Workers leaving Pennsylvania shipyards, Beaumont, Texas, 1943. (Library of Congress)
The implicit theory of technocratic neoliberalism is that the U.S. and other Western societies at this point are essentially classless societies in which the only significant barriers involve race and gender. The people at the top got there purely as a result of their own efforts, on the basis of their superior intellectual or academic skills. Many of these corporate managers, financiers, lawyers, accountants, engineers, foundation program officers, media elites, and academics do pretty much the same kind of work that people in their professions did half a century ago, adjusted for differences in technology and industrial organization. But we are supposed to believe that they are not just old-fashioned managers and professionals, but members of a new “creative class” and “digital elite,” the “thinkpreneurs” and “thought leaders” of the “knowledge economy” who live in “brain hubs” (to use only a few of the flattering terms in the lexicon of overclass self-idolatry).
From the assumption that a nearly meritocratic “knowledge economy” has replaced class-stratified, bureaucratic managerial capitalism follow two kinds of policies. The first are class-neutral, race- or gender-based policies to remove barriers to the advancement of racial minorities and women, including native white women. The second are policies that include skills training or retraining for unsuccessful native white men.
Class-neutral, race-based policies in the United States include affirmative action in hiring, government set-asides for specified groups in contracting, and gerrymandering of congressional districts to create majority-minority districts likely to elect a member of a racial minority as a representative. In most cases the beneficiaries of these policies tend to be members of the affluent elite within a particular racial or ethnic group. For technocratic neoliberalism, the goal is to ensure that there is the proper racial and gender balance within the overclass, the balance that presumably would result from a perfect meritocracy. If pure meritocracy does not yet exist, then a simulacrum will be created. But as the British socialist thinker Ralph Miliband put it, “access to positions of power by members of the subordinate classes does not change the fact of domination; it only changes the personnel.”
The assumption that contemporary North America and Europe already have near-classless societies, to be made perfectly classless by a few low-cost policy interventions, also compels neoliberals to attribute the problems of the native white Western working class not to the class system but rather to personal shortcomings, which a number of unfortunate individuals are alleged to share.
The most important personal shortcoming is alleged to be a lack of adequate job skills. The theory of skill-biased technological change (SBTC) was popular during the bubble years before the Great Recession. SBTC theory explained rising inequality by asserting that the “left-behind” members of the working class had inferior and outmoded skills not needed by the “creative class” or the “digital elite” in the new “global knowledge economy.”
The premise has been that U.S. corporations like Apple did not offshore production to China to take advantage of low-wage, unfree workers and state subsidies of various kinds. No, it is often implied, the poor Chinese workers migrating from rural areas to make iPhones in sweatshop factories in southern China in degrading conditions for a pittance had superior STEM (Science, Technology, Engineering, and Math) skills unmatched among ignorant American or European workers. Provide these “left-behind” workers in the West with appropriate skills (“human capital” in the pseudoeconomic jargon of neoliberalism) and their earnings will increase.
On the basis of SBTC theory, school curricula in the U.S. and elsewhere have been reconfigured to focus on STEM skills. For a generation, the conventional wisdom has held that the “jobs of the future” are “knowledge economy” jobs like software coding. But is this really true?
For working-class Americans and Europeans, the jobs of the future are mostly low-wage jobs, many of them in health care. In most of these jobs, the low wages are caused not by a lack of university education, which is not needed, nor by a lack of vocational skills, but by a lack of bargaining power on the part of workers.
Somewhat bolder proposals to help the working class, which also avoid any heretical questioning of the labor market effects of deunionization, offshoring, and mass immigration, include more redistribution of income in the form of cash transfers or tax breaks and more opportunities for working-class citizens to start their own businesses.
Redistributionist proposals range from expanding tax subsidies to wage earners, like America’s earned income tax credit (EITC), to the old but periodically revived idea of a universal basic income (UBI), which would allow all citizens to live at a minimally adequate level without working. While some minor forms of enhanced redistribution to mollify discontented voters will undoubtedly be tried in many Western countries, proposals for massive cash transfers are doomed for a number of reasons.
Purchasing political acquiescence from workers who have stagnant or declining incomes with substantial amounts of cash requires an economically dynamic sector of the economy to make the bribes affordable. In some versions, radical redistributionism posits the permanent existence of high intellectual-property rents flowing from the rest of the world to tech tycoons, along with global financial rents flowing to money managers. These rents, it is assumed, will be so high and sustainable that the tycoons and money managers will gladly share them with the rest of the population in the nation-states in which they happen to reside.
At the local level, something like this system has long existed in tech centers like San Francisco and financial entrepôts like New York and London. Local rentier interests are coddled by governments in return for their contribution to revenues. But while it may work in a few hub cities, the policy cannot be scaled up to the level of the ordinary nation-state, much less a continental nation-state like the United States, with a third of a billion inhabitants.
It is no coincidence that Reaganism-Clintonism and Thatcherism-Blairism flourished in an era of prolonged asset bubbles. For a time, it is possible for stock market booms and real estate bubbles to fund public services and redistribution while allowing the wealthy to keep most of their gains. But the financial industry is volatile and global innovation rents quickly disappear, as a result of lapsing patents, intellectual property theft, foreign success in indigenous innovation, and the commoditization of former cutting-edge industries.
Recently a rival approach to reform, antimonopolism, has attracted growing attention and support among American progressives. Based on a revival of the long-moribund small-producer republicanism of William Jennings Bryan, Louis Brandeis, and Wright Patman, this school blames inequality and a host of other social ills on increasing “concentration” or “monopoly” and proposes a radical antitrust policy as a panacea. Breaking up large firms into smaller ones, it is claimed, will increase opportunities for Americans to exit the labor market by transitioning from wage earners to small business owners. Those who continue to sell their labor for wages will have their bargaining power increased, and the monopsony wage-setting power of employers reduced, by a government policy of breaking up big employers into a greater number of smaller ones—so it is said.
Praising small business is certain to be an applause line in most Western democracies, given popular nostalgia for old-fashioned small-town and rural life. But multiplying the number of small firms will not help the wage-earning majority, because small firms pay poorly. In the U.S., large firms with over five hundred workers in 2007 employed 44 percent of all workers but only 28 percent of low-wage workers. Firms with fewer than ten workers employed only 20 percent of the workforce but 42 percent of low-wage workers.
Some of the new antimonopolists have suggested that breaking up big firms can increase the bargaining power of workers. But the idea that janitors will be in a better position to bargain for higher wages if Facebook is broken into three or four or five giant successor firms is implausible, to say the least.
The cure-alls of education, redistribution, and antimonopolism enjoy broad elite support from the center-left to the center-right, in part, no doubt, because they do not question the commitment of post-1970s neoliberalism to liberalized policies about trade, immigration, and organized labor. Redistribution, for example, is not necessarily a left-wing idea. On the contrary, labor liberals and social democrats have usually opposed proposals for post-tax transfers of cash to individuals, in favor of measures that increase the ability of workers to bargain for higher pretax wages, like limits on immigration and offshoring, collective bargaining at the firm or sectoral level, and public job guarantees and socialized in-kind benefits like universal health care (“de-commodification”).
Conversely, cash transfers and ideas of universal capitalism have a long and distinguished pedigree on the free market right. From Milton Friedman in the 1960s to Charles Murray in the 1990s, libertarians have proposed using some form of a basic income as a substitute, not a supplement, for most or all other social insurance and antipoverty programs.
But like the panaceas of education and redistribution, anti-monopolism does not question the premises of economic neoliberalism. Indeed, the antimonopolists claim, with some justification, that they are even more fervent devotees of markets than conventional neoliberals.
Worst of all, three of these schools of thought seek to respond to working-class populist rebellions by offering workers the chance to become something other than workers, as though there were something shameful and retrograde about being an ordinary wage earner. Many champions of education as a panacea want to turn wage earners into professionals. Advocates of universal capitalism want to turn wage earners into investors. Antimonopolists want to turn wage earners into small business owners.
In the 1930s, Keynes speculated about the euthanasia of the rentier class. These reformers propose the euthanasia of the working class. The neoliberal utopia is a workerless paradise.
What about socialism—the genuine kind with state ownership of the means of production? In theory, the option of democratic socialism need not be discredited by the horrors wrought by Marxist-Leninist dictatorships in rural nations like twentieth-century Russia and China.
Democratic socialism is discredited for other reasons. One is the greater track record of the mixed economy, with a blend of markets, public enterprises, and nonprofit provision, over both the pure free market economy and state socialism. A case can be made for socializing some enterprises or industries, but socializing everything can only be justified by dogmatic ideology.
The other argument against democratic socialism is the fact that socializing most or all of the economy by itself would not address the problem of checking the power of the managerial elite, which mere elections, however free, would be unlikely to constrain. Empowering organized labor by means like tripartite business-labor-government bargaining can provide real checks on the managerial overclass, without sacrificing the dynamism of the mixed economy.
The American writer Daniel McCarthy has aptly called approaches like the ones I have criticized in this essay “palliative liberalism.” However popular these miracle cures may be among the managerial elite and the overclass intelligentsia, as remedies for working-class distress in the deindustrialized heartlands of the Western world the panaceas of redistributionism, education, and antimonopolism are like prescriptions of aspirin for cancer. They may ameliorate the symptoms, but they do not cure the disease—the imbalance of power, within Western nation-states, between the overclass and the working class as a whole, including many exploited immigrant workers who labor for the affluent in the metropolitan hubs.
If banana republicanism is to be avoided as the fate of the Western democracies, reformers in America and Europe will have to do far more than buy off the population with a subsidy here or an antitrust lawsuit there. Indeed, if a package of minor, ameliorative reforms is handed down from the mountaintops of Davos or Aspen by a claque of benevolent billionaires and the technocrats and the politicians and intellectuals whom the billionaires subsidize, with little or no public participation or debate, the lack of voice and agency of most citizens will be made apparent in the most humiliating way.
What the racially and religiously diverse working-class majorities in the Western nations need is what they once possessed and no longer have: countervailing power. In the absence of mass-membership institutions comparable to the older grassroots parties, labor unions, and religious organizations, which can provide ordinary citizens with the collective power to check the abuses of the managerial elite, palliative reform at most can create oligarchy with a human face.
Michael Lind is a professor at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin. This essay is adapted from his most recent book, The New Class War: Saving Democracy from the Managerial Elite, published on January 21st by Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House, LLC. © 2020 by Michael Lind.