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What Happened To The Cultural Elites: The Capitalist Celebration

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Posts in this series
What Happened To The Cultural Elites: Changes In The Conditions of Production

David Swartz says that Pierre Bourdieu thought that the economic elites know the importance of cultural power. Culture and Power: The Sociology of Pierre Bourdieu, p. 127, 220. Cultural capital provides a justification for their exercise of economic power; it legitimizes the economic elites. Economic elites also found it valuable for their children to acquire cultural power through educational credentials and acquisition of the skills needed to manage businesses and fortunes. Bourdieu thinks that the cultural elites and the economic elites compete for power in society. In the US in the 1950s, the economic elites and the cultural elites reached a Truce. See this post for more detail and a discussion of the breakdown of the Truce.

The form of the Truce was that the cultural elites would dominate the discussion of what we now call social issues and the economic elites would dominate management of the economy. Before the Truce, the cultural elites included Marxists, Communists, socialists, and others who seriously questioned or even denied the legitimacy of the exercise of power by the economic elites. These groups were purged from the cultural elites, partly because of McCarthyism and partly by individual changes of mind. The Democratic party also dumped those groups. Republicans accepted many of the premises of liberalism, making a contested liberalism the dominant ideology. C. Wright Mills saw this Truce.

He challenged what he called the “Great Celebration” among liberal intellectuals who praised the return of prosperity and the rise of the nation to global superpower status.

The Great Celebration is a nice way to describe the Truce. The terms of the Truce required the cultural elites to accept capitalism as the one true economic faith. That had a number of bad results.

1. Conventional wisdom says that the Democratic Party is the party of the working class and the middle class. This connection is based on a political policy of shared prosperity. As neoliberalism rose to dominance, this policy was shed in favor of a market-based allocation of prosperity, with the economic elites controlling the way the market handled that allocation. When the Democrats capitulated to this policy, they broke the link between the working and middle classes and the cultural elites, a point commenter Lefty665 raised.

As I read Swartz, Bourdieu questioned why the cultural elites felt connected to the working class at all. Their habitus is completely different from that of the working class, and much more like that of the bourgeoisie especially in tastes and education. Bourideu suggests several reasons, including the fact that the working class and the cultural elites are in dominated positions in their segments of society, but that seems like resentment, and it seems weak.

I think the more likely explanation as to why cultural elites feel an affinity to the working and middle classes is a sense of fairness, of equity, and even a deep faith in the idea that all people are created equal and are entitled to equal dignity. Marxism may offer a framework for understanding the role of the proletariat in society, but there are others that don’t rely on historical materialism, for example the ideas of John Rawls in A Theory of Justice. In any event, it may be a better question to ask why so many of the cultural elites at least claim a connection to the working class.

Regardless of why, once the economic link is broken, the cultural elites have no base of support in society. Their incomes depend on their continued employment in the systems described in the first post in this series. That dependence undercuts their independence, even their intellectual autonomy. The claim to represent the interests of the working and middle classes became hollow.

2. Joining the Great Celebration required cultural elites to stop the study and advocacy of alternatives to capitalism, especially Marxism, but also socialism. Then the cultural elites slowly lost interest in the entire area of economics, and did not generate new alternatives or better ways to operate a capitalist system. As a result, neoliberal economists became the dominant force in the field of economics. When financial crises arose, the solutions considered mostly tracked the views of neoliberal economists. Later crashes were dealt with on neoliberal terms: government help for the financial sector, more free markets, less regulation and an abandonment of the reforms of the 1930s.

When the Great Crash came, there was no alternative. A short burst of Keynesian stimulus was followed by the usual neoliberal remedies, this time including austerity, privatization efforts (charter schools, Obamacare), and more emphasis on deregulated markets. Also, none of the economic elites were punished , and neither were neoliberal economists, because, after all, it was merely capitalist greed and some exuberant animal spirits, nothing malicious, let alone criminal. Millions of people were hammered, especially the working and middle classes, who lost an enormous part of their wealth while the economic elites were bailed out. The Democrats did not even recognize any of this as a problem largely because they had no alternatives to neoliberalism. That was the fault of the Cultural Elites.

3. The acceptance of capitalist economics meant that social issues connected to the economy were ignored, especially the effects of wealth inequality and income inequality, and the dangers of concentration of market power through consolidation and the crushing of small businesses. Liberal economists claimed to be interested in the problems of wealth and income inequality, but did nothing about it, either in their work or in their public statements. Paul Krugman wrote at least one paper on rising inequality in the late 1990s, but there was no follow-up in the economics community. Krugman offered this explanation:

The other [issue one might model] involves the personal distribution of income and wealth. Why are investment bankers paid so much? Why did the gap between CEOs and the average worker widen so much after 1980?

And here’s the thing: we really don’t know how to model personal income distribution — at best we have some semi-plausible ad hoc stories.

Krugman says he agrees with this article by Justin Fox. Fox describes the explanation of a sociologist, Dan Hirschman, who argues that the study of inequality dried up because no one was interested. Hirschman says it wasn’t a “deliberate suppression of knowledge”, it was “normative ignorance.” Fox tries to justify this as normal because there are limited resources and so on.

The plain fact is that although inequality is a central issue in politics and economic life, economists didn’t study it. Neither Krugman nor Fox gets to the root of the problem: why didn’t economists think this was an important problem? After all, making a living and accumulating wealth are the most important economic issues for every single member of society, and they know that politics matters. So why weren’t there dozens of competing models working off tons of data? I can’t think of an explanation that doesn’t make economists as a group complicit in the basic neoliberal program of transferring wealth and power to the economic elites. Ignoring motive, I’d say the most plausible explanation has to do with the Great Celebration, and the shift away from criticizing capitalism.

There were gains from the Truce, but these are ugly consequences.

The Problem of the Liberal Elites Part 4 Conclusion

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Most economists supported NAFTA, and then spent years justifying their support with models and econometric studies they claimed showed that it had little effect. They continued to support trade treaties when China entered the World Trade Organization. They supported the KORUS deal and most supported TPP. Meanwhile, manufacturing job losses increased from the allegedly minor losses of NAFTA to astonishingly high levels.
Link. Link. The linked studies don’t count ancillary job losses, including the jobs that never came here because US corporate executives took US generated capital and know-how overseas to build new plants, many with advanced manufacturing capability. The damage done by these trade deals to people and communities is obvious now, especially after Bernie Sanders won the Michigan primary, and an increasing number of economists are talking about it in public.

There is a strong parallel here with the crucial role played by economists in deregulation of the financial sector. This too had widespread support from economists across ideological spectrum.

How did these experts get it so wrong, and wreak such damage on so many people? I think it’s because they have so much confidence in their models, and use their authority as experts to push through policies based on those models. And if I’m right, this is a genuine problem for liberal experts.

We can see the confidence in models in Krugman’s work. In this blog post, Krugman takes up the question of why economists were so late to the study of inequality. He says he agrees with this Bloomberg View column by Justin Fox (which gives a nice history of the issue), but says that Fox missed a critical part of that failure: inequality is “a hard issue to model”.

The other [issue one might model] involves the personal distribution of income and wealth. Why are investment bankers paid so much? Why did the gap between CEOs and the average worker widen so much after 1980?

And here’s the thing: we really don’t know how to model personal income distribution — at best we have some semi-plausible ad hoc stories. Part of why Piketty made such a big splash was that he offered a sketch of a model of wealth inequality that tied it into broader macro numbers — r > g and all that — which gave all of us something systematic to talk about. But he himself concedes that the big rise in inequality so far has come from a surge in the right tail of earnings, which may have had something to do with norms, but in any case isn’t well explained by any model we have right now. Emphasis in original.

Krugman claims to rely on his models. He’s written a number of blog posts explaining his views and defending the process against those who argue that models are worthless if they don’t predict disasters and other bitter criticisms. Here’s an example from earlier this year.

And that really gets at my point, which is not that existing models are always the right guide for policy, but that policy preferences should be disciplined by models. If you don’t believe the implications of the standard model in any area, OK; but then give me a model, or at least a sketch of a model, to justify your instincts.

Conservatives and their economists insist that the vast increase in incomes at the top and the decrease at the bottom are the result of some special skill or lack of skill, or that the “market pays people what they are worth”; but that is just false, as I explain in detail here and here. Fox says that economists should look outside their specialties and consider the possibility of changing social norms, as some sociologists suggest, or changes in laws and political priorities, as some political scientists suggest. I doubt that social norms have changed. Every survey I’ve seen says that people don’t know the actual figures about wealth and income inequality, and wildly underestimate them.

Krugman says Piketty offers the explanation of “r > g and all that”, but what I read in Piketty is his theory that the rich use their economic and political power to get favorable changes in laws, regulations and court rulings, changes that increase wealth and income inequality solely for their benefit, with the losses inflicted on the rest of us. As far as I can tell, raw economic and political power are completely outside the economist field of view, simply because they cannot be modeled. And on top of that, those models don’t even consider fraud and corruption, which play a large role in our version of capitalism.

In his 1993 article in Foreign Affairs, Krugman makes the case that the real basis for NAFTA is foreign policy. It was intended to help Mexico transition to a more Westernized economy, which he thought was a good idea. That is a policy judgment, not an economic judgment. But whatever the government and the economists thought, NAFTA was an experiment in the exercise of raw economic power.

The same thing was true about China and the WTO, and TPP and TISA and US/China deals like BITs. The point of these treaties is to change the nature of existing markets and social structures, to create non-governmental forms of control of trade and property, and to protect and enhance the economic power of some US industries at the expense of the lives of millions of workers. Hiding behind weasel words like Free Trade and the professional reputations of most economists, Congress has ceded US sovereignty to a bunch of rogue corporations acting strictly in the interest of profits and shareholder returns, with neoliberals in both parties supporting Fast Track approval of whatever they want.

Krugman counts himself a lukewarm opponent of TPP, as do other liberal economists, for political and not economic reasons. Even though the damage is done, it’s nice to see this change.

That leads me to the conclusion that liberal elites, especially liberal economists, have a real problem: they have been wrong too often on too many important issues. They were wrong about trade. They were wrong about neoliberal economics in general, the Washington Consensus, and, as Queen Elizabeth II pointed out, they couldn’t even see the Great Crash coming.

After the Great Crash, they searched for explanations, but while some focused on the effect of deregulation, there were still plenty of defenders, including many who denied the relevance of the gradual weakening and then elimination of Glass-Steagall, but none of those explanations touched on fraud and corruption. No liberal economists called for prosecutions. Instead they focused the debate on the nature of their models, claiming that they were unfairly blamed for not predicting the Great Crash. Of course, those were the very models they used to advise policy makers that deregulation would be just fine.

Economists have all used the same introductory textbooks for decades now, teaching the simple tropes of capitalism. That sets the baseline for economic theory for the great mass of citizens who have been taught to think the ideas of Econ 101 as laid out the textbooks of Mankiw or Samuelson and Nordhaus are Gospel. Liberal economists who move away from those ideas are rejected by conservatives.

Now liberals say we trusted you to be right, and you weren’t. And not just that, you were wrong in the worst possible way: you concurred with conservative economists. That costs the liberal elites credibility with liberals and even many centrists.

And progressives, the heirs to FDR, by nature more suspicious of wealth and power, say: we trusted you, but you didn’t even question the goals and motives of the rich and powerful. Why would we ever trust you? We aren’t even sure we’re on the same side.

That presents liberal economists with a real problem. Why would anyone listen to them now?

Index to prior posts in this series.

Thomas Piketty On the Democratic Primary

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In an article in The Guardian, Thomas Piketty says that Bernie Sanders represents a real hope for the adoption of the tax policies Piketty lays out in Capital in the Twenty-First Century. Piketty calls for higher and steeply progressive income taxes and a high estate tax, which he thinks will lead to a reduction in income and wealth inequality, and to a better democracy, one less favorable to the interests of the rich and more open to the needs of society as a whole. He calls for a return to the ideals of the Democratic Party, ideals forged in response to an earlier awful financial debacle, and says that even if Sanders doesn’t win the nomination, he has opened the door for someone else to bring these ideas to fruition.

Piketty reminds us of the history of the Democratic Party starting with Franklin Roosevelt. He points out that FDR did not want to follow in the path of European nations, but instead forged a uniquely US path forward, including heavy regulation of the financial sector, a reasonably strong safety net, and a highly progressive system of taxation, including both a high marginal tax rate on outlandish income and a steep and a heavy estate tax that broke up fortunes quickly. After the financial problems of the 1970s, the disastrous loss of the War in Viet Nam, and due in part to the desires of the very rich, the nation turned its back on those ideals, and Ronald Reagan and his band of wreckers led the nation backwards towards a “mythical capitalism said to have existed in the past.” The Democrats did not resist these changes, but made peace with them.

Piketty says that the important thing Sanders wants to do is to restore the taxation system to previous levels, and to return to the uniquely US version of social democracy.

Sanders makes clear he wants to restore progressive taxation and a higher minimum wage ($15 an hour). To this he adds free healthcare and higher education in a country where inequality in access to education has reached unprecedented heights, highlighting a gulf standing between the lives of most Americans, and the soothing meritocratic speeches pronounced by the winners of the system.

Savor that last part, the part about the “gulf standing between the lives of most Americans and the soothing meritocratic speeches pronounced by the winners of the system.” The Clintons stand on the far side of that gulf with their huge fortune, their enormous foundation, and the hedge fund set up for their son-in-law whose meritocratic standing is open to serious question.

The last few weeks have sharpened our understanding of the differences between Sanders supporters and supporters of Hillary Clinton. Clinton is part of the neoliberal consensus described in Piketty’s article, which has governed the elite hive mind for decades. Sanders represents a break with that ideology. He is in the tradition of Franklin D. Roosevelt, the New Deal President, who established the US welfare state that was torn down by the neoliberals. Piketty too represents a break with the neoliberal consensus.

It is instructive to see where this divide lies. Take, for example, Paul Krugman. He is 62 years old, compared with Piketty, who is 44. Krugman is certainly liberal, but he has made it clear that he favors the incremental approach of Hillary Clinton. Krugman was trained in the mathematical school of economics, and even today insists that the use of mathematical models based on past history should be the central method of the discipline. Piketty was trained in the US, and is really good with those math techniques. However, he doesn’t accept the standard approach to the area, which he claims is closer to an ideology than a science. Instead, he adopts the methods of the social sciences. His book is a triumph of dogged efforts to read and understand 200 years of wealth and income inequality in Europe and the US.

Over the past several weeks Krugman has praised Clinton’s stand on Obamacare and financial regulation, and has derided Sander’s policies on both issues. He claims that Sanders cannot implement his plans and that they are somehow flawed. His comment sections are full of shocked people. Some call names, but many have more substantive issues: Krugman supported single payer in the past, and called for stronger financial regulation. Now he claims neither is possible.

What Krugman means is that the Republicans will never allow any tax increases. It’s that simple. He asserts that the ideas of Piketty and Sanders are never going to be possible because taxes cannot be raised. He accepts as a fact that there is no practical way to undo wealth and income inequality, that these are the immutable facts of our new normal. That is the dividing line between the neoliberal and the progressive wings of the Democratic party. One side says we need higher taxes and a larger social commons, areas of life not dominated by the rich people sucking up as much profit as possible. The other says we have to settle for whatever the rich will give us.

Krugman and most of the Democratic establishment is on one side of that line. And it isn’t an age thing. There are plenty of young wonks on the move who work inside the neoliberal consensus. Piketty and Sanders are on the other. And this isn’t an age thing either. There are plenty of people in all age groups, from Millenials to white-haired Boomers, who agree with Sanders.

This is the fight in the Democratic Party. Either you believe that we can change our government and our economy to work for all the people and not just the few, or you believe that we are doomed to remain under the thumb those who rule us from the far side of the money gulf with their laughable claim that they are the meritocracy and not a plutocracy.