Crank Politics

Jonathan Chait is the author of the 2007 book, THE BIG CON: The true story of how Washington got hoodwinked and hijacked by crackpot economics. In the September 11, 2007 article "Crank Politics," Paul Krugman responded:

There’s only one word to describe Jon Chait’s book: shrill. I mean, how can Chait say that “American politics has been hijacked by a tiny coterie of right-wing economic extremists”? The cocktail-party circuit knows better. As Peter Beinart, the then editor of The New Republic, wrote in his review of my 2003 book The Great Unraveling, “guest lists that cross ideological lines can help liberals understand the conservatives they write about. And many Washington conservatives genuinely don't see the Bush administration as radical: they see it as having ratified a big-spending, culturally liberal status quo.”

OK, end snark. Obviously I agree with just about everything that’s in Jon’s book. I cover some of the same ground in my own forthcoming book, The Conscience of a Liberal, though in much less detail. I’d like to take this conversation in a slightly different direction by talking about the second part of the book, on the political environment that lets crackpot economics flourish; Jon’s description is correct, but, I think, somewhat incomplete.

First, supply-side quackery is only one of the gambits used to sell tax cuts.

There are other, older versions – notably the claim that government is wasting your money on vast armies of useless bureaucrats. Way back in 1964, in his famous speech on behalf of Barry Goldwater, Reagan talked about how crazy it was that the federal government employed 2.5 million civilian workers; nobody pointed out that two-thirds of those civilians worked either for the Pentagon or for the post office.

Second, Jon talks at some length about the media, and in particular about the Republican ability to get journalists to harp endlessly on supposed character flaws of Democrats, while their own candidates get a free pass. He emphasizes the right-wing echo chamber, but there’s more to it than that. It’s also – as I can report from my own experience – a result of asymmetrical intimidation. Quite simply, if you point out character flaws in a conservative, there will be an all-out effort, involving major media as well as blogs and talk radio, to discredit and ruin you, personally. This just doesn’t happen on the other side.

So journalists feel that it’s safe to ridicule Democrats, even if the supposed character-defining episode never happened; they choke up and shy away when it comes to Republicans. That’s why even the most grotesque stuff, like Giuliani’s claim that he’s a rescue worker too, or Romney’s remark that his sons are serving the country by helping him become president, doesn’t get picked up.

Third, I’m surprised that Jon doesn’t talk at all about the key political role of race in the political shift in this country. Reagan didn’t start as a supply-sider: he started as the enemy of welfare queens in their welfare Cadillacs. And what I’ve learned from Larry Bartels, Tom Schaller, and other political scientists is that race is really central to the whole thing. Here’s a preview quote from my own book:

“The overwhelming importance of the Southern switch suggests an almost embarrassingly simple story about the political success of movement conservatism. It goes like this: thanks to their organization, the interlocking institutions that constitute the reality of the vast right-wing conspiracy, movement conservatives were able to take over the Republican Party, and move its domestic policies sharply to the right. In most of the country, this rightward shift alienated voters, who gradually moved toward the Democrats. But Republicans were nonetheless able to win presidential elections, and eventually gain control of Congress, because they were able to exploit the race issue to win political dominance of the South. End of story.”

Be Fair to the Fair Tax - A Rebuttal from Its Supporters

Be Fair to FairTax -- Throw the Red Herrings Back in the Water
August 29, 2007; Page A13 of The Wall Street Journal
http://online.wsj.com/article/SB118835673922011955.html?mod=googlenews_wsj

It is apparently getting so difficult to defend the current income tax system that its guardians must use smear tactics to slow down its best replacement. Bruce Bartlett ("FairTax, Flawed Tax," editorial page, Aug. 25) is the latest status quo defender to use fiction to slander the FairTax plan.

The FairTax was developed many years ago, totally independently of any other proposal, group or movement. It is a product of more than $20 million of advanced economic research, as well as detailed conversations with citizens as to their preferences defining the best possible national tax system. Many groups and individuals have agitated to replace the deeply flawed income tax system, including, apparently, the Church of Scientology. As a founder of Americans For Fair Taxation, I can state categorically, however, that Scientology played no role in the founding, research or crafting of the legislation giving expression to the FairTax.

Mr. Bartlett is equally wrong about many other aspects of the FairTax. We are disappointed but hardly surprised by such distortions about it coming from the very economist who once opined that the income tax system just needed a little "tweaking."

Leo Linbeck
Chairman and CEO
Americans for Fair Taxation
Houston



My guess is that few readers made it with an open mind past Mr. Bartlett attributing the FairTax's origins to the Church of Scientology. That organization may have a similar proposal or a proposal with a similar name, but I know for certain that the mainstream FairTax proposal found at www.fairtax.org has no connection to it.

I know this because the two principal founders of the FairTax movement, Leo Linbeck and Bob McNair of Houston, are friends of mine who served on my board at the Dallas Fed. I was there as they began to develop their proposal in the mid-1990s. I watched them pitch their fledgling idea to their friends and business associates, and I watched them urge prominent economists to do independent research on their proposal. I even accompanied them to San Francisco to pitch it to Milton and Rose Friedman. (I still remember Rose's homemade cookies.)

We should give the FairTax a fair chance. In fact, I posted a blog with that title a few weeks ago. See http://www.bob-mcteer-blog.com/. A fair chance means a thorough evaluation and discussion of its merits without the distraction of a red herring.

Bob McTeer
Distinguished Fellow
National Center for Policy Analysis
Former President of the Dallas Fed
Frisco, Texas



The FairTax would replace the federal corporate and individual income tax, payroll taxes and the estate and gift tax with a 23% national retail sales tax on all goods and services. Each household would be provided with a monthly prebate equal to the sales tax rate times the federal poverty level plus a small extra amount in the case of a married couple to prevent a marriage penalty.

The FairTax bill (H.R. 25) was developed by economists, business people and tax lawyers who understood that the current tax system is dysfunctional. Specifying the criteria by which successful reform should be evaluated, they engineered the tax around the notion that reform should minimize the adverse growth effects of the tax system, be neutral between debt and equity, consumption and savings, and among industries, should reduce compliance burdens that waste more than a quarter trillion dollars today, respect civil liberties instead of requiring Americans to reveal virtually every aspect of their lives to government, eliminate favoritism shown imports and remove the penalty on exports, enhance the competitiveness of the U.S. as an investment destination and a location for headquartering businesses, eliminate the bias against upward mobility, and increase transparency and comprehension of the tax system.

Mr. Bartlett questions economic claims that under the FairTax proposal the gross domestic product will rise 10.5%. In fact, Arduin, Laffer & Moore Econometrics estimates GDP gains up to 24.4% greater than under the current system by the 10th year. Michael Boskin, former chairman of the Council of Economic Advisers, estimates long-term gain to GDP from a consumption-based tax reform would be about 10%. Laurence Kotlikoff estimated a 7% to 14% increase in GDP. Many others find high single digit to low double digit gains. Lowering marginal rates and eliminating double and triple taxation of savings will increase the well-being of the American people by a trillion dollars per year and perhaps much more.

The FairTax would untax existing homes that represent three-quarters of all homes bought and sold. And by allowing mortgage interest payments to be paid with both pre-income and pre-payroll tax dollars, the tax is the equivalent of allowing mortgage interest to be deductible against payroll taxes today. Interest rates will drop by 25% for the same reason municipal bond rates are lower than taxable bond rates. Interest would not be taxable to the recipient. And of course there is the benefit of having the only developed economy in the world with a zero rate of tax on income.

Dan R. Mastromarco
David R. Burton
Alexandria, Va.

(Messrs. Mastromarco and Burton are principals in the Argus Group, a law and government relations firm.)

The Fair Tax is a Flawed Tax

In the August 26, 2007 Wall Street journal editorial "Fair Tax, Flawed Tax," conservative Bruce Bartlett asks "Does adding 30% to the price of every house sold sound like a good idea to you?"

Former Arkansas Gov. Mike Huckabee's unexpectedly strong second-place showing in the recent Iowa Republican straw poll is widely attributed to his support for the FairTax.

For those who never heard about it, the FairTax is a national retail sales tax that would replace the entire current federal tax system. It was originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service, with which the church was then at war (at the time the IRS refused to recognize it as a legitimate religion). The Scientologists' idea was that since almost all states have sales taxes, replacing federal taxes with the same sort of tax would allow them to collect the federal government's revenue and thereby get rid of their hated enemy, the IRS.

Rep. John Linder (R., Ga.) and Sen. Saxby Chambliss (R., Ga.) have introduced legislation (H.R. 25/S. 1025) to implement the FairTax. They assert that a rate of 23% would be sufficient to replace federal individual and corporate income taxes as well as payroll and estate taxes. Mr. Linder's Web site claims that U.S. gross domestic product will rise 10.5% the first year after enactment, exports will grow by 26%, and real investment spending will increase an astonishing 76%.

In reality, the FairTax rate is not 23%. Messrs. Linder and Chambliss get this figure by calculating the tax as if it were already incorporated into the price of goods and services. (This is known as the tax-inclusive rate.) Calculating it the conventional way that every other (This is called the tax-exclusive rate.)

The distinction is confusing, but think of it this way. If a product costs $1 at retail, the FairTax adds 30%, for a total of $1.30. Since the 30-cent tax is 23% of $1.30, FairTax supporters say the rate is 23% rather than 30%.

This is only the beginning of the deceptions in the FairTax. Under the Linder-Chambliss bill, the federal government would have to pay taxes to itself on all of its purchases of goods and services. Thus if the Defense Department buys a tank that now costs $1 million, the manufacturer would have to add the FairTax and send it to the Treasury Department. The tank would then cost the federal government $300,000 more than it does today, but its tax collection will also be $300,000 higher.

This legerdemain is done solely to make revenues under the FairTax seem larger than they really are, so that its supporters can claim that it is revenue-neutral. But for the government to afford to purchase the same goods and services, it would have to raise spending by the amount of the tax it pays to itself. The FairTax rate, however, is not high enough to finance the higher spending it imposes. Therefore the proposal only works if federal purchases are cut by 30%, close to $300 billion--the increased cost imposed by the FairTax.

Similarly, state and local governments would have to pay the FairTax on most of their purchases. This means that it is partly financed by higher state and local taxes. It's also worth remembering that state sales taxes now average 6%, which means that the total tax rate will be 36% on retail sales.

State sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles. But the FairTax would apply to 100% of services, including medical care, thus increasing their cost by 30%. No state comes close to taxing services so broadly.

Consumers would also find themselves taxed on newly constructed homes. Imagine paying 30% to the federal government on top of the purchase price of your next house.

Since sales taxes are regressive--taking more in percentage terms from the incomes of the poor and middle class than the rich--some provision is needed to prevent a vast increase in taxation on the nonwealthy. The FairTax does this by sending monthly checks to every household based on income.

Aside from the incredible complexity and intrusiveness of tracking every American's monthly income--and creating a de facto national welfare program--the FairTax does not include the cost of this rebate in the tax rate. As noted earlier, the FairTax is designed only to match current revenues and does not cover any increased spending that it may require. Since the rebate will cost at least $600 billion the first year, either federal discretionary spending would have to be cut by 60% or the rate would have to be five percentage points higher than advertised.

Rejecting all the tricks of FairTax supporters and calculating the tax rate honestly--by including the higher spending that it mandates and by being realistic about what could actually be taxed--professional revenue estimators have always concluded that a national retail sales tax would have to be much, much higher than 23%.

A 2000 estimate by Congress's Joint Committee on Taxation found the tax-inclusive rate would have to be 36% and the tax-exclusive rate would be 57%. In 2005, the U.S. Treasury Department calculated that a tax-exclusive rate of 34% would be needed just to replace the income tax, leaving the payroll tax in place. But if evasion were high then the rate might have to rise to 49%. If the FairTax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion).

I've emphasized problems with the FairTax rate because public opinion polls have long shown that support for flat-rate tax reforms is extremely sensitive to the proposed rate, with support dropping off sharply at a rate higher than 23%. But there are also massive technical and administrative problems with collecting all federal taxes at the checkout counter and relying entirely on state governments to collect the federal government's revenue.

Among the problems: What possible incentive would the states have to be vigorous in their federal tax collections? What is to stop them from slacking off and giving their citizens a tax cut at federal expense? What about states with no sales taxes? What's to stop people from bypassing retail outlets and buying their goods from producers or at wholesale, tax-free?

Perhaps the biggest deception in the FairTax, however, is its promise to relieve individuals from having to file income tax returns, keep extensive financial records and potentially suffer audits. Judging by the emphasis FairTax supporters place on the idea of making April 15 just another day, this seems to be a major selling point for their proposal.

Yet all but six states now have state income taxes. So unless one lives in one of those states, this promise is an empty one indeed. In short, the FairTax is too good to be true, and voters should not take seriously any candidate who supports it.

Mr. Bartlett was deputy assistant secretary of the Treasury for economic policy from 1988 to 1993.

Ken Wilber - Integral Politics

According to the YouTube video "Ken Wilber - Integral Politics":

At the recent 5-day Integral Institute seminar on Integral Business Leadership,
Ken Wilber was asked, by a senior Zen teacher, "What do you think of the Republican convention?"

Ken responded by giving an overview of what a truly integral politics might look like, and used that to compare and contrast with the Democratic and Republican conventions, both of which are less-than-integral. We think that this twenty-minute summary is brilliant, insightful, deadly serious, and wickedly funny, all at once. But by all accounts it is an extraordinary account of why all politics today are considerably less-than-integral, along with certain features that almost certainly would have to be included in the future in any truly integral politics.

In this synopsis, Ken focuses on three items that all political theories have attempted to address but none have managed to fully integrate. These are the tension between (1) the individual and the collective; (2) the source of the cause of human suffering: is the individual primarily to blame or is the society primarily to blame?; and (3) the different levels of development that the different political parties tend to represent: any truly integral politics would include and represent all of them, and yet how on earth do you do that?

Due to time considerations, Ken did not discuss two other equally important ingredients in any integral politics. One. In representational democracies, people have a right to be at whatever stage of development they are at, and generally speaking, within free speech, a right to express the values of whatever stage they are at. Traditional-fundamentalist (blue) has a right to be traditional, modernist (orange) has a right to be modernist, postmodernist (green) has a right to be postmodernist, and so on. This is generally modified in practice, to the extent that the center of gravity of a culture will tend to impose its values on others, especially if they are first-tier (or less-than-integral) values. Nonetheless, in democratic societies, there's a general background understanding that people have a right to be, and a right to express, whatever stage they are or whatever belief system they possess.

Two. They do not, however, have a right to act on those beliefs. This is generally handled in representative democracies by a separation of public and private, and by a similar if more specific principle of the separation of church and state. This means that, for example, in the privacy of my blue-meme mind, I am free to believe that Jesus Christ is my personal savior and that nobody achieves salvation without a belief in Jesus. In public behavior, however, I am not allowed to burn at the stake somebody who disagrees with me. In terms of integral psychology, this means in the interior of an individual (i.e., the upper left), the person can believe whatever they like; but in their public behavior (i.e., the upper right), they must behave according to laws drawn from a worldcentric or higher level of development (lower left), or else they are charged with civil or criminal behavior and removed from society if necessary (lower right).

This separation of church and state, or more generally what Max Weber called the differentiation of the values spheres, is one of the great and enduring contributions of the Western enlightenment, a contribution almost entirely misunderstood by extreme postmodernists, who in fact are operating under its protection while bitterly condemning it.

(The most common version of this is the aggressive attempt to reduce "I" and "It" to "We,' or the attempt to reduce art and science to a social construction, which can therefore be deconstructed. As it turns out, this reductionism presumes precisely what it denies, but then, deconstructive postmodernism has been little without its performative contradictions.)

A truly integral politics exists nowhere on the planet at this time, principally because not enough individuals have emerged at the integral levels of consciousness, and hence no governments anywhere have integral representatives as members (except rarely and by accident). Its principal challenge is to create some form of governance that allows each stage to be itself within the constraints of not harming others (i.e., to let red be red, and blue be blue, and orange be orange, and green be green, etc—precisely because, as we saw, this is a right in virtually all free societies), and yet to govern from the highest, widest, deepest, and most encompassing levels of development emerged to date (starting at yellow). Most representative democracies do this anyway, except their center of gravity is not yet fully integral, and they do it implicitly, not explicitly.

http://www.youtube.com/watch?v=tQRUu_4W2j8

Click here to read more about Ken Wilber and Integral Theory. or see "Ken Wilber - Integral Vision."

Looking at President Bush, Seeing an 'Impostor'

The article "Looking at President Bush, Seeing an 'Impostor'," summarizes the February 22, 2006 National Public Radio (NPR) interview of Bruce Bartlett by Fresh Air's Terry Gross:

Despite what his supporters say, President Bush has far more in common with Richard Nixon than Ronald Reagan. That's the idea put forth in conservative economist Bruce Bartlett's new book, Impostor.

The book, subtitled "How George W. Bush Bankrupted America and Betrayed the Reagan Legacy," looks at the president from the point of view of a former Reagan White House official.

Calling President Bush an opportunist who lacks a set of political principles like those that guided Reagan, Bartlett worries that the country -- and conservatives in particular -- are being hurt by the president's mistakes. He faults Bush for increasing federal spending -- with programs like the 2003 Medicare prescription drug bill -- while also cutting taxes.

Bartlett, who supported Bush in the 2000 election, was a domestic policy aide at the White House in the Reagan administration; he also served as deputy assistant secretary in the Treasury Department under the first President Bush.

Until recently, Bartlett was a senior fellow at the conservative think tank the National Center for Policy Analysis. He lost the job in October because, Bartlett says, he was increasingly critical of President Bush.

Excerpt from 'Impostor'
by BRUCE BARTLETT

Chapter 1

I Know Conservatives, and George W. Bush Is No Conservative

George W. Bush is widely considered to be one of the most politically conservative presidents in history. His invasion of Iraq, his huge tax cuts, and his intervention in the Terri Schiavo case are among the issues where those on the left view him as being to the right of Attila the Hun. But those on the right have a different perspective -- mostly discussed among themselves or in forums that fly below the major media's radar. They know that Bush has never really been one of them the way Ronald Reagan was. Bush is more like Richard Nixon -- a man who used the right to pursue his agenda, but was never really part of it. In short, he is an impostor, a pretend conservative.

I write as a Reaganite, by which I mean someone who believes in the historical conservative philosophy of small government, federalism, free trade, and the Constitution as originally understood by the Founding Fathers. On that basis, Bush clearly is not a Reaganite or "small c" conservative. Philosophically, he has more in common with liberals, who see no limits to state power as long as it is used to advance what they think is right. In the same way, Bush has used government to pursue a "conservative" agenda as he sees it. But that is something that runs totally contrary to the restraints and limits to power inherent in the very nature of traditional conservatism. It is inconceivable to traditional conservatives that there could ever be such a thing as "big government conservatism," a term often used to describe Bush's philosophy.

Perhaps the greatest sin of liberals is their belief that it is possible for them to know everything necessary to manage the economy and society. To conservatives, such conceit leads directly to socialism and totalitarianism. At a minimum, it makes for errors that are hard to correct. By contrast, conservatives like Ronald Reagan understand that the collective knowledge of people as expressed in the free market is far greater than any individual, government bureau, or even the most powerful computer can possibly have. And in politics, they believe that the will of the people as expressed through democratic institutions is more likely to result in correct policies than those devised by Platonic philosopher kings. Liberals, on the other hand, are fundamentally distrustful of the wisdom and judgment of the people, preferring instead the absolutism of the courts to the chaos and uncertainty of democracy.

Traditional conservatives view the federal government as being untrustworthy and undependable. They utilize it only for those necessary functions like national defense that by their nature cannot be provided at the state and local level or privately. The idea that government could ever be used actively to promote their goals in some positive sense is a contradiction in terms to them. It smacks too much of saying that the ends justify the means, which conservatives have condemned since at least the French Revolution.

George W. Bush, by contrast, often looks first to government to solve societal problems without even considering other options. Said Bush in 2003, "We have a responsibility that when somebody hurts, government has got to move." A more succinct description of liberalism would be hard to find.

My main concern is with Bush's economic policy because that is my field of expertise. But it doesn't mean that I am content with the rest of his program. I am deeply concerned about the Iraq operation, which has more in common with Woodrow Wilson's policy of making the world safe for democracy than with traditional conservative foreign policy, which is based on defending the American homeland and avoiding unnecessary political and military entanglements with other countries -- a view best expressed in George Washington's Farewell Address.

I am also concerned with Bush's cavalier attitude toward federalism and his insistence on absolute, unquestioning loyalty, which stifles honest criticism and creates a cult of personality around him that I find disturbing. As former Reagan speechwriter John Podhoretz, author of a sympathetic book about Bush, has observed, "One of the remarkable aspects of this White House has been the fanatical loyalty its people have displayed toward Bush -- even talking to friendly journalists like me, it's been nearly impossible to get past the feel-good spin."

For example, in 2002, the White House directly ordered the firing of former Republican congressman Mike Parker of Mississippi as head of the Army Corps of Engineers because he publicly disagreed with the administration's budget request for his agency. In 2005, it ordered the demotion of a Justice Department statistician who merely put out some data that the White House found inconvenient. This micromanagement of such low-level personnel is extraordinary in my experience. Columnist Robert Novak referred to this sort of thing as the Bush White House's "authoritarian aura."

In White Houses filled with high-caliber people, dissent invariably arises and becomes known. The apparent lack of dissent in this White House, therefore, is an indication to me of something troubling -- an unwillingness to question policies even behind closed doors, an anti-intellectual distrust of facts and analysis, and blind acceptance of whatever decisions have been made by the boss.

The only alternative is something equally bad -- fear of telling Bush something he doesn't want to hear. When asked whether he ever disagreed with him, Mark McKinnon, Bush's chief campaign media adviser in 2004, said, "I prefer for others to go into the propeller first." This is the sort of thing that has gotten many big corporations like Enron in trouble in recent years, and I fear similar results from some of Bush's ill-considered policies, especially the disastrous unfunded expansion of Medicare.

In thinking about Bush, I keep coming back to Ronald Reagan. Although derided as an amiable dunce by his enemies, it is clear from recent research that his knowledge and intellect were far deeper than they imagined. Articles and speeches drafted in his own hand leave no doubt that Reagan was exceptionally well read and had an excellent grasp of both history and current issues, including highly technical matters and complex statistics. This knowledge was honed by decades of reading the classics of conservative thought and having spent much of his life publicly debating those whose views were diametrically opposed to his.

By contrast, George W. Bush brags about never even reading a daily newspaper. Having worked in the White House, I know how cloistered the environment can be and how limited its information resources are -- much of what White House staffers know about what is going on in the White House actually comes from reporters and news reports rather than inside knowledge, which is frequently much less than reporters imagine. It's distressing to contemplate the possibility that the president's opinion about the worthlessness of outside information sources is widely held within the White House. Unfortunately, I know from experience that the president sets the tone and style for everyone in the White House, suggesting that it is more likely than not that this view does indeed permeate the West Wing -- a suspicion confirmed by the memoirs of those who have worked in this White House.

Reagan, on the other hand, had a conservative distrust of his own ability to know all the facts and arguments before making important decisions. That is one reason why he was so tolerant of leaks from the White House during his administration. Reagan knew that this was an important safety valve that allowed dissenting viewpoints to reach him without being blocked by those with their own agendas. Deputy Chief of Staff Dick Darman, who controlled the paper flow in and out of the Oval Office, for example, was often accused of preventing Reagan from seeing memos that argued against positions Darman favored.

I was involved in one very small effort to get around Darman myself. One day early in the Reagan Administration, while I was still working on Capitol Hill, a midlevel White House staffer whom I knew called me. He had written a memo to the president that he couldn't get through the bureaucracy. Knowing that Reagan was an avid reader of Human Events, the conservative weekly newspaper, my friend suggested that I take his memo, put my name on it, and publish it as an article in Human Events. I did, thereby getting the information and analysis to the president that my friend thought he needed. Others in the White House frequently did the same thing by leaking memos to theWashington Post or the New York Times that appeared as news stories.

By contrast, the Bush White House is obsessive about secrecy, viewing leaks of even the most mundane information as the equivalent of high treason. Ironically, this attitude can be self-defeating, since "leaks" are a very effective way of getting one's message out -- as the Clinton White House often demonstrated. Think of it as giving an exclusive story to a reporter who has no choice but to accept the leaker's "spin." In this way, a leak can garner more and better press for a White House initiative than more conventional means like press releases. Leaking, in short, is not a moral issue, but can be a useful public relations technique.

Conservative Doubts

Traditional conservatives had grave doubts about George W. Bush since day one. First, he was his father's son. George H. W. Bush ran as Reagan's heir, but did not govern like him. Indeed, the elder Bush signaled that there would be a sharp break with Reagan-style conservatism in his inaugural address, when he spoke of being "kinder" and "gentler." Conservatives immediately asked themselves, "Kinder and gentler than whom?" To them, the answer was obvious: Ronald Reagan. In effect, Bush was accusing his predecessor and the philosophy he stood for as being the opposite of kind and gentle -- nasty and brutish, perhaps. As columnist George Will later put it, Bush was determined "to distinguish himself from Reagan by disparaging Reagan."

George H. W. Bush's break with Reagan quickly became apparent in other ways as well. For instance, he fired virtually every Reagan political appointee in the federal government just as thoroughly as if he had been a Democrat. Of course, the Reagan appointees all knew that they were liable to be replaced at some point, but the suddenness and thoroughness of the purge caught them all by surprise -- there had been no forewarning before Inauguration Day. It created a lot of ill will that came back to haunt the elder Bush when he got into political trouble later on. Most of the Reagan people sat on their hands rather than come to his aid.

I was spared the purge only because Reagan had appointed Treasury Secretary Nicholas Brady in the last days of his administration, knowing that he was a close friend of then–Vice President Bush. Since Brady stayed on, that spared Treasury the "transition" that other departments underwent and thus avoided a purge. Within a year or so, most of the senior political appointees moved on anyway and Bush had his chance to appoint their successors. The same thing would have happened in all the other departments, too, thereby saving Bush a lot of unnecessary antagonism from the Reagan crowd. It would have helped Bush govern as well, since many of the purged positions remained vacant for some time for various reasons and were often filled with less competent and experienced replacements. Moreover, many of the so-called Bush people turned out to have no meaningful connection to him and were nothing more than friends of friends, serving in government just to get a line on their résumés and not because they had anything to accomplish in terms of policy.

One of the first things I noticed when the new crowd came in in 1989 was that they would very seldom mention Ronald Reagan's name. When necessary, they always referred to the "previous administration." And it was quite clear that they viewed Reagan's "hard-line" conservatism as passé and counterproductive to governing. They, on the other hand, thought themselves to be much more politically astute and believed that they would be far more effective by jettisoning Reagan's ideological baggage.

The problem was that having abandoned Reagan's principles, they had nothing to replace them with except political expediency. This culminated in the infamous abandonment of the no-new-taxes pledge in 1990. The Bush people thought they were being so clever by simply posting a notice in the White House pressroom on June 26, 1990, which said that budget negotiations with congressional Democrats would take place and include discussion of "tax revenue increases." They seem to have thought that no one would notice this fundamental reversal of Bush's position on taxes. Needless to say, it was noticed instantaneously, causing an almost immediate decline in Bush's poll ratings.

I was told by one of the key participants in this decision that they never intended it as a repudiation of the pledge, but merely as an acknowledgment that in a growing economy taxes automatically rise. If this is true, it certainly is not evidence of political sophistication, but rather its opposite. Being the only Reaganite left in the Treasury Department, apparently I was the only one who knew how negatively Bush's concession would be perceived by the Republican rank and file. Unfortunately, no one asked my opinion before the decision was made.

I bring all this up because when George W. Bush first came on the radar screen as a potential presidential candidate, all that most conservatives knew about him was that he was the son of a president who had abandoned a successful conservative governing philosophy in favor of what they saw as squishy moderation, and was appropriately punished by voters for his sins. So when the younger Bush started talking about "compassionate conservatism," therefore, traditional conservatives immediately were suspicious of another Bush betrayal. As Richard Miniter wrote in the conservative Manchester Union Leader, "Bush's 'compassionate conservatism' strikes some as insulting and signals a return to his father's 'kinder and gentler' conservatism, which led to tax hikes and the loss of the White House."

As National Review's Andrew Stuttaford later put it, compassionate conservatism is an idea that should have been "strangled in the cradle." To even call it an idea is "flattery," he said. For the most part, it is little more than "pork wrapped up in schmaltz."

Right from the beginning, George W. Bush made it clear that he was not a conservative in the Reagan mold. In a speech in Indianapolis on July 22, 1999, he called the idea that our problems would be better solved if government would just get out of the way a "destructive mind-set." Government is "wasteful and grasping," Bush said, but "we must correct it, not disdain it." Commenting on this speech, Cato Institute president Ed Crane said it could have come straight out of the Progressive Policy Institute, a think tank allied with the Democratic Party.

Even in front of explicitly conservative audiences, Bush continued his theme that government was not the enemy, but just wasn't being used for the proper ends. In a speech to the Manhattan Institute on October 5, 1999, Bush put it this way: "Too often, my party has confused the need for limited government with disdain for government itself." He went on to complain that the government was too weak to do what was needed. It was "grasping" and "impotent," he said.

Excerpted from Impostor by Bruce Bartlett Copyright (c)2006 by Bruce Bartlett.

Neoliberalism: origins, theory, definition

The following information from Paul Treanor provides some insight into neoliberalism:

Neoliberalism: origins, theory, definition

Since the 1990s activists use the word 'neoliberalism' for global market-liberalism ('capitalism') and for free-trade policies. In this sense, it is widely used in South America. 'Neoliberalism' is often used interchangeably with 'globalisation'. But free markets and global free trade are not new, and this use of the word ignores developments in the advanced economies. The analysis here compares neoliberalism with its historical predecessors. Neoliberalism is not just economics: it is a social and moral philosophy, in some aspects qualitatively different from liberalism. Last changes 02 December 2005.

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Neoliberalism inadequately defined?

The definition of neoliberalism presented here is more abstract than usual - but it also suggests that neoliberalism has been underestimated. A widely quoted example of those 'usual definitions' is What is "Neo-Liberalism"? by Elizabeth Martinez and Arnoldo García:

Neo-liberalism is a set of economic policies that have become widespread during the last 25 years or so. Although the word is rarely heard in the United States, you can clearly see the effects of neo-liberalism here as the rich grow richer and the poor grow poorer....Around the world, neo-liberalism has been imposed by powerful financial institutions like the International Monetary Fund (IMF), the World Bank and the Inter- American Development Bank....the capitalist crisis over the last 25 years, with its shrinking profit rates, inspired the corporate elite to revive economic liberalism. That's what makes it 'neo' or new.

This sense of the word 'neoliberalism' is widely used in Latin America. However, neoliberalism is more a phenomenon of the rich western market democracies, than of poor regions. That is why I emphasise the historical development of liberalism, in those western market democracies. The IMF and the World Bank are not the right places to look, to see the essence of neoliberalism. And the WTO ideology - free trade and 'competitive advantage' - is 200 years old. There is nothing 'neo' in their liberalism.

Seattle and Genoa?

The image of 'neoliberalism' has been heavily influenced by the protests against it: people think of the violent protests at Seattle and Genoa, and the associated social movements. If you only thought about that, then neoliberalism would be an ideology of the riot police, and that's not accurate.

It's true that the Genoa G8 summit was intended as a show of force. The organisers knew that violent demonstrations were probable in an Italian city, but chose to confront them. Democratically elected leaders "should not run from demonstrators", said Tony Blair. (However, when it was Britain's turn to organise the G8 summit, the hypocrite choose the isolated Gleneagles hotel in Scotland). 20 000 police and soldiers were deployed at the Genoa G8 summit - NATO used 42 500 troops to occupy Kosovo. This show of force was out of all proportion to the political strength of anti-market forces, but it emphasised the legitimacy of the market-democratic states.

It is possible for 'the state' to suppress 'the market', but also to promote it. In fact, the free market emerged in Europe under the protection of the state, and the market needs the state, more than the other way around. The market needs internal regulation, in order to function: the state, in the form of the legal system, ensures contracts are enforced. In the form of the police, it prevents theft and fraud. It establishes uniform systems of weights and measures, and a uniform currency. Without these things there would be no free market, no market forces, and no resulting market society. Bill Gates disputes the US Government's authority over his business - but if there was no government at all, the poor would soon steal his wealth. The attack on the World Trade Center provided some images of this dependency - the reopening of the New York Stock Exchange by police and firefighters, for instance. (In turn, at least in the United States, the market is integrated in the national identity: the NYSE reopening was seen as an act of national defiance).

The free market is itself a form of social organisation: it is neither spontaneous nor endemic to humans. If no-one ever promoted or enforced it, there would be no free market on this planet. For thousands of years, there was none. The modern free market came into existence primarily because liberalism demanded its existence. This demand was a a political demand, and it was enforced through the state.

The general functionalist starting premise is only modified to the extent that the "system" is comprehended as capitalist, in a specific way "form-determined". The state and the political system function as a form of an 'ideal all-around capitalist', who must uphold not just the society as such, but the 'capitalist element'. The different forms of state interventionism are explained both as an expression of functional needs of the accumulation and reproduction process of capital. The general requirements of capital accumulation such as basic infrastructure, functioning law systems and legitimization mechanisms are tasks that cannot be carried out by individual capitalists due to the competition relations, but instead systemically require a "fictive all-around-capitalist". This "capitalist referee" must guarantee the fulfilment of these tasks in the interest of maintaining the system of capitalist society..
Business and the State: Mapping the Theoretical Landscape
Volker Schneider and Marc Tenbuecken, 2002.

If everyone on this planet was a liberal, an enthusiastic supporter of the free market, then that would be the end of the matter. But of course some people oppose the market, and its effects - especially the resulting inequality. The market is a political and social regime, and like any other regime, it must be enforced against opposition. That is true even of democracies: democrats overthrow dictators, and dictators overthrow democracies. If either side wants to avoid their own overthrow, they must use force. Democrats do use democratic force, and do fight democratic wars, as they know in Iraq.

The relationship between supporters and opponents of the free market, is similar to that between democrats and anti-democrats. They are enemies, inherently. On the very existence of the market, no compromise is possible. The free market either exists, or it does not exist. It can disappear by consent - which is absurdly unlikely - or without consent. Any attempt to end the free market is, by definition, an attempt to overthrow a fundamental social structure. Certainly, in the long-established western market democracies, it would mean a collapse of the existing social structures. The effect would be dramatic - comparable to occupation by a foreign power.

So it is not surprising that force is used in the face of a threat, and it is not surprising that it is the force of the state. That is after all, a typical task of the state - the preservation of the regime itself, the preservation of the nature of the state. Anarchist propaganda speaks of "the State", as if all states were interchangeable, but they are not. A market democracy is not interchangeable with a Bolshevik regime, simply because they both have a government, an army, and a police force. A market democracy will use force, state force, against an attempt to overthrow either democracy or the market. That is what the riot police did: defend the state, and defend the market - without contradiction between them.

In historical perspective 'Genoa' was an absurd over-reaction. The western market democracies are the most stable and successful societies in history. The principle of the free market is accepted by well over 90% of their population, probably closer to 99% in western Europe. The tensions can be explained by the underlying sense of threat, but they are not specifically related to neoliberalism, and they certainly do not explain it. For that, a long-term and ideological perspective is necessary.

Liberalism

Liberalism as a coherent social philosophy dates from the late 18th century. At first there was no distinction between political and economic liberalism (economics was not considered a separate discipline until about 1850). Classic liberal political philosophy has continued to develop - after 1900 as a purely conservative philosophy. The basic principles of all liberal philosophy are:

• Liberals believe that the form of society should be the outcome of processes. These processes should be interactive and involve all members of society. The market is an example, probably the best example, of what liberals mean by process. Liberals are generally hostile to any 'interference with process'. Specifically, liberals claim that the distribution of wealth as a result of the market is, in itself, just. Liberals reject the idea of redistribution of wealth as a goal in itself.
  

• Liberals therefore reject any design or plan for society - religious, utopian, or ethical. Liberals feel that society and state should not have fixed goals, but that 'process should determine outcome'. This anti-utopianism became increasingly important in liberal philosophy, in reaction to the Communist centrally-planned economies: it anticipated the extreme deregulation-ism of later neoliberalism.
  

• Liberalism is therefore inherently hostile to competing non-liberal societies - which it sees not simply as different, but as wrong. In the last 10 years, Islamic society has replaced the Communist state, as the perceived 'opposite' to a liberal society.
  

• Nevertheless liberalism has compromised with one specific form of non-liberal ideology: nationalism, in the ethno-national form which underlies most present nation states. A political community based on common origin, history and language is not liberal, but liberals never tried to form the voluntarist, contractual, non-historical state - which liberalism would logically imply. The nation state was simply taken for granted, as the political and economic arena for liberal process.
  

• Liberals define liberalism itself as 'freedom', so they rarely think consent is required for the imposition of a liberal society. In fact, most would say it can not be imposed, inherently. After the Cold War this belief has acquired a geostrategic significance: many western liberal-democrats now believe, that a war to impose a liberal-democratic society is inherently just. This belief influences interventionist policy, but as yet no war for the sole purpose of liberalisation has been fought.
  

• Classic political liberals reject the idea that there are any external moral values: they say that there are only opinions. They feel that these opinions should be 'expressed' in public, and that in some way this 'market of opinions' will favour the truth. (The idea that truth can be revealed by discourse is much older than liberalism).
  

• The liberal rejection of external moral values is formally expressed in the liberal idea of human rights: both good and evil humans have equal rights, which apply equally when they facilitate good or evil actions. Classic liberal philosophy advocated 'liberty' as a value, even if they did not call it a value. In effect it places liberty as a value above good (and evil).
  

• Liberals believe in formal equality among participants in a liberal society, but almost all liberals also believe in inequality of talent. Many liberals were therefore sympathetic to biological theories of inequality. (Theories of hereditary racial differences in intelligence are now popular among US neoliberals).

Liberalism is a universal ideology, and in principle liberals seek to apply it to the entire planet, and the entire human population. Most liberals have supported the expansion of liberal society, although in the 19th century that meant among the 'civilised nations'. For a long time the free market was considered the only cross-cultural and 'exportable' element of liberalism. Only recently have liberals advocated, that African and Asian societies should become 100% liberal-democratic societies. 'Liberal missionaries', such as George Soros, were unknown or marginal in the 19th century.

Market liberalism

The free market is not simply 'exchange' or 'trade'. Two people who exchange products can not form a free market in the liberal sense, even if their transactions are monetarised. The element of competition is missing in this two-person society.

A minimal liberal free market needs at least three parties, with two of them in competition - for instance, two competing sellers and one buyer. The resultant pressure on the two sellers to lower prices, is the simplest type of 'market force'. Such a force comes into existence without any conscious action on the part of the three parties. In modern markets there are millions of parties, and complex market forces. Market-liberals value this characteristic of the market. Their belief in the moral necessity of market forces in the economy, is probably the first defining feature of market liberalism. The second is the belief in entrepreneurs themselves, as a good and necessary social group. To summarise:

• For all liberals, interactive process legitimises outcome: in market liberalism, the market is the primary process, and market transactions are the interaction.
  

• Market liberals believe that economic transactions should take place in a framework which maximises the effect of each transaction on every other transaction. (That is an abstract definition of the free market, but it makes the later transition from liberalism to neoliberalism easier to understand).
  

• Liberals see the market as good, and often as semi-sacred. They want the market to be as large as possible, involving all of society. In modern liberal-democratic states almost all adults participate in the market. A private club in a Communist state, where members can hold a closed free market, would satisfy no liberal.
  

• Liberals are hostile to economic self-sufficiency - so strongly, that they believed in war to 'open up markets'. The most famous example is the Opium War, when Britain forced the Chinese Empire to allow the import of opium. This liberal belief in market expansionism has revived after the end of the Cold War.
  

• Market liberals are hostile to trade barriers: "free trade" is a classic slogan of market liberalism. That meant traditionally, the free flow of goods and capital: neoliberalism later developed a more diffuse version, where 'flow' and 'interaction' are treated as quasi-ethical values.
  

• Market liberals believe that important aspects of society should be determined by the market, certainly the distribution of income and wealth. Neoliberalism later extended this belief, claiming that all social life should be determined by the market.
  

• All market liberals are hostile to interference in the market, by church, state or others - although since the 19th century only the state has sufficient power to interfere. Market liberals are clearly anti-utopian, in the sense of opposing economic planning, especially centralised state control of the entire economy. They believe that the market produces the best 'design for society', and that is is wrong to substitute any other design.
  

• However, market liberalism is itself a utopia, despite its anti-utopianism. In the 'ideal world' of market liberalism, no goods or services exist which are not the product of market forces, but all goods or services which are market-responsive do exist. This is in itself a utopian project, implying a total structuring of society. Neoliberalism goes even further - extending the market principle beyond the production of goods and services.
  

• The social institution of the entrepreneur is central to market liberalism. An entrepreneur is a person whose profession is, to respond to market forces. In the 19th century most entrepreneurs were still private individuals, later the business firm took over this function. The enterprise/firm is a permanent organisation, structured to respond to market forces. An entrepreneur is not a farmer, or a manufacturer, or a consultant: in theory an entrepreneur changes activities in accordance with the market. In reality most entrepreneurs retained a specialisation for some specific products or services: but neoliberalism now demands, that the theoretical flexibility should become standard practice.
  

• Without the entrepreneur there is no free market, therefore market liberals demand a privileged social status for the entrepreneur. The early liberal theorists were hostile to the urban guild economy of mediaeval Europe: they saw it, in effect, as a conspiracy not to compete. In their historical vision, the entrepreneur rescued Europe from the poverty of the Middle Ages. (This vision was shared by Karl Marx, who admired the cultural dynamism of the free market). Not just mediaeval Europe, but all societies without an entrepreneurial caste, were seen as failures.

A central but rarely explicit political demand of market liberals is therefore, that entrepreneurs should have control of the economy. This has not only been accepted, but has become so incorporated into the culture of western liberal-democratic societies, that few people ever think about it. But it would not be any less logical, to hand the economy to engineers, or priests - or not to privilege any one group. The choice depends on underlying values, and liberals value the entrepreneur. This value preference of liberals, and its widespread acceptance, has created what in the US is called 'the business community'. That is a real and identifiable social elite - with specific cultural preferences, specific clothing, and often a specific form of language (sociolect). It does in fact control the economy, in liberal-democratic states. Although this was probably not foreseen by early liberals, market liberalism has become an ideology in support of this elite. Their culture, attitudes, and ethics have greatly influenced neoliberalism.

Neoliberalism

If Adam Smith returned and saw the more extreme aspects of neoliberalism, he would probably find them bizarre. Nevertheless, they derive from the ideas of early liberalism. The belief in the market, in market forces, has separated from the factual production of goods and services. It has become an end in itself, and this is one reason to speak of neoliberalism and not of liberalism.

A general characteristic of neoliberalism is the desire to intensify and expand the market, by increasing the number, frequency, repeatability, and formalisation of transactions. The ultimate (unreachable) goal of neoliberalism is a universe where every action of every being is a market transaction, conducted in competition with every other being and influencing every other transaction, with transactions occurring in an infinitely short time, and repeated at an infinitely fast rate. It is no surprise that extreme forms of neoliberalism, and especially cyberliberalism, overlap with semi-religious beliefs in the interconnectedness of the cosmos.

Some specific aspects of neoliberalism are:

• A new expansion in time and space of the market: although there has been a global-scale market economy for centuries, neoliberals find new areas of marketisation. This illustrates how neoliberalism differs from classic market liberalism. Adam Smith would not have believed that a free market was less of a free market, because the shops are closed in the middle of the night: expansion of trading hours is a typically neoliberal policy. For neoliberals a 23-hours economy is already unjustifiable: nothing less than 24-hours economy will satisfy them. They constantly expand the market at its margins.
  

• The emphasis on property, in classic and market liberalism, has been replaced by an emphasis on contract. In the time of Adam Smith, property conferred status in itself: he would find it strange that entrepreneurs sometimes own no fixed assets, and lease the means of production.
  

• Contract maximalisation is typically neoliberal: the privatisation of the British railway network, formerly run by one state-owned company, led to 30 000 new contracts. Most of these were probably generated by splitting services, which could have been included in block contracts. (A fanatic neoliberal would prefer not to buy a cup of coffee, but negotiate separately for each microlitre).
  

• The contract period is reduced, especially on the labour market, and so the frequency of contract is increased. A service contract, for instance for office cleaning, might be reduced from a one-year to a three-month contract, then to a one-month contract. Contracts of employment are shorter and shorter, in effect forcing the employee to re-apply for the job. This flexibilisation means a qualitatively different working life: many more job applications, spread throughout the working life. This was historically the norm in agriculture - day labour - but long-term labour contracts became standard after industrialisation.
  

• Market forces are also intensified by intensifying assessment, a development especially visible on the labour market. Even within a contract period, an employee will be subject to continuous assessment. The use of specialised software in call centres has provided some extreme examples: the time employees spend at the toilet is measured in seconds: this information is used to pressure the employee to spend less time away from the terminal. Firms with contracts are also increasingly subject to continuous assessment procedures, made possible by information technology. For instance, courier services use tracking software and GPS technology, to allow customers to locate their packages in transit. This is a typical example of the new hyper-provision of business information, in neoliberal economies.
  

• New transaction-intensive markets are created on the model of the stock exchanges - electricity exchanges, telephone-minute exchanges. Typical for neoliberalism: there is no relationship between the growth in the number of transactions, and the underlying production.
  

• New forms of auction are another method of creating transaction-intensive markets. Radio frequency auctions, such as those for UMTS frequencies, are an example. They replaced previous methods of allocation, especially licensing - a traditional method of allocating access to scarce goods with no clear private owner. The complex forms of frequency spectrum auctions have only been developed in the last few years. Neoliberals now see them as the only valid method of making such allocations: they dismiss all other methods as 'beauty contests'.
  

• Artificial transactions are created, to increase the number and intensity of transactions. Large-scale derivative trading is a typically neoliberal phenomenon, although financial derivatives have existed for centuries. It is possible to trade options on shares: but it is also possible to create options on these options. This accumulation of transaction on transaction, is characteristic of neoliberalism. New derivatives are created, to be traded on the new exchanges - such as 'electricity futures'. There is no limit to this expansion, except computer power, which grows rapidly anyway.
  

• Automated trading, and the creation of virtual market-like structures, are neoliberal in the sense that they are an intensification of "transaction for transaction's sake". However, a world in which all entrepreneurial activity was automated would not be neoliberal, or liberal.
  

• This expansion of interactivity means that neoliberal societies are network societies, rather than the 'open societies', of classic liberals. Formal equality and 'access' are not enough for neoliberals: they must be used to create links to other members of the society. This attitude has been accurately labelled 'connectionist'.
  

• Because of contract expansionism, transaction costs play an increasing role in the neoliberal economy. All those 30 000 contracts at British Rail had to be drafted by lawyers, all the assessments have to be done by assessors. There is always some cost of competition, which increases as the intensity of transactions increases. Neoliberalism has reached the point where these costs threaten to overwhelm the existing economy, destroying any economic gains from technological change.
  

• The growth of the financial services sector is related to these neoliberal characteristics, rather than to any inherent shift to service economies. The entire sector is itself a transaction cost: it was almost non-existent in the centrally planned economies. In turn, it has created a huge demand for office space in the world's financial centres. The expansion of the sector and its office employment are in direct contradiction of propaganda about 'more efficiency and less bureaucracy' in the free market.
  

• The speed of trading is increased. Online market data is expensive, yet it is now available free with a 15-minute delay. The markets move so fast, that the data is worthless after 15 minutes: the companies can then give it away, as a form of advertising. Day-traders buy and sell shares in minutes. Automated trading programmes, where the computer is linked direct to the stock exchange system, do it in seconds, or less. It is this increased speed which has led to the huge nominal trading volumeson the international currency markets, many times the Gross World Product on a yearly basis.
  

• Certain functions arise which only exist inside a neoliberal free market - 'derivative professions'. A good example is the profession of psychological-test coach. The intensity of assessment has increased, and firms now regularly use psychological tests to select candidates, even for intermediate level jobs. So ambitious candidates pay for training, in how to pass these psychological tests. Competition in the neoliberal labour market itself creates the market for this service.
  

• The creation of sub-markets, typically within an enterprise. Sub-contracting is itself an old market practice, but was usually outside the firm. It is now standard practice for large companies to create competition among their constituent units. This practice is also capable of quasi-infinite extension, and its promotion is characteristic of neoliberalism. A few companies even required each individual employee to register as a business, and to compete with each other at the place of work. A large company can form literally millions of holdings, alliances and joint ventures, using such one-person firms as building blocks.
  

• Supplier maximalisation: this extends the range of enterprises that compete for each contract. The ideal would be that every enterprise competes for every contract offered, maximising competition and market forces. In the case of the labour market, the neoliberal ideal is the absolutely flexible and employable employee, who can (and does apply) for every vacancy. In reality, an individual can not perform every kind of work - but there is a real development towards non-specialised enterprises, especially in the producer services sector. In neoliberalism, instead of the traditional 'steel tycoon' or 'newspaper baron' there are enterprises which "globally link people and knowledge, and cultures" or "advise and implement solutions to management issues". (In fact these are quotes from the accountants Price Waterhouse, but you can not guess this from the descriptions).

Neoliberalism is not simply an economic structure, it is a philosophy. This is most visible in attitudes to society, the individual and employment. Neo-liberals tend to see the world in term of market metaphors. Referring to nations as companies is typically neoliberal, rather than liberal. In such a view Deutschland GmbH competes with Great Britain Ltd, BV Nederland, and USA Inc. However, when this is a view of nation states, it is as much a form of neo-nationalism as neoliberalism. It also looks back to the pre-liberal economic theory - mercantilism - which saw the countries of Europe as competing units. The mercantilists treated those kingdoms as large-scale versions of a private household, rather than as firms. Nevertheless, their view of world trade as a competition between nation-sized units, would be acceptable to modern neoliberals.

Competition for inward investment, on the other hand, was generally unknown until the late 19th century. This competition is often seen by activists as the core doctrine of neoliberalism, especially since the neo-mercantilist policies are easy to understand and very unpopular: wage cuts, less money for public services, less tax on the rich. The neo-mercantilist nation, in other words, behaves like a caricaturally mean and nasty capitalist. It is not relevant either for these policies, or for opposition to them, whether they have any effect at all. Perhaps investment decisions are not made on this basis, perhaps there is no real mobility of capital, perhaps no investor is interested in Argentina, for instance. But so long as the Argentine government believes that it should pursue certain polices to attract investors, then it will do so. So long as it believes that the 'SA Argentina' is a business firm, then it will run Argentina accordingly.

The market metaphor is not only applied among nations, but among cities and regions as well. In neoliberal regional policy, cities are selling themselves in a national and global marketplace of cities. They are considered equivalent to an entrepreneur selling a product, but the product is the city (or region) as a location for entrepreneurs. The successful 'sale' of the product is the decision of an entrepreneur to locate there, not simply the sale of land or factories. This view of cities as sub-firms within the fictive 'national firm' parallels the creation of sub-markets within real firms. The difference is, that those sub-markets really exist - neoliberal city governments, on the other hand, act primarily on a belief in a metaphor. Again, there is no hard evidence that the global marketplace of cities exists: for most economic sectors complete mobility of plant and labour is an illusion. Most firms can not simply move from city to city, across continents and ignoring language and cultural barriers, in pursuit of locational advantage. Here too, the neoliberalism is a philosophy, an attitude - rather than an economic reality. It has influenced European politics - the fear of this neoliberalism dominated the French campaign against the European Constitution. There is certainly a neoliberal lobby within the EU, represented by the Lisbon Council, although it sees the world in terms of competing trade blocks rather than competing cities or regions. However, it is not clear how a continent could be run as a business firm - even its inhabitants wanted that. (More on neoliberal economic geography below).

A good example of the underlying attitudes is the basic policy document of the city of Düsseldorf - the Leitbild, equivalent to a 'mission statement' in English. It was adopted in 1997, and is no longer online at the city website, but parts are quoted at St@ttbuch Düsseldorf...

Düsseldorf bekennt sich zum Prinzip des Wettbewerbs. Der Erfolg von Städten entscheidet sich im Wettbewerb nach innen und aussen. Düsseldorf will besser sein.
Wettbewerb ist treibende Kraft unseres gesellschaftlichen Systems. Im zusammenwachsenden Europa gilt dies in hohem Masse auch für die Beziehungen zwischen den Regionen, die als Wirtschaftsstandort, als Lebensraum für die Bürgerinnen und Bürger und als Kulturstandort miteinander konkurrieren. Sich hierzu bekennen heisst, den Wettbewerb aufnehmen und aktiv gestalten zu wollen.
Im Wettbewerb besteht nur, wer gut ist. Düsseldorf will Wettbewerb. Im Interesse der vielen Millionen Menschen des Lebens- und Wirtschaftsraums: Düsseldorf will besser sein.
...
Düsseldorf is committed to the principle of competition. The success of cities is decided by competition, internal and external. Düsseldorf wants to be better. Competition is the driving force of our social system. In a Europe which is becoming more integrated, this applies increasingly to the relations between regions. They compete with each other as investment location, as residential choice for the citizens, and in cultural activity. Our commitment means that we will actively and structurally enter into this competition. In a competitive world, only the good can survive. Düsseldorf wants to compete! In the name of the millions of people in our economic and residential region: Düsseldorf wants to be the best!

The neoliberal urban vision was adopted, without debate, by many city governments in the 1990's. At some point, a belief in 'competition by population structure' was incorporated - the idea that a successful city is inhabited only by successful people. This belief, nonsensical or not, has had an effect in a negative sense: some cities now pursue active policies aimed at relocating low-income households outside the city. In the Netherlands, a new law allows large cities to legally ban poor people, from certain areas, or from the entire city..

As you would expect from a complete philosophy, neoliberalism has answers to stereotypical philosophical questions such as "Why are we here" and "What should I do?". We are here for the market, and you should compete. Neo-liberals tend to believe that humans exist for the market, and not the other way around: certainly in the sense that it is good to participate in the market, and that those who do not participate have failed in some way. In personal ethics, the general neoliberal vision is that every human being is an entrepreneur managing their own life, and should act as such. Moral philosophers call this is a virtue ethic, where human beings compare their actions to the way an ideal type would act - in this case the ideal entrepreneur. Individuals who choose their friends, hobbies, sports, and partners, to maximise their status with future employers, are ethically neoliberal. This attitude - not unusual among ambitious students - is unknown in any pre-existing moral philosophy, and is absent from early liberalism. Such social actions are not necessarily monetarised, but they represent an extension of the market principle into non-economic area of life - again typical for neoliberalism.

The idea of employability is characteristically neoliberal. It means that neoliberals see it as a moral duty of human beings, to arrange their lives to maximise their advantage on the labour market. Paying for plastic surgery to improve employability (almost entirely by women) is a typical neoliberal phenomenon - one of those which would surprise Adam Smith.

Eileen Bradbury, a psychologist who advises surgeons at the Alexandra Hospital in Cheadle, Cheshire, said she was particularly worried that Jenna wanted the operation so that she could be successful. "That is a very disturbing belief for a 15-year-old girl to have, and also a false one," she said. "I have seen women coming for surgery who work in television and they say they have to have it done or they won't get the work. I usually go along with that because it is probably true".
Guardian: Parents defend breast implants for girl, 15.

In practice many 'workfare neoliberals' also believe that there is a separate category of people, who can not participate fully in the market. Workfare ideologies condemn this underclass to a service function for those who are fully market-compatible. Note however, that by recognising a non-market underclass, neoliberals undermine their own claims about the universal applicability of market principles.

The general ethical precept of neoliberalism can be summarised approximately as:

• "act in conformity with market forces"
• "within this limit, act also to maximise the opportunity for others to conform to the market forces generated by your action"
• "hold no other goals"

If everyone lives by such entrepreneurial precepts, then a world will come into existence in which not just goods and services, but all human and social life, is the product of conformity to market forces. More than traditional market liberals, neoliberals therefore have a quasi-heroic attitude to the entrepreneur, and to engagement in the market. A 1998 speech by German entrepreneur Jost Stollmann is typical: his neoliberal ideas played a prominent role in the national elections in Germany in that year. Stollmann includes his personal moral philosophy, such as it is...

Ich möchte die Lust und Bewunderung unternehmerischen Erfolgs in den Augen der jungen Menschen sehen. Ich möchte den Stolz und den Zuspruch der Eltern spüren, wenn sich Sohn oder Tochter tatenvoll in das Abenteuer Selbständigkeit stürzen.
....so gut sein, wie wir nur können - getreu der bewährten Formel, die ich während meiner Zeit in Amerika verstehen gelernt habe: 'BE THE BEST YOU CAN BE'
Jost Stollmann

The idea that everyone should be an entrepreneur is distinctly neoliberal. Early liberals never expected the majority of the population to own property, let alone run a business. (The participation of the poor in the market was limited to accepting any work they were offered). The practices on the flexibilised labour market would seem strange to the early liberals. For instance, individuals set up a one-person employment agency with one person on the books, themselves - partly for tax reasons, but also to meet the ideal of the entrepreneur. Policy to increase the number of entrepreneurs is typically neoliberal, although ironically it must be implemented by the State. A classic market-liberal would not say that a free market is less of a free market, because only 10% of the population are entrepreneurs. For neoliberals it is not sufficient that there is a market: there must be nothing which is not market.

the neoliberalism joke

Marxist: "The workers have nothing to sell but their labour power" Neoliberal: "I offer courses on How to Sell Your Labour Power Like A Shark"

There is therefore no distinction between a market economy and a market society in neoliberalism. With the attitudes and ethics set out above, there is only market: market society, market culture, market values, market persons marketing themselves to other market persons. In a sense neoliberalism has returned to the position of early liberalism - which also combined culture, values and ethics with economics. But neoliberalism brings a far more intensive 'market' - replacing not only traditional social forms, but also the concept of private life. At the same time this 'market' is increasingly remote from the necessity of production, which was so real for the early liberals - when there were still regular famines in Europe. In fact it is so remote from the existing cultural perception of a 'market', that it would perhaps be better to use some other word.

Finally, neoliberalism has become associated with specific cultures (especially US culture) and a specific language (English). This is not surprising: Anglo-American liberalism had the most influence on neoliberalism. Neoliberalism as ideology is not tied to any culture or language. It is true that a single global language would facilitate free trade - but that could be Esperanto, as well as English. In practice, the promotion of the English language, neoliberal policies, and pro-American foreign policy, usually go together: this was especially true in Central and Eastern Europe.

Globalisation and neoliberalism

Often the terms 'globalisation' and 'neoliberalism' are used as if they were interchangeable. That is only correct in a limited sense, for the neo-mercantilist aspects of the neoliberal ideology. I will try to clarify the perceived and actual relationship between the two - especially for the South American use of the term 'neoliberalism'.

The neoliberal ideology sees the nation primarily as a business firm, as explained above. The nation-firm is selling itself as an investment location, rather than simply selling export goods. If no-one in government believes in this ideology, it will have no consequences. If however, a neoliberal government is in power, it will pursue policies designed to make the nation more attractive as an investment location. These policies are generally pro-business, and are perceived as such by the opponents of the policies.

But remember that the ideology is neo-mercantilist: the policies are national policies, directed ultimately at the welfare of the nation and not of the market. Paradoxically, they are a form of protectionism: if there is a global market of investment locations, then it is 'unfair competition' for governments to artificially increase the attractiveness of their own country. Such governments are, strictly speaking, not good market liberals. Hard-line classic market liberals would shrug their shoulders at the election of an anti-business government. "Business will go elsewhere, the country will become poor, that's the way the global market works, leave the market alone", they would say. They would not waste their time trying to get a pro-business government elected there. In reality few liberals are so consistent, neoliberals certainly are not. But their rhetoric of 'national competitiveness' is a form of economic nationalism: it is a modern version of the old nationalist insistence, that the whole nation should work together. It revitalises jingoism, chauvinism, flag-waving and foreigner-bashing: Tony Blair is probably the best example.

Don't tell me that a country with our history and heritage, that today boasts six of the top ten businesses in the whole of Europe, with London the top business city in Europe, that is a world leader in technology and communication and the businesses of the future, that under us has overtaken France and Italy to become the fourth largest economy in the world, that has the language of the new economy, more brilliant artists, actors and directors than any comparable country in the world, some of the best scientists and inventors in the world, the best armed forces in the world, the best teachers and doctors and nurses, the best people any nation could wish for. Don't tell me with all that going for us that we do not have the spirit to meet all the challenges before us.
Blair conference speech, 26 September 2000

Now, a neoliberal government will almost certainly appeal to 'globalisation' as a justification and legitimisation of its policies - Tony Blair certainly does. By globalisation they mean, more or less, that the global market of investment locations now exists, and that it is an inevitable historical development. The opponents of the neoliberal government will, in turn, oppose this 'globalisation'. However, that does not mean that the global market of nations actually exists. The existence of neoliberal governments, pursuing neoliberal policies justified by an appeal to globalisation, does not mean that a new global order has superseded the order of nation states. The very fact, that it is still primarily the nation state which is being 'marketed' in this way, shows that the nation has not disappeared.

Before considering the reality of the global order, it is also necessary to consider the beliefs of the opponents of such a neoliberal government. Again paradoxically, many of them accept without question the neoliberal claim that there is a long-term historical process of 'globalisation', transforming the nation into a business firm on a global market of nation-firms. Worse, if the nation is a business then it is often clearly weak - everyone can see that Argentina is economically worse off than the United States. A neoliberal government will therefore try to convert a nation such as Argentina into a 'strong player', which means worsening the living conditions of much of the population. Now here is the next paradox: the response of the opponents is also an economic nationalism, this time with the emphasis on protectionism. The opposition perception of globalisation differs in one respect: for them it is a historical but not spontaneous development. For them it is a policy imposed by a non-national global elite, directed against the individual nations.

In their view, the international financial institutions are equivalent to an imperial power, which has de facto colonised countries such as Argentina. In caricatural form: they believe that a new and powerful empire has come into existence, the Empire of IMF-ia, at an indeterminate location. The neoliberal government, in this view, is a traitorous elite acting as a colonial Viceroy for the IMF-ian Empire. The opposition wants to replace it with a government which will 'liberate' the nation from the global market, from its colonial status. That 'liberation' is generally understood as: withdrawal of the nation-firm from the global market of nation-firms, protectionism, economic nationalism, and self-sufficiency instead of trade. Here too there is a paradox: the oppositional movements are not anti-business: they generally see national business as a victim of global business. (Local business in South America is in the comfortable position, that both neoliberals and anti-neoliberals want to help it, for different reasons).

The 'IMF-ia model' is partly correct: the global financial institutions are indeed a bastion of neoliberal ideology, and they can bully some poor countries into adopting neoliberal policies. But they can't do that to the rich western powers, in fact they would not exist without the support of these powers. They are not a force outside nations, they are not an imperial power. The global financial institutions are, in the simplest terms, an instrument of US policy - and if there is a quasi-imperial power, it is the United States.

The point is, once again, that the truth of beliefs about globalisation is itself irrelevant. If the government and people all believe that a country is being attacked by fire-breathing dragons, then the government might distribute asbestos suits to the population, and the opposition might complain that there were not enough of them. Ideologies and politics can operate on a completely fictive basis. Millions of Europeans died to 'resolve' theological issues such as the Virgin Birth of Mary, Mother of God.

So the perceptions have themselves generated a political reality: on the basis of a belief in 'globalisation' some governments pursue neoliberal policies, which are neo-mercantilist in their logic and aims. In such circumstances opposition to globalisation and neoliberalism coincides, rather than neoliberalism being identical or synonymous with globalisation. Both sides share a common fallacy: that trade and sovereignty are opposites, a zero-sum pair. The neoliberals believe that national success - "in today's global market" - requires the abandonment of national economic autonomy and sovereignty. Their opponents believe that national welfare requires minimisation of trade and external links: they believe that trade and invasion are equivalent, although no-one will say that outright. Once again, the equivalences and perceptions on both sides are false. Most of the Gross Global Product is tied to individual nation states for technical, climatic, logistical, and cultural reasons. For most investment decisions, there is no global market of locations. And sovereignty is not necessarily inverse to trade volume and trade regime. A powerful country such as the United States can have a high trade volume relative to GNP. Many colonies - by definition not sovereign - had a low trade volume relative to GNP, because the bulk of 'GNP' consisted of peasant agriculture. But even a fallacious belief can apparently support not just one, but two competing forms of economic nationalism.

So what is the reality behind the perceived globalisation? One reality is that nation states still dominate global social and economic structures. However these nation states themselves form a specific arrangement of a specific type of state. Globalisation claims appear logical if you see nation states as isolated islands, but that is not the historical reality. The very existence of a world of nation states, indicates some form of global order of nation states. What these nation states do - trade or no trade, capital flows or no capital flows - is irrelevant to that issue. What is already global can not logically be globalised: therefore there is no globalisation, in the widely used sense. There is no transition underway, or recently completed, to a fundamentally different global structure. Because the existing order of nation states is already global, intensification of global flows, or global trade, or global communication does not undermine it, or fundamentally alter it. If some part of the world were to break with this global order - for instance a future autarkic caliphate - that would be a radical change. When nations trade with each other, that simply indicates that the global order of nations is functioning as expected.

The false premise in the globalisation thesis is in fact the standard nationalist claim, that each nation is a separate and particular entity. In reality nations collectively are a global and universalist structure: the functional equivalent of a nationalist world state. The world functions as if a nationalist world government had seized power in the 19th century, led by Mazzini and Garibaldi and friends. Most existing states were indeed established by nationalist groups. Nationalists co-operate to maintain one (nationalist) world order and exclude others. The nation state is not a particularity, existing by itself in isolation, but part of a global design. Supporters of the globalisation thesis claim, that a world of isolated nation states existed in the recent past - before 1989, or more approximately before 1950. They claim that these isolated nation states are now being eroded in a global process: it includes the formation of the neoliberals claimed 'market of nations'.

Economic globalization represents a major transformation in the territorial organization of economic activity and politico-economic power....The sovereignty of the modern state was concentrated in mutually exclusive territories and the concentration of sovereignty in nations...economic globalization has contributed to a denationalizing of national territory...
Saskia Sassen. Losing Control: Sovereignty in an Age of globalization (1996).

But is the global order of nation states disappearing, anywhere? In reality, there is no collapse of the nation state to be seen. Nation states have not suffered anything comparable to the dissolution of the Austro-Hungarian or Ottoman empires. All that remains of those empires are oversized palaces in Vienna and Istanbul. The rest of their institutions have completely disappeared: there is not a square metre of Habsburg or Ottoman territory left in Europe. There is no longer an Austro-Hungarian imperial army, or police, or courts, or parliament. The nation states succeeded the multi-ethnic empires, seized all their territory, and remodelled all society on that territory. The replacement was total. Where is the equivalent 'collapse' of the nation state? There are few places on earth without the institutions of a nation state - perhaps Somalia, but that is not the result of globalisation. If the world was truly 'globalised' then it would be full of disused national parliament buildings - and not a national army in sight. The world is not like that, and will not be like that in the immediate future.

In other words, 'globalisation' remains a belief rather than a reality. It is an instrumental belief with great political influence and effect. It is appealed to by both neo-mercantilist neoliberals and their economic-nationalist opponents. Nationalists have a tradition of appealing to external threats to enforce national unity. The nation must unite and work together, they said - to defeat the Hun, or the Bolshevik threat, or the Yellow Peril, or the enemy within the gates, or Osama bin Ladin. The instrumental use of 'globalisation' is in the same dishonourable category.

Summarising neoliberalism

To conclude, here are summaries of neoliberalism in two forms. First a list of key points in neoliberalism:

• transaction maximalisation
• maximalisation of volume of transactions ('global flows')
• contract maximalisation
• supplier/contractor maximalisation
• conversion of most social acts into market transactions
• artificial maximalisation of competition and stress
• creation of quasi-markets
• reduction of inter-transaction interval
• maximalisation of parties to each transaction
• maximalisation of reach and effect of each transaction
• maximalisation of hire/fire transactions in the labour market (nominal turnover)
• maximalisation of assessment factors, by which compliance with a contract is measured
• reduction of the inter-assessment interval
• creation of exaggerated or artificial assessment norms ('audit society')

A final summary definition of neoliberalism as a philosophy is this:

Neoliberalism is a philosophy in which the existence and operation of a market are valued in themselves, separately from any previous relationship with the production of goods and services, and without any attempt to justify them in terms of their effect on the production of goods and services; and where the operation of a market or market-like structure is seen as an ethic in itself, capable of acting as a guide for all human action, and substituting for all previously existing ethical beliefs.

The Well-Founded Structure of the Republican Political Machine

In the March 30, 2005 New York Times editorial "A Party Inverted," former New Jersey Democratic senator Bill Bradley praises the well-founded structure of Republican politics and chastises Democrats for not emulating it:

Five months after the presidential election Democrats are still pointing fingers at one another and trying to figure out why Republicans won. Was the problem the party's position on social issues or taxes or defense or what? Were there tactical errors made in the conduct of the campaign? Were the right advisers heard? Was the candidate flawed?

Before deciding what Democrats should do now, it's important to see what Republicans have done right over many years. When the Goldwater Republicans lost in 1964, they didn't try to become Democrats. They tried to figure out how to make their own ideas more appealing to the voters. As part of this effort, they turned to Lewis Powell, then a corporate lawyer and soon to become a member of the United States Supreme Court. In 1971 he wrote a landmark memo for the United States Chamber of Commerce in which he advocated a sweeping, coordinated and long-term effort to spread conservative ideas on college campuses, in academic journals and in the news media.

To further the party's ideological and political goals, Republicans in the 1970's and 1980's built a comprehensive structure based on Powell's blueprint. Visualize that structure as a pyramid.

You've probably heard some of this before, but let me run through it again. Big individual donors and large foundations - the Scaife family and Olin foundations, for instance - form the base of the pyramid. They finance conservative research centers like the Heritage Foundation, the Cato Institute and the Intercollegiate Studies Institute, entities that make up the second level of the pyramid.

The ideas these organizations develop are then pushed up to the third level of the pyramid - the political level. There, strategists like Karl Rove or Ralph Reed or Ken Mehlman take these new ideas and, through polling, focus groups and careful attention to Democratic attacks, convert them into language that will appeal to the broadest electorate. That language is sometimes in the form of an assault on Democrats and at other times in the form of advocacy for a new policy position. The development process can take years. And then there's the fourth level of the pyramid: the partisan news media. Conservative commentators and networks spread these finely honed ideas.

At the very top of the pyramid you'll find the president. Because the pyramid is stable, all you have to do is put a different top on it and it works fine.

It is not quite the "right wing conspiracy" that Hillary Clinton described, but it is an impressive organization built consciously, carefully and single-mindedly. The Ann Coulters and Grover Norquists don't want to be candidates for anything or cabinet officers for anyone. They know their roles and execute them because they're paid well and believe, I think, in what they're saying. True, there's lots of money involved, but the money makes a difference because it goes toward reinforcing a structure that is already stable.

To understand how the Democratic Party works, invert the pyramid. Imagine a pyramid balancing precariously on its point, which is the presidential candidate.

Democrats who run for president have to build their own pyramids all by themselves. There is no coherent, larger structure that they can rely on. Unlike Republicans, they don't simply have to assemble a campaign apparatus - they have to formulate ideas and a vision, too. Many Democratic fundraisers join a campaign only after assessing how well it has done in assembling its pyramid of political, media and idea people.

There is no clearly identifiable funding base for Democratic policy organizations, and in the frantic campaign rush there is no time for patient, long-term development of new ideas or of new ways to sell old ideas. Campaigns don't start thinking about a Democratic brand until halfway through the election year, by which time winning the daily news cycle takes precedence over building a consistent message. The closest that Democrats get to a brand is a catchy slogan.

Democrats choose this approach, I believe, because we are still hypnotized by Jack Kennedy, and the promise of a charismatic leader who can change America by the strength and style of his personality. The trouble is that every four years the party splits and rallies around several different individuals at once. Opponents in the primaries then exaggerate their differences and leave the public confused about what Democrats believe.

In such a system tactics trump strategy. Candidates don't risk talking about big ideas because the ideas have never been sufficiently tested. Instead they usually wind up arguing about minor issues and express few deep convictions. In the worst case, they embrace "Republican lite" platforms - never realizing that in doing so they're allowing the Republicans to define the terms of the debate.

A party based on charisma has no long-term impact. Think of our last charismatic leader, Bill Clinton. He was president for eight years. He was the first Democrat to be re-elected since Franklin Roosevelt. He was smart, skilled and possessed great energy. But what happened? At the end of his tenure in the most powerful office in the world, there were fewer Democratic governors, fewer Democratic senators, members of Congress and state legislators and a national party that was deep in debt. The president did well. The party did not. Charisma didn't translate into structure.

If Democrats are serious about preparing for the next election or the next election after that, some influential Democrats will have to resist entrusting their dreams to individual candidates and instead make a commitment to build a stable pyramid from the base up. It will take at least a decade's commitment, and it won't come cheap. But there really is no other choice.