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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 Slow Death of Neoliberalism: Part 2

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The Slow Death of Neoliberalism Part 1.

This post focuses on the failings of neoliberal economic theory. Neoliberalism arises out of positivist philosophy, defined in Part 1. Positivism is the theory that the only true knowledge comes from the scientific process.

There are five main principles behind Positivism:

1. The logic of inquiry is the same across all sciences (both social and natural).

2. The goal of inquiry is to explain and predict, and thereby to discover necessary and sufficient conditions for any phenomenon.

3. Research should be empirically observable with human senses, and should use inductive logic to develop statements that can be tested.

4. Science is not the same as common sense, and researchers must be careful not to let common sense bias their research.

5. Science should be judged by logic, and should be as value-free as possible. The ultimate goal of science is to produce knowledge, regardless of politics, morals, values, etc.

Economists created a group of sayings which they put in their introductory textbooks and teach as laws and principles to their students at all levels. For example, N. Gregory Mankiw, economics professor at Harvard, starts his introductory economics textbook Principles of Macroeconomics with a list of ten Principles he claims almost all economists agree are true. Any thoughtful person reading this list will see that these ten statements are either tautological (you can’t do two things at once) or are mere rules of thumb. The idea that you could build a positivist science on this foundation is absurd. But Mankiw disagrees, and so does everyone who took Econ 101 and stopped, and especially so do the elites from our top schools.

It’s not surprising, then, that this version of economics is failing. It cannot perform the basic goal of a scientific theory, making accurate predictions. Economic models have failed and will continue to fail to predict disasters; and there isn’t much hope that they will ever be able to predict anything of interest.

In Part 1 I pointed out that the positivist program can’t be easily adapted to the social sciences. David Andolfatto of the St. Louis Fed agrees, and tells us what we can expect from economics:

But seriously, the delivery of precise time-dated forecasts of events is a mug’s game. If this is your goal, then you probably can’t beat theory-free statistical forecasting techniques. But this is not what economics is about. The goal, instead, is to develop theories that can be used to organize our thinking about various aspects of the way an economy functions. Most of these theories are “partial” in nature, designed to address a specific set of phenomena (there is no “grand unifying theory” so many theories coexist). These theories can also be used to make conditional forecasts: IF a set of circumstances hold, THEN a number of events are likely to follow. The models based on these theories can be used as laboratories to test and measure the effect, and desirability, of alternative hypothetical policy interventions (something not possible with purely statistical forecasting models).

This obvious straw man at the beginning of this quote is typical of the arrogant economist described by Marion Fourcade. But let’s see how well the economist business does at the weak test of effectiveness offered by Andolfatto.

For decades economists taught the Kuznets Curve which they said shows that as industrialization proceeds, economic inequality first rises and then falls.
Thomas Piketty takes up this theory in Capital In The Twenty-First Century, and extends the data forwards and backwards from the early 1950s. Here’s a graph of top decile income share from 1910 to 2010 from Wikipedia.

Looking at that graph through the time Kuznets wrote, the early 50s, it might be read to support that hypothesis. The sudden rise, starting under Reagan and continuing ever since, completely contradicts the hypothesis. That didn’t stop people from teaching it.

The Phillips Curve asserts that there is a connection between inflation and unemployment: as the unemployment rate drops, inflation increases. It’s one of Mankiw’s 10 principles; and it’s deeply embedded in the models used by the Fed to decide interest rates. It’s mostly wrong. Here’s a recent debunking from the Philadelphia Fed, concluding that the Phillips Curve might help forecast inflation in a weak economy, but does not work in an expanding economy.

The Wikipedia Page for Phillips Curve says that:

The original Phillips curve literature was not based on the unaided application of economic theory. Instead, it was based on empirical generalizations. After that, economists tried to develop theories that fit the data.

A 2008 paper, The History of the Phillips Curve: Consensus and Bifurcation, Economica (2008), P. 10, lays out the history in detail. Roughly speaking, it begins with the observation by William Phillips that in the UK there was a stable relation between the rate of wage growth and inflation over a substantial period of time, and deviations could be explained reasonably. This paper was picked up by Paul Samuelson and Robert Solow and turned into the earliest mathematical formula in 1958. Since then there have been a number of occasions where the Phillips Curve failed, and each time economists just grab some more of their existing tools and try to fix it or explain the failure, in each case after policy-makers have gone on as if it were right and forced bad results on the economy and especially the wages of workers.

Here’s a third example. Economists say that the reason wages are stagnant is that productivity is flat, as if there were a relation between wages and productivity. Anyone who looks at this chart and reads this article from the Economic Policy Institute will have a huge question about that.

And that isn’t just the right-wing. Plenty of centrist Democrats make the same argument. And by the way, what does this say about the central theory of free market economics that supply and demand for labor set prices?

As I say here and here, neoliberal economists used their ideology of free markets to influence policy and to change the entire way we think about society without having the slightest idea of the consequences of their meddling because their models aren’t designed to deal with changes in societies or economies. As my examples show, they just keep on regardless of the success or failure of their predictions, and politicians and rich people ignore the failings and continue to follow their foolish advice.

Neoliberal economics obviously fails to measure up to the standards of positivism. It can’t predict anything useful, and it barely is able to explain itself coherently. That’s a problem with positivism too. People are slowly, slowly coming to grips with these failures and the damage they have done. It’s adherents are dying off, and their replacements are into it for the money and the power. Stupid ideas never die, but maybe they will lose their influence.

Updated to correct link to EPI article and chart.