“Ideology is agreeing on what NOT to ask.” - Sahaj Sharda
Marxism’s Long March to Irrelevance
In the 1930s, Joe Kennedy Senior asked Felix Frankfurter for advice on his young sons’ educations. Frankfurter responded, “If they were mine I know what I would do. I would send them to London to spend a year with Harold Laski, who is the greatest teacher in the world.” Thus, Joe Kennedy Junior, and briefly John Kennedy, began a course of study at the London School of Economics under Mr. Laski.
I relay this anecdote because there was a moment in American history where the American left was very drawn by socialist ideas from Europe. Harold Laski, of course, was a Fabian socialist thinker, and Joe Kennedy Senior wanted his sons to study under Laski precisely so his sons could learn the socialist perspective which was in vogue at the time.
This interest in socialism wasn’t isolated to the Kennedys. Indeed, famous American scientists like Oppenheimer flirted with communist ideas around the same time. Much of the American academy had views on the Spanish civil war, the Russian revolution, and the viability of the communist party domestically.
As history has emphatically borne out, this communist curiosity was dramatically misplaced. No society with centralization of power and authority remains vibrant for long. Like a black hole, the over-centralization of power and authority sucks up all light from the surrounding area. But this was a lesson that was slowly and painfully learned over the course of the 20th century.
President Kennedy’s Speech in West Berlin (June, 1963):
“There are some who say that communism is the wave of the future. Let them come to Berlin. And there are some who say in Europe and elsewhere we can work with the Communists. Let them come to Berlin. And there are even a few who say that it is true that communism is an evil system, but it permits us to make economic progress. Lass' sie nach Berlin kommen. Let them come to Berlin.”
During the Cold War, there were two parallel strands of argument made by supporters of the Soviet Union against the American version of market democracy.
The first was that Soviet-style communism enabled rapid economic progress. You can see President Kennedy arguing against that view in his Berlin speech. But the whole reason he felt the need to refute it was that this communist economic growth narrative had purchase inside the United States. Where did that purchase come from?
After the Soviet Union launched Sputnik, there was a feeling of technological eclipse in the United States. The Soviet Union’s growth rate throughout the 1950s shocked many in the west. But, eventually, Soviet growth slowed. In 1964, Khrushchev was replaced by Brezhnev, and economic growth turned into economic stagnation. By the 1970s, progress in living standards in the Soviet system was flatlining, a period known as the Brezhnev stagnation. As it become more clear that economic progress in the Soviet system simply couldn’t keep up with progress in the West, the argument that Soviet style communism increased economic growth collapsed in popularity.
The Kitchen Table Debate (July, 1959):
[Both men enter kitchen in the American exhibit.]
Nixon: I want to show you this kitchen. It is like those of our houses in California.
[Nixon points to dishwasher.]
Khrushchev: We have such things.
Nixon: This is our newest model. This is the kind which is built in thousands of units for direct installations in the houses. In America, we like to make life easier for women...
Khrushchev: Your capitalistic attitude toward women does not occur under Communism.
Nixon: I think that this attitude towards women is universal. What we want to do, is make life more easy for our housewives...
The second strand of argument used to justify the Soviet system was an argument that even if the American system produced more and better technology, the ways in which that technology was used was fundamentally bad and therefore the system was bad.
Take Mr. Khrushchev’s line in the kitchen table debate, “your capitalistic attitude toward women does not occur under Communism.” He’s basically saying that the technology of the dishwasher is fine, but the ends to which it is used (the oppression of women) makes the American system worse than communism.
Soviet style communism has long since collapsed around the world, including in the Soviet Union, but this Soviet-style criticism that the American system channels its useful features into evil ends persists. In fact, it’s still a dominant narrative in many political quarters today.
The critique showed up, from the 1950s up to today, in a variety of forms. Some leftist critics held that America may be better at science but our imperialist bent means we will uniquely use technical advances to oppress the third world. Other leftist critics held that America may produce a lot of consumer goods but at the cost of a polluted planet on the path to catastrophe. One incredibly persistent leftist critique was that America produced a lot of wealth but at the cost of deep and alienating inequality in our society.
Some of these critiques have more merit than others, and some are more right than wrong. But in these frames you see something inherently missing. Gone are the debates over the best ways to organize production in a society. From the 1970s on, the fundamental Marxist controversy about ownership over “the means of production” eventually evaporated from left discourse in America.
By the early 1990s, the Berlin Wall had fallen. The Soviet Union was disintegrating. The American system had sustained through the cold war. Our society naturally drew implications from that turn of events. We decided to double down on the areas of our society that differed most starkly from the Soviet system. Namely, we decided to embrace big business interests, even as they increasingly monopolized and slaughtered infant industries. In our euphoria over winning the cold war, the wrong lesson the left was learning was that markets structured by government to promote big business were the reason for the American victory.
What The Left Should Have Learned
Of course there were other lessons that we could and should have learned from the American victory in the cold war. Perhaps the most important of these was that the American insistence on structuring production around decentralized competitive markets, and more broadly the American insistence on competition, geopolitical and economic, unleashed technological innovations that powered us to victory.
Take, for example, the American use of antitrust to remove barriers to entry for new and innovative firms. During World War II, the most powerful American industrialists contributed massively to the research and development of new technologies that would augment American power for decades to come. For example, “researchers at Bell Labs are credited with the invention of the transistor, the solar cell, the radar, and the laser, among other things.” Much of this inventive boom occurred during WWII and was concentrated in a handful of firms.
But after the war, instead of allowing all of this technology to be locked behind just one firm in the case of AT&T, on January 14, 1949, the United States Government filed an antitrust lawsuit with the aim to split Western Electric from AT&T. Eventually, the case settled in 1956. As these scholars explain, “The consent decree contained two main remedies. The Bell System was obligated to license all its existing patents royalty-free, and it was barred from entering any industry other than telecommunications. As a consequence, 7,820 patents, or 1.3 percent of all unexpired US patents, in a wide range of fields became freely available in 1956.”
As some economists estimate, this one consent decree increased follow-on innovation in non-telecom sectors by nearly 15 percent and nearly sixty percent of that increase came from small firms. Indeed, “Intel would have found it harder to develop microprocessors without a consent decree in 1956 that forced AT&T, then America’s telephone monopoly, to agree to license all its past patent free of charge, including the ones for the transistor.” Because America restructured its industries after the war, new and dynamic companies like Intel emerged, foreshadowing a later era of Silicon Valley rising to global dominance.
This lesson about the importance of structuring and restructuring industries around competition is not limited to that one example nor is it limited to using antitrust as a tool. Indeed, the industrial policy implicit in the Apollo project catalyzed innovation after innovation in field after field. Importantly, the Apollo project sourced from a wide swath of American industry, new firms included. The results were dramatic everywhere, but take computing again. In the 1960s, the Apollo project was consuming nearly 60 percent of all American integrated circuit output, catalyzing the infant computing industry. As David Mindell argues, “Apollo was the moment that people stopped talking about how big their computers were and started bragging about how small they were,” and “integrated circuits were radical, new, wacky stuff, the fact that Nasa was incorporating them into the Apollo mission was a huge boost to the legitimacy of the technology.”
Yet, despite these clear examples of the importance of government structuring and restructuring industry in ways that accelerated innovation, somehow the importance of the American policy making role was lost in the euphoria over winning the cold war.
What the Left Learned Instead
So fully was the Marxist ideology defeated by the empirical results of the 20th and 21st centuries that even the leftists, the politically mainstream ones at least, actually gave up entirely on questions over different ways to organize the ownership of productive assets. To see how deep the ideological retreat was, take a look at these notes jotted down by (future President) Barack Obama from around the time he was in law school in the early 1990s. Look specifically at point three.
Of course, “efficiency” is a vague term. In science efficiency is defined as “the ratio of the useful energy delivered by a dynamic system to the energy supplied to it”. Taking the scientific framing, it becomes obvious that efficiency is something to work on. The laws of entropy tell us that a system left alone becomes less efficient over time. Things trend towards chaos and disorder. Even efficient systems trend towards inefficiency.
Similarly, an economic system can be more efficient than another system without being very efficient in itself. An economic system can be efficient in the short term while becoming inefficient in the long term. But the lesson the left learned was not how to think about how to make our system more efficient or how to keep it efficient. Instead, the lesson learned was “why the left should celebrate efficiency,” as Barack Obama noted. The efficiency of our markets was taken as a given, even if those stagnant markets grew more dysfunctional over time. Leave big “efficient” firms alone. This was the starting position of neoliberalism. This is where the left fucked up.
The Left’s Overreactive Retreat
Human nature is quite bipolar. Mass psychology even more so. That’s why asset markets boom and bust, even during periods where this is little change in asset fundamentals. But human bipolarity doesn’t just show up in markets. It shows up in all sorts of realms. We swing from one artistic impulse to another. The pendulum swings from romanticism to rationalism and back again. In politics too, we swing from side to side, both within parties and between them.
The wrong idea that was implicit in our thinking towards the end of the cold war was that structuring and restructuring markets was something that communists did. They failed. Therefore, it must be something that we shouldn’t do. It was a dramatically over-broad conclusion. The nuance was that the communists structured production around centralization and central planning, but somehow even the deeply American tradition of decentralization was largely abandoned.
Well when the American left gave up on questions of structuring production, they went emotionally bust on ALL questions of structuring production. This happened despite the important gains by an earlier era of production reformers: the authors of antitrust law, worker protections, and unions were all forgotten. Because communism went bust, the left went emotionally bust on even those production questions that were NOT communism. Indeed, antitrust is the opposite of communism. It is an embrace of small and disruptive businesses, but nevertheless antitrust’s value in the leftist coalition collapsed. Similarly, industrial policy was forgotten. The left made a full retreat, and nothing was left defended.
Although there may be arguments that the retreat began prior to President Carter, the left’s retreat is best exemplified by President Reagan’s election victories, followed by a third Republican term, and then a “New Democrat”. Elsewhere in the anglosphere, we had years of Thatcher eventually followed by “New Labour”.
When you give up on the debates over productive structure, what remains? You still have to run on something? What issues remained for the Democrats? In the realm of economics, if you give up on supply, you can only talk about demand. And thats precisely the cultural shift that occurred on the left over the last few decades. Increasingly, frames like “organic food” or “carbon footprint” became popular. Liberals rejoiced in biking to work and buying fair trade toys. Ethical consumption became one major nexus of focus.
The old Soviet critique that America may produce more but uses those resources for worse things become a dominant narrative on the left. The modern and extreme version of this idea is that somehow degrowth is better than growth because less consumption will be better than more, from an environmental perspective.
It is an extremely unhealthy state of affairs when intellectuals give up debating an entire area of questions. As George Orwell observed in his time: “in England the immediate enemies of truthfulness, and hence of freedom of thought, are the press lords, the film magnates, and the bureaucrats, but that on a long view the weakening of the desire for liberty among the intellectuals themselves is the most serious symptom of all.”
In a prior era of ideological diversity, debates forced democracy to cover for the contradictions of the market. In this new era, the stage was set for an anti-democratic coup. Soon markets became increasingly rigged by big business. Corporate communists were soon left alone to corrupt democracy.
Big Business Takes Over
Already in 1971, future Chief Justice Lewis Powell, then a lawyer for the Chamber of Commerce, wrote a memo on how big business interests could take over the campuses, courts, and culture. As he wrote, “The day is long past when the chief executive officer of a major corporation discharges his responsibility by maintaining a satisfactory growth of profits, with due regard to the corporation’s public and social responsibilities. If our system is to survive, top management must be equally concerned with protecting and preserving the system itself.”
In the subsequent decades, Powell’s vision eventually took root. Methodically, Powell urged as follows: “The Chamber should consider establishing a staff of highly qualified scholars in the social sciences who do believe in the system. It should include several of national reputation whose authorship would be widely respected — even when disagreed with.” The plan was to use scholars to come up with pro-big-business ideas, use those ideas to convince judges, and then use judges to change the law.
The Rise of Experts
Powell’s plan is best demonstrated with the rise of the Chicago School of Economics. At Chicago, economists like Milton Friedman gained a platform for the promotion of self-described libertarian ideas. Big business took these ideas and promoted the hell out of them. As Lancieri, Posner, and Zingales explain, “the major reason why the Chicago School prevailed and its dominance persisted for almost fifty years is that business coopted and promoted Chicago school thinking as a tool to advance its interest.”
This was Powell’s plan at work. Chicago began to dominate economic thinking. Friedman, Schultz, Stigler, Coase, Becker, Miller, Fogel and Lucas all taught at Chicago when they received their Nobel Prize awards. Their ideas were then taken and spread amongst judges. Judges used these ideas to change the business environment in economic areas where judges exercised undue power. As Lancieri, Posner, and Zingales conclude: “nearly all key decisions that reshaped antitrust policy were made by regulators and judges with relatively little democratic accountability.”
Chicago style ideas constantly justified leaving big business alone. As the Institute for New Economic Thinking summarizes, “In microeconomics, led by George Stigler, the guiding maxim in the Chicago approach was to preserve the Neoclassical paradigm whenever possible, never to doubt it. When there is no obvious solution to a particular problem, the recommended course was to extend the Neoclassical paradigm by incorporating new concepts into it that would make the subject matter amenable to economic analysis. Examples of extensions to the Neoclassical paradigm conceived by Chicago economists are search theory (due to George Stigler), human capital theory (due to Gary Becker and T.W. Schultz) and property rights/transaction cost theory (due to Ronald H. Coase).”
As Orwell once observed, “A totalitarian society which succeeded in perpetuating itself would probably set up a schizophrenic system of thought, in which the laws of common sense held good in everyday life and in certain exact sciences, but could be disregarded by the politician, the historian, and the sociologist.” He may as well have added the economist and the judge to that list.
America & Corporate Communism
The Powell plan was famously successful. Take two data points.
First, the American economy has become structurally concentrated in fewer firms. As a study from 2017 concluded, “More than 75% of US industries have experienced an increase in concentration levels over the last two decades. Firms in industries with the largest increases in product market concentration have enjoyed higher profit margins, positive abnormal stock returns, and more profitable M&A deals, suggesting that market power is becoming an important source of value.”
Second, that concentration has resulted in more market power. Since 1980, markups—how much companies charge for products beyond their production costs—have tripled from 21 percent to 61 percent due to growing consolidation (Quarterly Journal of Economics, 2019).
One reason why big business has been so successful in taking over America is that it has understood the power of process very deeply. As Representative Dingell famously observed, “If I let you write the substance and you let me write the procedure, I’ll screw you every time.” Big business lobbyists write the procedure. As a result, big business screws us every time.
The neoliberals necessarily cannot check big business on procedure. The starting point of the neoliberal project is that markets are inherently “efficient”. Therefore, thinking about how to set up production doesn’t really matter. The market will take care of it. Big business pretends to agree with that position publicly, but internally they understand what the neoliberals don’t. Market structure is everything. The rules are everything. Big businesses are the masters of regulatory complexity.
The most obvious and vivid example of this was the global financial crisis. In the decades prior to 2008, Big banks concentrated massively. In those previous two decades, neoliberals were either neutral or encouraging this trend. After all, the starting point of neoliberalism was that markets were efficient, and therefore whoever dominated those markets must also be efficient.
Well that turned out not to be the case. Massive bailouts, close to a trillion dollars, were pushed through the door in a time of global crisis. In subsequent years, the banks returned to an even more consolidated landscape where big bank profits were higher than ever.
This system of bailouts in over-concentrated industries has been described as socialism for the rich, but its actually worse than that. It’s actually more like corporate communism. The central planners in a very few big banks direct the flow of credit in the economic system. When the system collapses, the central planners get bailouts and bonuses.
This corporate communism goes beyond banks. One can similarly make a critique of central planning at the Big Tech companies, Airlines, Defense Contractors, Big Pharmaceuticals, and other vitally important sectors. Somehow the left embracing “efficiency” brought us to the least efficient system possible. And the traditional legal tool used to fight this inefficiency, antitrust law, has been absolutely razed by the courts.
The Ideology of “The Moderate”
One can always ask the question, if judges were usurping power and distorting antitrust doctrine, why didn’t the legislature step in to check them? Isn’t our system one of checks and balances? In those preceding decades, why didn’t the democratic institutions check the technocratic ones?
But this misses the point. The judge-led takeover occurred exactly as the “efficiency” bubble was taking root on the left. Indeed, with debates over production collapsing, the neoliberals developed a new ideology to go along with their focus on “efficiency”. This was the ideology of moderation. Moderation too was an ideology co-opted by big business.
In the 1990s through 2016, President Clinton and President Obama were the kings of this “new left”. They were the neoliberal epoch. Each completely surrendering on questions of market structure and political economy. More importantly, each was deeply committed to expertise. When the dominant economic experts were Chicago style, neither went against that academic consensus.
The politics of moderation are anti-contrarian. Moderation is cold. It’s a quiet-down-over-there way of thinking. Moderation is not how democratic institutions effectuate reform. And if the courts are seizing undue power, moderation is not how those judges are brought to heel. Moderation is a status quo modality.
But the moderation project, as conceived, was internally inconsistent. Just as the universe grows more disordered over time, so do closed off markets become more concentrated and chaotic. So do closed off politics become more corrupt. The public’s reaction to that concentration and corruption is a demand for action, and moderation politics cannot then mobilize institutions to meet the moment.
Moderation can work for a while. It cannot work forever. Moderation brings about its own collapse.
President Obama’s Keynote Democratic National Convention (July, 2004 Boston):
“Yet even as we speak, there are those who are preparing to divide us, the spin masters and negative ad peddlers who embrace the politics of anything goes. Well, I say to them tonight, there's not a liberal America and a conservative America - there's the United States of America. There's not a black America and white America and Latino America and Asian America; there's the United States of America. The pundits like to slice-and-dice our country into Red States and Blue States; Red States for Republicans, Blue States for Democrats. But I've got news for them, too. We worship an awesome God in the Blue States, and we don't like federal agents poking around our libraries in the Red States. We coach Little League in the Blue States and have gay friends in the Red States. There are patriots who opposed the war in Iraq and patriots who supported it. We are one people, all of us pledging allegiance to the stars and stripes, all of us defending the United States of America.”
The Culture Wars
While the Left gave up on questions of productive structure, it never gave up on questions of downstream consequences of that productive structure. For example, redistribution was a mainstay area of debate throughout the period beginning in the 1970s and into today.
Indeed, if you think about what the Democratic Party has most strongly stood up for, a lot of leftist politics was channelled into tax policy, affirmative action, and welfare spending. On the margins there was some debate about production, things like a public option in health insurance, but largely speaking the dominant modality was around redistributing the fruits of big business.
But we don’t live in an entirely totalitarian system. We still have two parties. There will still be a debate about something. So, if you close off debate around questions of production, you will shift political debate into questions of consumption. Since consumption is fundamentally linked to individual likes and dislikes, society will, and has, shift into political battle around areas of cultural cleavage.
We’re now told to not consume this or that to show our virtues. Advertisers flock from celebrity to celebrity. Cancellations become cultural events. Society has polarized around what citizens should and shouldn’t consume. A few decades after debates about production shut down, people argue over whether consuming Budlight is good or bad. Indeed, so many political debates today default down to brand. DeSantis doesn’t like Disney, for instance.
Many decades later, it is now becoming very clear that the culture wars are the necessary endpoint of the Khrushchev critique of the American system in the Kitchen Table debate with Nixon. If that second strand of argument critiquing capitalism is all that remains, we are doomed to a never ending culture war, a war of symbols against symbols.
The Infancy of Competitionism
But I think people are starting to get the message now. It easier to disagree about production. At the very least if you open up more vectors of disagreement you create more room for diverse coalitions. When two dimensions of disagreement are crammed into one dimension, people travel to the further poles of that one dimension. From the 1970s until recently, there were simply less pieces to barter with. Politicians could only position themselves politically on the cultural number line, as more left or more right. The politics of moderation made polarization worse instead of better.
But increasingly, new vectors are opening. Debates about how to structure markets, how to structure productive assets are returning. On July 9, 2021 President Biden signed an executive order on competition policy. In parallel, he has pursued a variety of industrial policies including deep subsidies for a variety of industries.
But this isn’t just happening at the Presidential level. Take for example, my critique of structuring educational assets around a handful of elite colleges that all collude with each other. I opened a new vector, and now new diverse coalitions are forming. See this letter that Republican Senator JD Vance sent to the FTC citing an article I wrote. As Senator Vance urged, “I humbly propose that collusive behavior by colleges and universities, particularly as it relates to new admissions policies adopted in the aftermath of the Harvard College decision, may be a worthy subject for a 6(b) study. For example, it is possible that a hub-and-spoke conspiracy model will be adopted in the wake of Harvard College, with the U.S. News & World Report college rankings serving as the hub.”
As a Democrat, I disagree with Senator Vance on a lot. But why shouldn’t we be able to work together on this and other issues? Coalition politics is necessary for progress, and if one thing is clear it is that neoliberalism is dead. The question is what comes next. Its a question I hope to answer in more detail on this Substack over the course of the coming year.