Oracle. Therefore, an institutional understanding of prices is a necessary part of creating post-neoliberal ways of knowing in common.

From this perspective, Isabella Weber’s recent work on price formation is a Freirian project of making the world more knowable, not only a contribution to a policy debate. An expert on market construction in twentieth-century China, Weber began a public controversy at the exact point where neoliberals want debates to come to a halt: She asked who sets prices, under what conditions, and who benefits. She also outlined possible courses of action. Because her work revealed the institutional and political character of prices, it disturbed neoliberal forms of organizing public knowledge: When prices became more knowable, people no longer have to accept them as The Market Oracle’s everyday manifestation.

If prices are a legal and institutional practice, it becomes plausible to ask who, if anyone, should claim the right to set up the conditions for markets

Institutionally grounded approaches to price-setting take conversations to neoliberals’ home turf. First, they challenge neoliberal claims about a Spontaneous Order and its capacity to produce Truth. If prices are institutional artifacts, the order cannot be spontaneous—someone has to set prices, and no one can do so outside of an always-changing legal and political context. Second, if prices are a legal and institutional practice, it becomes plausible to ask who, if anyone, should claim the right to set up the conditions for markets. Once the bogus claims about a Spontaneous Order have become implausible, markets become visible as political practices. Therefore, the broader and more inclusive conversations about prices become, the harder it becomes to sustain neoliberal forms of knowing the world. Such public conversations can become nails in neoliberalism’s coffin. And as prices become more knowable, Trumpian arguments about migrants, prices, and deportations become more implausible.

Public conversations about Job Guarantee (JG) programs are yet another Freirian process of “reading” the world and challenging neoliberal forms of organizing knowledge. In a context in which neoliberals blame unemployment on its victims, the possibility of providing guaranteed public employment on demand reveals that those who appear to be objects of the market can become subjects who reshape their lives as they remake institutions. A federally financed but locally administered program, a JG would offer a decent public-purpose job to anyone who wants it. It would allow municipalities, school districts, and other local organizations to offer workplaces. In a world in which millions have to move because of global heating, and millions more will need new jobs when we wind down fossil fuels, the JG can realize the right to work for those who are already present and those who are yet to arrive.

Collective reflection about the Job Guarantee has the potential to undermine neoliberal forms of organizing knowledge. First, it challenges the idea that there is a Superior Information Processor: If public institutions eliminate involuntary unemployment, they work better than The Market, and claims about the latter’s superiority become implausible. Second, people can understand, debate, and change such a program. As they do so, they realize they are not doomed to remain objects of “the market” because the latter is a changeable legal construct. And third, in such conversations, people realize that they do not need to think of jobs as scarce: There is always work to be done in our time of crises—in local schools, in the care sector, or in climate adaptation projects. For all these reasons, conversations about the JG challenge neoliberal forms of knowledge. They also make Trumpian claims more implausible: If the labor market is a set of malleable institutions and work is not scarce, everyone can be included and exclusion becomes more difficult to justify.

The JG could become a nail in neoliberalism’s coffin and open doors for democratizing economic life

But the Job Guarantee’s promise doesn’t end here: It could become a knowledge formation process that allows us to rethink how we want to live and work together. A JG could democratize public decisions about needs, priorities, and capacities through local assemblies that become sites of a community investigating itself. As they make decisions, such bodies could create empowering forms of collective knowledge. A JG may also create a porous boundary between administrators and workers: The latter would do part of their job as administrators and learn about the legal and financial arrangements that enable the program. (There is ample precedent from cooperatives, and the current Colombian government uses assets it seized from the mafia to employ people who will later run companies.) Schools and universities could prepare students for investigating local possibilities, a post-neoliberal form of career advising that would help young people find their place in a changing world. In short, a Freirian JG has enormous potential for undermining neoliberal assumptions as its participants build the habit to “read the world,” and remake their lives as they remake institutions. The JG could become a nail in neoliberalism’s coffin and open doors for democratizing economic life.

An ethos of untested feasibilities, not New Deal nostalgia, should guide post-neoliberal projects

Post-neoliberal processes of knowledge formation should avoid New Deal nostalgia. New Deal programs are a reference point because they provide a level of material comfort to some groups, and because its tangible legacy reminds us of what we can accomplish in short order. But New Deal programs did not democratize decisions about production and tended to reduce politics to distributive questions. In this context, neoliberals advanced the idea that The Market was a more democratic alternative. Therefore, proponents of post-neoliberal institutions such as a Job Guarantee should avoid uncritically embracing the New Deal. Experiments across the globe can serve as models: For instance, in a recent South African program, workers self-propose cultural projects to be financed by the government, while millions of workers in rural India improve local infrastructure as part of a JG program. An ethos of untested feasibilities, not New Deal nostalgia, should guide post-neoliberal projects.

One important difference between current Job Guarantee proposals and New Deal forms of public employment lies in the area of monetary knowledge. Many JG advocates situate JG proposals as part of a broader analysis of public money creation. They ask: If the federal government’s capacity to create money not limited to a certain quantity, why can it not employ all jobseekers? How should we think about the possibilities of public spending if prices are institutional formations and not determined by an elusive quantity of money? When they ask these questions, proponents of Modern Monetary Theory (MMT) animate a Freirean process and cultivate post-neoliberal forms of knowledge: If people come to understand public money creation, the idea of a Spontaneous Order cannot long survive.

While this might seem like a technical point, it marks a departure from New Deal forms of knowing the economic. President Roosevelt famously promoted the “right to a useful and remunerative job,” which was later enshrined in the Universal Declaration of Human Rights. But at the same time, he attempted to remove the question of federal money creation from public debate. In contrast, MMT emphasizes a broad institutional understanding of money creation that makes forced idleness (unemployment) difficult to justify. It seeks to create forms of public knowledge that make neoliberalism implausible, and with it, Trumpian claims about migrants, jobs, and deportations.

For years, proponents of MMT have challenged the prophets of austerity and promoted an alternative framework for federal spending grounded in an understanding of public money creation. Yet after Trump’s victory, the context has shifted, and the game has changed: Austerity might become less important than the threat of slashing federal funding for openly political reasons. Claiming federal money creation as a public institution could become a less effective challenge. Has the time come for taking seriously money’s nature as a multilayered institution, a core proposition of MMT and other institutionalist approaches? While federal spending is highly effective, it is not the only form of money creation. Public state banks could become more important, and we might revisit the possibilities of money creation at different scales, echoing historical practices in the United States and recent proposals from the Eurozone. Conversations about money as a malleable institution are yet another nail in neoliberalism’s coffin and open doors to democratizing economic life.

If Trump’s claims about deportations, joblessness, and the housing crisis echoed so widely in public life, this was the case because the idea of an All-Knowing Market continues to structure public life. A robust response to MAGA ought to make such claims implausible as it cultivates forms of collective knowledge that build people’s confidence in knowing the world from where they stand.

 

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Jakob Feinig is Associate Professor of Human Development at State University of New York, Binghamton and a member of the Money on the Left editorial collective. Feinig’s work interrogates the historically changing politics of money creation in British colonial America and the United States. In a series of articles and a book (Moral Economies of Money, Stanford University Press), he shows that for centuries, large groups understood money creation as a political practice and attempted to redesign the institutions that create money.

Neoliberalism has been with us from the 1980s. Since then, capitalism has undergone multiple crises and transformations. Most recently, capitalism endured a global financial crisis and a pandemic that brought trade to a halt, locked people in their homes, and ushered the state back at the forefront of economic policy.

There are many ways in which the term neoliberalism is understood. I use the concept primarily referring to two things: firstly, an era in the history of capitalism, which starts with the elections of Margaret Thatcher in the UK and Ronald Reagan in the US; secondly, the predominance of an economic policy package which includes the liberalisation of international trade, the privatisation of public services and the flexibilization of labour markets. A key characteristic of neoliberalism is that it fuelled a process that many refer to as ‘financialisation’, namely the growing dominance of the financial sector over everything else in the economy.

Scholars seem to increasingly imply that the term neoliberalism has become passé. Capitalism has changed too much since the 1980s and this begs for a different conceptualisation of its contemporary articulation. Diagnosing contemporary capitalism as either ‘surveillance’ (Zubboff 2019), ‘rentier’ (Christophers 2020), ‘platform’ (Srnicek 2017), ‘asset manager’ (Braun 2022), ‘cannibal’ (Fraser 2022), or ‘precarity’ (Azmanova 2020), also points to different prognoses of the possibility of progressive social transformation. Varoufakis (2023) and Dean (2020) go so far as to invite us to question whether we are still speaking of capitalism at all.

If we have surpassed neoliberalism, how should we understand the form of capitalism that we now inhabit? In this piece I argue that any answer to the question of what comes after neoliberalism must account for the rise of Big Tech and asset management corporations – that is, their growing grip on our lives. I will draw on two frameworks that focus on these recent transformations of contemporary capitalism, namely ‘technofeudalism’ as conceptualised by Yanis Varoufakis and what Benjamin Braun has called ‘asset manager capitalism’.

In fact, a key to understanding the latest transformation of contemporary capitalism may be found in exploring the links between what Varoufakis calls ‘cloud capital’ and the ubiquitous (as Braun convincingly argues) asset managers. Taking a short detour into the history of economic thought, I will argue that what both phenomena suggest is the triumph of rent over profit, of appropriation over production, such that the doubts regarding the survival of capitalism may indeed be warranted.

 

Technofeudalism

In Technofeudalism: What Killed Capitalism (2023) Varoufakis argues that the use of AI, digital and algorithmic networks has transformed the nature and power of particular pockets of capital. That is, a new form of capital has emerged – what he calls ‘cloud capital’ – that has the power to subjugate capitalist production to its own needs and logic. Production is still capitalist, in the sense that it relies on private means of production and the exploitation of wage labour, but it is embedded into a technofeudal structure (I will return to the ‘feudal’ part in the last section). While traditional (or ‘terrestrial’, as Varoufakis calls it) capital is able to only exploit workers, cloud capital can also exploit consumers as well as other capitalists who do not possess cloud capital. This adds an additional layer not only to capitalism’s hierarchy of economic stratification, but also to the societal hierarchy of power and capacity for control.

As Varoufakis claims, consumers are exploited because their leisure time is being mined for profit by Big Tech. Leisure time spent by searching on Google, interacting with Alexa, posting on Instagram, or scrolling through TikTok, has been instrumentalised for the accumulation of cloud capital, without consumers bearing any direct benefits of their ‘labour’. A large part of the personal data that we share on all these platforms ultimately forms what Shoshana Zuboff (2019) calls a ‘behavioural surplus’ (i.e. the surplus of data on consumer behaviour accumulated over and above what is needed to improve the consumer experience). This surplus is sold to advertisers in the hope not only of predicting, but also affecting our future behaviour.

Varoufakis notes that every time we interact with a digital servant, such as Alexa, we effectively train its algorithm to recognise our habits and preferences and give us good recommendations. But ultimately the time comes, after an inevitable building of trust, when Alexa starts exploiting our consumer profile to change our habits and preferences, pushing for products we would not otherwise purchase. At that point, it is no longer clear who trains whom, who the master and who the servant is. 

In short, the production of cloud capital does not solely rely on wage labour (the labour of people directly employed by the likes of Google or X), but also free rides on the unwaged labour of consumers. Consequently, while traditional capitalist firms such as General Motors and General Electric spend around 80% of their revenue on wages, Big Tech firms end up spending only around 1%. It is this feature of producing while relying on unwaged labour that bears resemblance to the feudal order.

cloud fiefs isolate buyer from buyer, seller from seller, such that only the algorithm has the power to connect them

Cloud capital also has the capacity to exploit other capitalists who do not possess it, by replacing markets with cloud fiefs. Varoufakis argues that e-commerce platforms such as Amazon are not markets. He views markets as public institutions that house spontaneous, decentralised interactions between consumers and producers. Instead, cloud fiefs isolate buyer from buyer, seller from seller, such that only the algorithm has the power to connect them. Entering Amazon is like entering a town where everything is owned and controlled by one person, here Jeff Bezos. Contrary to the public and open nature of markets, this describes a privatised institutional arrangement of centralisation. This allows cloudalists (owners of cloud capital) to demand excessive commission charges (up to 40% in the case of Amazon) from other capitalists to gain access to their fief – what Varoufakis calls ‘cloud rents’.

As for cloud capital’s effect on workers, Varoufakis implies that its capacity for total monitoring and control leads to the even further exploitation of the worker – more than the traditional capitalist could hope for. This is epitomised by Amazon warehouses where wearable tech and algorithms tirelessly work to optimise packing targets, squeezing warehouse workers to the point of collapse. Instead of being answerable to a boss, workers become answerable to an algorithm which tracks their every move. As a result, not only are workers pushed to work harder, but their capacity for collective action to safeguard minimal working conditions (such as the right to go to the restroom) significantly diminishes.

In the context of neoliberalism, this amounts to a further disempowering of workers, a pattern that has been evident for the past several decades. Since the 1980s, productivity gains have almost exclusively benefited employers in the US, with employees seeing their real wages stagnate, if not decline (Economic Policy Institute 2024, see Figure below).

Nancy Fraser (2022) calls this phenomenon the rise of the ‘hybrid worker’ – a worker who is at the same time exploited and expropriated. Following Marx, Fraser understands capitalist exploitation as occurring because the employer pays a wage that covers the necessary costs of the worker’s reproduction but retains most of the surplus value produced. However, Fraser (2022) claims, the expansion of debt has allowed employers to pay workers even less. That is, many workers under neoliberalism were paid less than what they needed to survive as functioning workers, which pushed them further and further into indebtedness. Thus, as well as being exploited, their labour was also expropriated. To this, Varoufakis (2023) adds that the arrival of cloud capital makes matters even worse due to its greater capacity for monitoring and control that, along with debt, renders workers’ labour even more expropriable.

Varoufakis claims that the arrival of cloud capital implies the impossibility of social democracy, at least as it was conceived in the latter part of the 20th century. It is far from obvious how platform Big Tech companies are to be regulated. Price regulation is impossible since they offer their products for free, while anti-trust regulation is hard to enforce since the raison d’etre of a platform is its capacity for economies of scale. Whether it is a platform for renting apartments or hailing taxis, the main product that a platform offers to both buyers and sellers is access to a large network of buyers and sellers. More often than not, having a small platform is akin to offering a bad product. 

Furthermore, under technofeudalism workers are tightly monitored to prevent their collective action, while consumers are physically isolated, making boycotts difficult to organise. Still, the recent success of the Amazon Labor Union in the US and the consumer boycotts of Starbucks, Pizza Hut, and McDonald’s show that all hope is not lost. In fact, Varoufakis argues that these impediments can be overcome by a grand coalition of workers, consumers, and small capitalists who do not possess cloud capital (e.g. your neighbourhood restaurant or bodega whose profits are squeezed by the exorbitant fees of Uber Eats). One must think beyond the traditional strategies of progressive politics, engaging in what he calls ‘cloud mobilisation’ – namely using the capacities of the cloud against cloud capital itself. 

 

Asset Manager Capitalism

While analysing the current social order as ‘technofeudal’ centres one’s attention on the social power of platform and Big Tech companies, the diagnosis of ‘asset manager capitalism’ invites us to reckon with the phenomenal rise of asset management corporations. Benjamin Braun and Brett Christophers (2024) start with some stylised facts. The so-called Big Three asset managers (BlackRock, Vanguard, and State Street) used to own some 13.5% of all S&P 500 companies in 2008, which is now up to 22%. Varoufakis (2023) adds that they are the largest shareholders in 90% of firms in the NYSE. Moreover, asset managers jointly control 126 trillion dollars of financial resources, totalling 526 billion in revenues, while their profits are estimated at around 200 billion per year (equivalent to the GDP of Greece) (Braun & Christophers 2024). The numbers undoubtedly speak for themselves.

Asset managers wield their immense access to financial resources to actively influence the behaviour of other capitalists. In the case of ‘conventional’ asset managers, such as the Big Three, a large part of those assets come from insurance schemes, pension and sovereign wealth funds who are looking for someone to invest their vast sums of capital. Due to their sheer size, asset managers tend to hold significant equity that implies substantial control over company policy. This has turned asset managers into the “central nervous system of contemporary capitalist society” (Braun & Christophers 2024, p.553) as well as into important shapers of capitalism at large.

Many states have also increasingly become dependent on asset managers for the design and implementation of their own policies, for instance regarding the green transition and even basic public goods provision.

States are also held hostage to the policy preferences of large asset managers. Especially in the Global South, where countries depend on foreign denominated bonds to finance their state services, asset managers can directly affect their access to the sovereign bond market. Hence, they become the arbiters of the creditworthiness, solvency and ultimately also of the sovereignty of a number of countries. Many states have also increasingly become dependent on asset managers for the design and implementation of their own policies, for instance regarding the green transition and even basic public goods provision. Not only that, but state dependence and weakening (or altogether non-existent) monetary sovereignty, coupled with immense access to resources imply that asset managers also have the capacity to directly lobby governments. This either happens with the purpose of preventing regulation, or to actively promote their policy agenda.

An example of a policy space where the influence of asset managers has been pivotal is monetary policy. Benjamin Braun (2022) argues that the dovish approach that most central banks initially took towards inflation is related to the influence of asset managers. Traditionally, monetary policy has been a field of class conflict. Banks, creditors and savers usually prefer low inflation and high interest rates, even if it comes at the cost of some unemployment. Conversely, workers and debtors prefer low interest rates since they facilitate investment and job creation. In fact, debtors are often willing to shoulder some inflation because it eats into the real value of their debt. Alas, the rise of asset managers has aligned the interests of Wall Street with those of the working class on this issue. Persistently low interest rates caused asset price inflation which ballooned asset valuations, increasing the fee revenues of asset managers. By making borrowing cheaper, low interest rates also reduced the financing costs of highly leveraged asset managers. Hence, the interests of banks and savers were trumped by the sheer power that asset managers have amassed.

What remains unclear in this presentation of asset manager capitalism is whether the rise of asset managers presents us with a radical break from neoliberalism or rather is merely an outcome of the deepening of financialisation. A very common critique of neoliberalism is that it brought the triumph of financial capital over the rest of the economy. This triumph though, instead of productive, has become parasitic. Speculative activities have become more remunerative than productive investment, a condition that breeds financial instability. Not only that, but it stifles productivity gains as capital is increasingly funnelled away from other activities and into finance (see Mazzucato 2018, Harvey 2024, Lapavitsas 2013).

Perhaps the first economist who made an explicit link between neoliberalism and the increasing influence of institutional investors, such as pension funds, was Hyman Minsky (Whalen 2010). For Minsky, the 1980s ushered in the era of ‘money manager capitalism’, where money managers and their funds became the new masters of the economy. His concerns about this phenomenon were largely similar to those discussed just above, namely the crisis-prone nature of the system, as well as its unwillingness to finance productive investments. While it seems that Minsky’s diagnosis was prolific, it is doubtful that he could have imagined the extent of concentrated ownership and power that asset managers have now amassed.

Therefore, if the rise of asset managers represents the culmination of the longstanding process of financialisation of the economy (i.e. the increasing dominance of finance over all other productive sectors), then many of the critiques of neoliberalism from the past few decades perhaps still remain relevant. We may be witnessing new levels of concentration of capital, but reigning in finance and ensuring it functions for the public good would still be a major policy priority. This is not, however, the case for the diagnosis that Varoufakis proposes. As suggested in the previous section, accepting the hypothesis of technofeudalism leads to a radical rethinking of policy priorities as well as strategies for progressive social transformation.

 

So, What Comes After Neoliberalism?

It is undeniable that the rise of cloud capital and asset managers are two fundamental phenomena that structure contemporary capitalism. Perhaps, it is these two types of corporations that will shape, at least to an extent, that which will come (or has come) after neoliberalism.

While the two critiques of contemporary capitalism discussed point our attention to different phenomena, the implications one can draw from them have much in common. Indeed, they both imply a greater concentration of capital and power in the hands of the few as well as increasing inequality. However, what I wish to emphasize here is that both frameworks suggest the dominance of rent over profit, of appropriation over production. 

Whatever is in the process of replacing neoliberalism, it is making matters even worse.

Many have viewed the advent of neoliberalism and financialisation as coming hand in hand with the return of the figure of the rentier. For example, Harvey (2024) argues that financialisation and monopolisation unleashed the modern rentier who produces nothing except for monetary profit through asset ownership or financial speculation. Azmanova (2020) finds that rentiers have been actively created by state policy that aims to increase the competitiveness of national or regional ‘champions’, to the detriment of market competition and anti-trust regulation.

It seems that whatever is in the process of replacing neoliberalism, it is making matters even worse. Cloudalists and asset managers are rentiers par excellence. They are in the business of taking, not making. They profit from ownership and control – instead of production – under conditions of limited competition. Brett Christophers (2020) holds the same view, suggesting that platform rents are playing a key role in what he calls ‘rentier capitalism’. In his book devoted to asset management corporations, he also concludes that asset managers are “pure rentiers” (Christophers 2023, p.45). An asset manager may own a wind farm in Norway, or a real estate complex in Florida, but they have nothing to do with the everyday operation and maintenance of these assets, all of which are contracted out to other companies. They produce nothing, while “their business is maximising and extracting the income – rent – that that asset generates” (Christophers 2023, p.45).

These scholars, myself included, view capitalist production as simultaneously relying on profit and rent, production and appropriation, exploitation and expropriation. While the emergence of capitalism sidelined rent, appropriation and expropriation, it never achieved to overcome them altogether. These duplets are not equivalent to each other, but they all point to the fact that capitalism is not merely a system of contractual exchange where the most efficient, the most productive and the smartest benefits accordingly. Behind contractual exchange stands the hidden abode of unearned income, patrimonial capital, hereditary power, and outright expropriation. For Varoufakis (2023), the triumph of profit over rent was what ultimately defined the transition from feudalism to capitalism. In this sense, the comeback of rent that cloud capital has brought implies that we must question whether we are living under capitalism at all. 

In Marxist political economy the importance of the balance between profit and rent was most clearly expressed by Rosa Luxemburg who argued that primitive accumulation was a structural feature of capitalism, rather than merely its enabling condition. Alternatively, in classical political economy, David Ricardo viewed rentier landlords as vestiges of feudalism that stood in the way of the full flourishing of the capitalist mode of production. Keynes, similarly, called for the euthanasia of the rentier, primarily referring to parasitic financiers who enriched themselves by keeping capital artificially scarce (Mann 2019). Even in mainstream neoclassical economics, the term monopoly rent refers to profits accrued over and above normal profits attainable under an efficient and competitive market design.

In short, across many schools of economic thought, as well as political affiliations, rent-seeking, appropriation and expropriation are viewed as burdens on a capitalist economy, if not wholly morally and politically reprehensible. Thus, if indeed what we are witnessing now is a further shifting of the balance towards rent and appropriation, even further than the one brought by neoliberalism, then trouble lies ahead.

Attempting to square the rise of cloud capital with that of asset managers might be the key to understanding the profound transformations that capitalism is undergoing as we speak.

Varoufakis (2023) locates the source of trouble (i.e. rent-seeking) in Big Tech, while Braun and Christophers (2024) in asset management corporations. However, what is missed is how these two phenomena relate to each other. Since Blackrock et al. are major shareholders in Big Tech companies, how does that imbricate them in the novel dynamics that cloud capital introduces? Are asset managers the ultimate cloudalists? As seen in the Table below, it seems that the answer is in the affirmative (Hyppolite & Michon 2018). BlackRock, Vanguard, State Street and Fidelity own the largest stakes (collectively over 20%) in the top 10 US tech companies. 

If public and open markets are no longer the main mechanism of distribution of goods and services, if the allocation of financial resources is subject to the idiosyncratic whims of a few gargantuan corporations, if Big Tech companies acquire a significant part of their capital for free because consumers do not own their data – that is, if rent has displaced profit in our political economies – then indeed, are we still speaking of capitalism? Theorising the now is often challenging. However, attempting to square the rise of cloud capital with that of asset managers might be the key to understanding the profound transformations that capitalism is undergoing as we speak. What must follow from the above, taking up the glove from Varoufakis, is an attempt to link theory and practice. That is, facing up with the fact that along with neoliberalism, the familiar toolbox of progressive politics (e.g. taxation, regulation and mobilisation), has also become passé – or at least inadequate for the challenges that lie ahead. Perhaps we must think and act more radically.

 

 

References:

Azmanova, A. (2020). Capitalism On Edge: How fighting precarity can achieve radical change without crisis or utopia. Columbia University Press: NY, USA.

Braun, B. (2022). Exit, Control, and Politics: Structural power and corporate governance under asset manager capitalism. Politics & Society. 50(4): 630–654.

Braun, Β. & Christophers, Β. (2024). Asset manager capitalism: An introduction to its political economy and economic geography. Economy and Space. 56(2): 546-557.

Christophers, B. (2023). Our Lives in Their Portfolios: Why Asset Managers Own the World. Verso: London, UK.

Christophers, B. (2020). Rentier capitalism: who owns the economy, and who pays for it? Verso: London, UK.

Dean, J. (2020). Neofeudalism: The End of Capitalism? Los Angeles Review of Books. Economic Policy Institute (2024). The Productivity-Pay Gap. https://www.epi.org/productivity-pay-gap/. 

Fraser, N. (2022). Cannibal Capitalism: how our system is devouring democracy, care and the planet – and what we can do about it. Verso: London, UK.

Harvey, D. (2024, forthcoming). The Story of Capital: What everyone should know about how capital works.

Hippolyte, P.A. & Michon, A. (2018). Big Tech Dominance (1): The New Financial Tycoons. Fondation Pour L’Innovation Politique Study. https://www.fondapol.org/en/study/big-tech-dominance-1-the-new-financial-tycoons/. 

Lapavitsas, C. (2013). Profiting Without Producing: How Finance Exploits Us All. Verso: London, UK.

Mann, G. (2019). In the Long Run We Are All Dead: Keynesianism, Political Economy, and Revolution. Verso: London, UK.

Mazzucato, M. (2018). The Value of Everything: Making and Taking in the Global Economy. Public Affairs: NY, USA.

Srnicek, N. (2017). Platform Capitalism. Polity Press: Cambridge, UK.

Varoufakis, Y. (2023). Technofeudalism: What Killed Capitalism. Bodley Head: London, UK.

Whalen, C. J. (2012). Money Manager Capitalism found in Chapter 34 of Toporowski, J. &

Michell, J. (2012). The Handbook of Critical Issues in Finance. Edward Elgar: Cheltenham, UK. https://econpapers.repec.org/bookchap/elgeebook/14083.htm 

Zuboff, S. (2019). The Age of Surveillance Capitalism: the fight for a human future at the new frontier of power. Public Affairs: NY, USA.

 

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Panos Tsoukalis is a fellow at the World Inequality Database and a graduate student at the New School for Social Science Research.

This article was originally published at the Institute for New Economic Thinking’s site on April 19, 2024. Professor Galbraith generously allowed this symposium to share that piece as well. Read the original article on INET at this link.

 

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References

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Fasteau, Marc and Ian Fletcher, Industrial Policy for the United States: Winning the International Competition for Good Jobs and High-Value Industries, Cambridge: Cambridge University Press, 2024.

Galbraith, James K., “The Quasi-inflation of 2021-2022: A Case of Bad Analysis and Worse Response,” Institute for New Economic Thinking, February 2, 2023. (Galbraith 2023a)https://www.ineteconomics.org/perspectives/blog/the-quasi-inflation-of-2021-2022-a-case-of-bad-analysis-and-worse-response

Galbraith, James K., “Review of A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism,” EH.net. September, 2023. https://eh.net/book_reviews/a-fabulous-failure-the-clinton-presidency-and-the-transformation-of-american-capitalism/ (Galbraith 2023b)

Hourihan, M., Muro, M. and Chapman, M. R., The Bold Vision of The Chips and Science Act isn’t Getting the Funding it Needs. Brookings.edu, 2023. https://www.brookings.edu/articles/the-bold-vision-of-the-chips-and-science-act-isnt-getting-the-funding-it-needs/

Hudson, Lee, “Pentagon to resume F-35 deliveries after Chinese materials discovered,” Politico, October 7, 2022. https://www.politico.com/news/2022/10/07/pentagon-f-35-deliveries-chinese-materials-00060962

Jayapal, Pramila, “Jayapal, Warren Raise Concerns about Commerce Department Tasking Wall Street Financiers with Allocating $39 Billion in CHIPS Semiconductor Funding,” Press Release, January 10, 2024. https://jayapal.house.gov/2024/01/10/jayapal-warren-raise-concerns-about-commerce-department-tasking-wall-street-financiers-with-allocating-39-billion-in-chips-semiconductor-funding/

Joint Economic Committee, U.S. Congress, Monetary Policy, Selective Credit Policy and Industrial Policy in France, Britain, West Germany and Sweden, A Staff Study, Washington: GPO, 1981. https://books.google.com/books/about/Monetary_Policy_Selective_Credit_Policy.html?id=G3B23B4XwRYC

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Lee, Jan Lanhee and Debbie Wu, “TSMC’s Second Factory in Arizona Delayed as US Grants Remain in Flux,” Bloomberg, January 18, 2024. https://www.bloomberg.com/news/articles/2024-01-18/tsmc-s-second-fab-in-arizona-delayed-as-us-grants-remain-in-flux

Manchin, Joe, “ICYMI: Because of the IRA, We Are Producing Fossil Fuels at Record Levels,” Press Release, September 23, 2023.https://www.manchin.senate.gov/newsroom/press-releases/icymi-manchin-because-of-the-ira-we-are-producing-fossil-fuels-at-record-levels

Mazzucatto, Mariana, Mission Economy: A Moonshot Guide to Changing Capitalism, London: Allen Books, 2021.

McDermott, Jennifer. Matthew Daly, Michael Hill, and Mike Catalini, “Offshore wind projects face economic storm. Cancellations jeopardize Biden clean energy goals” Associated Press, November 4, 2023. https://apnews.com/article/offshore-wind-orsted-cancellation-biden-new-jersey-3f2ff7c9832210ce862f6e7179fae439

Nichols, Hans, “Biden’s 2024 Goody Bags: Laws Pump Billions into Republican and Swing States,” Axios, April 5, 2024. https://www.axios.com/2024/04/05/biden-half-trillion-dollar-jobs-campaign

Partsinevelos, Kristina and Cait Freda, “Semiconductor manufacturers wait for checks one year after Biden signs CHIPS Act,” CNBC, August 9, 2023. https://www.cnbc.com/2023/08/09/chips-act-semiconductor-makers-wait-for-checks-one-year-on.html

Pollin, Robert, Jeannette Wicks-Lim, Shouvik Chakraborty, Gregor Semieniuk, Chirag Lala, Employment Impacts of New U.S. Clean Energy, Manufacturing, and Infrastructure Laws, Political Economy Research Institute, Research Report, September 18, 2023. https://peri.umass.edu/component/k2/item/1758-employment-impacts-of-new-u-s-clean-energy-manufacturing-and-infrastructure-laws

Rodrik, Dani, “A New Paradigm for Economic Policy and the Role of Mainstream Economics,” Post-Neoliberalism, November 28, 2023. https://www.postneoliberalism.org/articles/a-new-paradigm-for-economic-policy-and-the-role-of-mainstream-economics/

The Economist, “What the Inflation Reduction Act has achieved in its First Year,” August 17, 2023. https://www.economist.com/the-economist-explains/2023/08/17/what-the-inflation-reduction-act-has-achieved-in-its-first-year.

The Guardian, “US spends billions on roads rather than public transport in ‘climate time bomb’,” February 29, 2024. https://www.theguardian.com/business/2024/feb/29/biden-spending-highways-public-transport-climate-crisis

Ting-Fang, Cheng and Lauly Li, “TSMC, Intel suppliers delay U.S. Plants on surging costs, labor crunch,” Nikkei Technology, March 19, 2024. https://asia.nikkei.com/Business/Technology/TSMC-Intel-suppliers-delay-U.S.-plants-on-surging-costs-labor-crunch

White House, FACT SHEET: Biden-Harris Administration Celebrates Historic Progress in Rebuilding America Ahead of Two-Year Anniversary of Bipartisan Infrastructure Law, November 9, 2023. https://www.whitehouse.gov/briefing-room/statements-releases/2023/11/09/fact-sheet-biden-harris-administration-celebrates-historic-progress-in-rebuilding-america-ahead-of-two-year-anniversary-of-bipartisan-infrastructure-law/ (White House 2023a)

White House, FACT SHEET: Bidenomics is Boosting Clean Energy Manufacturing for Offshore Wind and Creating Good-Paying American Union Jobs, July 20, 2023. https://www.whitehouse.gov/briefing-room/statements-releases/2023/07/20/fact-sheet-bidenomics-is-boosting-clean-energy-manufacturing-for-offshore-wind-and-creating-good-paying-american-union-jobs/ (White House 2023b).

Wraight, Tom, “Rethinking the American Industrial Policy Debate: The Political Significance of a Losing Idea,” Journal of Policy History, Volume 36 , Issue 2, April 2024, 191–214. DOI: https://doi.org/10.1017/S0898030623000362

Notes

1. The study was commissioned by the House Banking Committee and I organized it over the spring and summer of 1980, participating in field research in all four countries. In addition to the Zysman/Cohen duo, it helped to launch the careers of the late Richard Medley, founder of Medley Global Advisers, writing on West Germany, and Catharine Hill, later President of Vassar, writing on the UK. Sweden was covered by Andrew Martin, a distinguished specialist from the Center for European Studies at Harvard. When Henry Reuss moved to chair the JEC in 1981, that committee undertook to publish the study.

2. In an era of global multinationals where manufacturers are spread over many countries, this is a dated idea, but it persists, partly because companies ally themselves with states.

3. The abolition in the early 1990s of the Office of Technology Assessment was one key step in the subordination of congressional initiatives to business lobbies. This and the reduction of congressional staff were parts of a deliberate strategy of House Speaker Newt Gingrich at that time.

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James K. Galbraith holds the Lloyd M. Bentsen Jr. Chair in Government/Business Relations at the LBJ School of Public Affairs, The University of Texas at Austin. His next book, with Jing Chen, is Entropy Economics: The Living Basis of Value and Production, forthcoming from the University of Chicago Press. He thanks Deepshikha Arora for research assistance and Thomas Ferguson for useful comments.

Albena Azmanova

Industrial policy is making a spectacular comeback in the US. and Europe. It is at the heart of President Biden’s economic policy designed to revive American manufacturing – what has been called Bidenomics for its rupture with politics-as-usual. The European Commission adopted in 2020 a new industrial strategy aiming to reduce the strategic dependencies of European economies on external economic actors, while facilitating the green and digital transitions. Is industrial policy here to stay?

Robert Reich

We should have never let go of industrial policy. It was sacrificed at the altar of the belief, espoused even by the Clinton and Obama administrations, that free trade benefits all. True, free trade has profited consumers as it has brought cheaper goods. It benefited corporations, big investors, executives, Wall Street traders and other professionals. But free trade deals also destroyed millions of US jobs and caused US wages to stagnate or decline. This is what the Biden economic revolution aims to reverse. Between 2000 and 2017, a total of 5.5m manufacturing jobs vanished in the U.S. Automation accounted for about half of the loss, and imports, mostly from China, the other half. This is what the Biden economic revolution is reversing through massive public investments in infrastructure, semiconductors, wind and solar energy, and manufacturing. There are three other critical ingredients of Bidenomics: the threat (and, in some cases, reality) of tough antitrust enforcement, a pro-labor National Labor Relations Board, and strict limits on Chinese imports. Taken together, these policies are beginning to alter the structure of the American economy in favor of the bottom 90 percent. For instance, just over the past year, manufacturing construction in high-tech electronics, which the administration has subsidized through CHIPS and the Inflation Reduction Act, has quadrupled. Tens of billions in infrastructure spending has been funnelled to the states for road, water system, and internet upgrades to deliver high-speed Internet to underserved communities. More clean-energy manufacturing facilities have been announced in the last year than in the previous seven combined.

Bidenomics is effectively changing the structure of the American economy. Good manufacturing jobs are coming back.

Bidenomics is effectively changing the structure of the American economy. Good manufacturing jobs are coming back.  This is turning out to be the most successful set of economic policies the United States has witnessed in a half-century. It may even put the nation on the path to widely shared prosperity for a generation.

Albena Azmanova

This seems, indeed, to amount to a radical policy shift – a break with the free-market and free-trade doctrines that administrations across the left-right divide have championed during the neoliberal spell of the past 40 years. But is the policy shift really as radical? In Capitalism on Edge, I’ve observed that a trademark of contemporary capitalism is the governments’ practice of active reverse distribution – from society to specific economic actors, from the weak to the strong.  Notwithstanding their overt espousal of the free market dogma, in order to ensure the competitiveness of national economies, governments across the left-right ideological spectrum supported hand-picked economic actors in order to increase the advantage the actors already have in the global marketplace – the phenomenon of ‘national champions’. While this maximized the opportunities for a handful of economic actors, the risks were shifted onto society, thereby engendering massive precarity. You yourself have commented on this discrepancy between the neoliberal mantra of free markets and the practice of governments. Some 38 years ago, in an op-ed for the New York Times you sarcastically congratulated Ronald Reagan for adopting “a more ambitious industrial policy than the Democrats ever dreamed of proposing” (“Reagan’s Hidden Industrial Policy“, August 4, 1985). So, is the shift in economic logic we now see really that significant?

Robert Reich

There was an important debate in the 1980s about the transition to the ‘new economy’ of openly integrated, digitalized economies. A view was gaining ground that our government should be more purposeful in easing the transition of our economy out of basic industries like steel and textiles into high-tech businesses. The argument was that without an explicit industrial policy – encouraging our older industries to reduce outmoded capacity and adapt newer technologies, without channelling research and development funds to emerging industries and helping workers retrain – the changes would come slower and be more painful, and in the meantime the United States would have lost out to other nations that had made the transition more smoothly (notably, Japan). That would mean the government actively shifting economic resources, picking competently winners and losers – effectively pursuing an industrial policy– which went against the ideological drift of the times.

And yet, this is exactly what Reagan did as he actively promoted both high tech and the arms industry. America’s emerging industries – advanced computers, lasers, fiber-optics, new materials, biotechnologies and so on profited immensely. Billions were channelled into new weapons – especially those depending on advanced technologies. Well over 60 percent of all the research and development funds for America’s high-technology industries at that time came directly from the Pentagon. Altogether, Reagan’s budget deficit, tax plan and military buildup amounted to an extraordinarily ambitious plan for shifting America’s industrial base – industrial policy with a vengeance.

However, American basic industry was sacrificed. Basic steel, autos, textiles, commodity chemicals and others that rest on mass or large-batch production are particularly vulnerable to price competition in open markets. Moreover, in 1981 the value of the dollar began climbing to unprecedented levels as the budget deficit ballooned. This made American exports very costly and these industries were forced to contract. Reagan’s tax reforms also eliminated any lingering incentives to invest in America’s older industrial base. Steel, autos and others were forced to reduce domestic capacity, set up operations abroad (or enter into joint ventures with foreign producers) and diversify into specialized niches. Millions of jobs were lost in old-line manufacturing businesses. Crippled by international trade, American basic industry was done for.

Yet, as I warned back then, the collapse of America’s basic industries was shedding off far more blue-collar workers than could be reabsorbed into other high-paying jobs, even during the years of record growth. I argued that such a brave leap from older industries to new carries a danger that the new ones will not be able to sustain our standard of living on their own. We badly needed the return of industrial policy, but of a different kind – we needed to put high technologies into our older industries – and simultaneously upgrade workers’ skills to handle the new manufacturing processes – so as to render the entire industrial base more competitive.

Albena Azmanova

The return of industrial policy in the US and Europe is marked by the imperative of competitiveness. This implies that the globally integrated market within which competitiveness is sought, remains an acutely relevant factor in the design of economic policy. Does the return of industrial policy entail the end of globalisation or does it rather invite us to redesign globalisation in a way that it sustains ecologically and socially sustainable economies?

Robert Reich

Whether globalization is good or bad depends on who gets most of its benefits and who pays most of its costs. For too long, US workers have paid disproportionately. Over the past 40 years, global market integration was fuelled by the age-old economic doctrine of “comparative advantage”, which assumes that more trade is good for all nations because each trading partner specializes in what it does best. But in many cases a country’s comparative advantage was cheap labour, which in turn was a result of dangerous or exploitative conditions, and lack of right to collective bargaining. Sure, neoliberal globalisation intensified economic growth and reduced the inequality between countries, mostly because of China’s growth, but the working conditions for most workers have deteriorated because of the advantages the rules of the game gave to cheap labour. We can change that.

It has taken one of the oldest presidents in American history, who has been in politics for over half a century, to return America to an economic paradigm that dominated public life between 1933 and 1980 and is far superior to the one that has dominated it since. Call it democratic capitalism.

The Great Crash of 1929 followed by the Great Depression taught the nation a crucial lesson that we forgot after Ronald Reagan’s presidency: that the so-called “free market” does not exist. It’s a fiction. Markets are always and inevitably human creations. They reflect decisions by judges, legislators, and government agencies as to how the market should be organized and enforced — and for whom.

The economy that collapsed in 1929 was the consequence of decisions that had organized the market for a monied elite — allowing nearly unlimited borrowing, encouraging people to gamble on Wall Street, suppressing labor unions, holding down wages, and permitting the Street to take huge risks with other people’s money.

Franklin D. Roosevelt and his administration reversed this. They reorganized the market to serve public purposes — stopping the excessive borrowing and Wall Street gambling, encouraging labor unions, establishing Social Security, and creating unemployment insurance, disability insurance, and a 40-hour workweek. They used government spending to create more jobs.

During World War II, they controlled prices and put almost every American to work. Subsequent Democratic and Republican administrations enlarged and extended democratic capitalism. Wall Street was regulated, as were television networks, airlines, railroads, and other common carriers. CEO pay was modest. Taxes on the highest earners financed public investments in infrastructure (such as the national highway system) and higher education.

America’s postwar industrial policy spurred innovation. The Department of Defense and its Defense Advanced Research Projects Administration developed satellite communications, container ships, and the internet. The National Institutes of Health did trailblazing basic research in biochemistry, DNA, and infectious diseases.

Public spending rose during economic downturns to encourage hiring. Even Richard Nixon admitted “we’re all Keynesians.” Meanwhile, antitrust enforcers broke up AT&T and other monopolies. Small businesses were protected from giant chain stores. Labor unions thrived. By the 1960s, a third of all private-sector workers were unionized.

Large corporations sought to be responsive to all their stakeholders — not just shareholders but employees, consumers, the communities where they produced goods and services, and the nation as a whole.

Then came a giant U-turn. The OPEC oil embargo of the 1970s brought double-digit inflation followed by Fed Chair Paul Volcker’s effort to “break the back” of inflation by raising interest rates so high that the economy fell into deep recession.

All of which prepared the ground for Ronald Reagan’s war on democratic capitalism. From 1981 onward, a new bipartisan orthodoxy emerged that the so-called “free market” functioned well only if the government got out of the way (conveniently forgetting that the market required government).

The goal of economic policy thereby shifted from public welfare to economic growth. And the means shifted from public oversight of the market to deregulation, free trade, privatization, “trickle-down” tax cuts, and deficit reduction — all of which helped the monied interests make more money.

What happened next? For 40 years, the U.S. economy grew, but median wages stagnated. Inequalities of income and wealth ballooned. Wall Street reverted to the betting parlor it had been in the 1920s. Finance once again ruled the economy. Spurred by hostile takeovers, corporations began focusing solely on maximizing shareholder returns — which led them to fight unions, suppress wages, abandon their communities, and outsource abroad.

Corporations and the super-rich used their increasing wealth to corrupt politics with campaign donations — buying tax cuts, tax loopholes, government subsidies, bailouts, loan guarantees, non-bid government contracts, and government forbearance from antitrust enforcement, allowing them to monopolize markets.

Democratic capitalism, organized to serve public purposes, all but disappeared. It was replaced by corporate capitalism, organized to serve the monied interests.

The secret story of the Biden administration is its return to democratic capitalism. Biden learned from the Obama administration’s mistake of spending too little to pull the economy out of the

Great Recession that the pandemic required substantially greater spending, which would also give working families a cushion against adversity. So he pushed for and got the giant $1.9 trillion American Rescue Plan.

This was followed by a $550 billion initiative to rebuild the nation’s bridges, roads, public transit, broadband, water, and energy systems. And in 2022, the biggest investment in clean energy sources in American history — expanding wind and solar power, electric vehicles, carbon capture and sequestration, and hydrogen and small nuclear reactors. Then came the largest public investment ever made in semiconductors, the building blocks of the next economy. Notably, these initiatives were targeted to companies that employ American workers.

Biden also embarked on altering the balance of power between capital and labor, as did FDR. Biden put trustbusters at the head of the Federal Trade Commission and the Antitrust Division of the Justice Department. And he remade the National Labor Relations Board into a strong advocate of labor unions.

Unlike his Democratic predecessors, Biden has not sought to reduce trade barriers. In fact, he has retained several from the Trump administration. But unlike Trump, he has not given a huge tax cut to corporations and the wealthy.

It’s also worth noting that, in contrast with every president since Reagan, Biden has not filled his White House with former Wall Street executives. Not one of his economic advisers — not even his treasury secretary — is from the Street.

Biden’s larger achievement has been to change the economic paradigm that reigned since Reagan. He taught America a lesson we once knew but have since forgotten — that the “free market” does not exist. It is designed. It either advances public purposes or it serves the monied interests.

Biden’s democratic capitalism is neither socialism nor “big government.” It is, rather, a return to an era when government organized the market for the greater good.

Albena Azmanova

The industrial policies the US and the EU are now adopting considerably rely on subsidizing specific industries, which amounts to a transfer of public resources in private hands. The industrial policy through which the post-war inclusive prosperity was achieved in developed economies, especially in Europe, relied considerably on state-owned companies (such as British rail, and the French steel producer Arcelor) which were privatized in the 1980s and 1990s. Does this golden formula of national industrial policy stand a chance today? Is this something we should try to emulate?

Robert Reich

I don’t think we have any choice, frankly. The public doesn’t want a return to state-owned enterprise (the American public would never tolerate it). But in order for industrial policy to work, it must be structured as a transparent contract, with responsibilities on both sides. If the public sector is to foot the bill, the recipients of these public funds must agree to specific conditions that both benefit the public and prevent profiteering.

Albena Azmanova

And finally, a question about the social purpose of economic policy. You have been one of the most ardent critics of inequality. Is equality to be the guiding virtue of the transformative politics we pursue?

Robert Reich

To criticize immense inequalities does not imply that equality is a gauge of justice.  The distribution of income and wealth doesn’t have to be a zero-sum game in which the rich do better only at the expense of everyone else, and everyone else can do better only if wealth at the top is constrained. It is power — the power to alter the rules of the game and organize the market to the advantage of those possessing it — that is a zero-sum game. Some possess it only to the extent that others do not. And in modern America, as we all know, great wealth turns into great power. In Republican circles, the monied interests have preached the snake oil of supply-side economics, which legitimized giant tax cuts going mostly to the rich and large corporations. Those tax cuts — under Reagan, George W. Bush, and Trump — exploded the federal debt, fuelled giant profits in the biggest firms and financial institutions, and stoked a surge in billionaire wealth but did literally nothing for average working people. In Democratic circles, the monied interests have used neoliberalism — which has called for deregulation, privatization, free trade, and the domination of finance over the economy. This orthodoxy pervaded the Clinton and Obama administrations. This whole perilous dynamic needs to be ended. This requires altering the structure of the economy so the poor and working middle class get a larger share of the gains and the ownership class doesn’t continue to run away with the lion’s share. Gaining more jobs at higher wages is imperative.
Biden understands that the new investments must translate into high-paying jobs, which often require unions. “When I think climate, I think jobs … union workers are the best workers in the world,” he said in a recent speech on Bidenomics.

The monied interests don’t want unions, of course. The narrow congressional majority that got these bills passed rolled back some of the labor conditions that were originally on the tax credits and grants. Moreover, much of the funding is pouring into so-called “right-to-work states” that make it exceedingly difficult to unionize.

But a buoyant economy strengthens the hand of workers, making it easier to unionize — an equitable economy cannot replace equitable social policy, but it creates the conditions for the empowerment of the many. That is why a new Industrial policy is just the start.

 

References

• R. Reich. August 29, 2023. “Biden is turning away from free trade — and that’s a great thing“. The Guardian.
• R. Reich. 31 July, 2023 “Why Bidenomics will get Joe another term and give the Democrats control over Congress“. Substack.
• R. Reich. 3 Aug, 2023. “Biden’s New Industrial Policy. And Ronald Reagan’s Old One“. Substack.

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Robert Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. His latest book is THE SYSTEM: Who Rigged It, How To Fix It (Picador, 2020)