Symposium | Beyond Neoliberalism

Philanthropy’s Role

By Jennifer Harris

Tagged Economicsneoliberalismphilantrhopy

There is a longstanding tendency among center- and left-leaning U.S. foundations to focus on discrete issues—health-care reform, federal legislation to curb carbon emissions, quality public K-12 education, skills training, $15 federal minimum wage, and so on. Such an issue-specific approach is understandable, perhaps even correct. But it misses the intellectual soil that virtually all these problems grow out of. This oversight makes all these individual fights harder. Without more concerted attention to the ideas and values that govern so much of what society sees as possible and desirable, progress on our biggest problems becomes more difficult and less certain.

What we need, in other words, is an intellectual movement that sheds the free-market absolutism ushered in by Friedrich Hayek and Milton Friedman 40-plus years ago, in favor of new building blocks better suited to society’s current problems. Such shifts in intellectual ground are rare, but they do happen. Ideas like mercantilism gave way to laissez-faire liberalism, which in turn gave way to Keynesianism, which was then superseded by the free-market absolutism of Hayek and Friedman in the 1970s. If past is precedent, though, the next turn of the screw won’t happen on its own—philanthropy will need to play a central role.

The notion that ideas and values deserve explicit philanthropic attention isn’t new. Commentators like Michael Shuman, David Callahan, and Andy Rich have been making this argument for two decades. On stepping down from the helm of a multi-issue progressive think tank in 1998, Shuman lamented, “We are in a monumental struggle over the very future of governance and public policy as we know it.” He went on, warning that if funders “insist we play Wiffle ball while our opponents play hardball, we’re destined to lose.”

Twenty years on, the situation is scarcely different. This raises a question: What does it mean to take aim at a set of ideas? Certainly, a new intellectual movement requires ideas of its own—you cannot replace something with nothing—and fortunately, there are green shoots emerging. But it also takes contending with the coalitions and power structures sustaining Hayekian free-market orthodoxy, often called neoliberalism; these ideas didn’t ascend into orthodoxy organically, nor should we expect they will recede without a fight. This requires a shift in mindset on the part of both the foundations, the individuals, and the organizations involved in this work. Back to Shuman: “Funders must be prepared, as their conservative counterparts were over the past generation, to invest in serious intellectual exploration—in books, journals, magazine articles, and conferences—without expecting an instant return. And if we want this work to be relevant, it must be carried on alongside, and together with, grassroots organizing. Intellectual work can no longer be separated from organizing or campaign work.” In short, all sides—intellectuals, think tanks, sympathetic business leaders, moral and religious authorities, and foundations—must come to understand themselves as part of a common project.

First, it is worth considering just how transformative such movements can be.

The power of our most basic political and economic ideas comes in how rarely we check in on them, in their ability to go unquestioned. Ideas like “The king is divine” ordered political and thus economic life across Europe for centuries, until the 1640s, when supporters of Parliament “invented” popular sovereignty—the view that all power comes from the people—to better their hand against Charles I.

But these ideas are, to borrow historian Edmund Morgan’s term, “make-believe”—in that they are human inventions, created to help society explain the world at any given time. The test of these stories is not whether they are right or wrong—but whether they are useful in solving problems society needs to solve.

Once embraced, these ideas endure until events pass them by—rendering them powerless to explain and order the world any longer. In a 2018 essay, Hewlett Foundation President Larry Kramer chronicled how, in the late nineteenth century, laissez-faire liberalism suited the demands of the robber barons and others at the vanguard of industrial development. But by the 1930s, the Great Depression had marginalized such libertarian ideas in favor of Keynes’s mixed economy, a shift completed after World War II with the creation of new institutions to suit the new economic order. Given the need to manage swings in demand and to stimulate innovation and industrial production to defeat the Axis powers and later the Soviet Union, a strong role for the state made more sense.

Keynes’s ideas also worked, as evidenced by the three decades of widely shared prosperity following World War II. But by the mid-1970s and early 1980s, America had new problems. Unemployment exceeded 10 percent, and interest rates and inflation were skyrocketing. And these new problems demanded a new story.

Enter Milton Friedman, armed with just such an explanation. He and his fellow “neoliberals,” as they have come to be known, of course pointed to government as the culprit (Friedman, Hayek, and other early Chicago School adherents pioneered the term “neoliberal” before Washington Monthly’s Charlie Peters adopted it to refer to Gary Hart-style centrism within the Democratic Party). Their central goal was shoring up individual liberty against the winds of communism. The best way to protect liberty and prosperity, their story went, was through efficient competitive markets, populated by rational, profit-maximizing individuals; and they evangelized the corresponding belief that government ought to be confined to establishing and protecting free markets.

Their ideas upended virtually every corner of policymaking—fiscal and monetary policy, labor policy, trade policy, industrial policy, and much more. Market efficiency became the guiding logic for cutting taxes, public investment, and regulation. Neoliberal thinking went on to colonize other disciplines beyond economics, from law and business to myriad social sciences. GDP became the singular measure for societal well-being. And as the neoliberals seized key prizes, like the courts, concepts like shareholder primacy, corporate speech rights, and more moved from the obscure fantasies of a group of fringe intellectuals into U.S. law.

The point of this potted history is this: Some intellectual paradigm or another is always marking the boundaries of our political imagination, and when it falls down against the problems of the day—“when the facts stray too far from these fictions,” to return to Morgan—it is our ideas that must shift to us, not the other way around.

And today’s facts have strayed. Even if we grant that the Hayekian free-market orthodoxy might have suited the late twentieth century, there is growing evidence that it is no longer up to the task. At this point, market solutions, whether by pricing carbon or enacting a cap-and-trade scheme, are not sufficient to save us from the devastating consequences of climate change. Nor can markets self-correct the outsized returns to capital over labor and the resultant compounding of wealth disparities in a country where the richest 1 percent already hold more wealth than the bottom 90 percent.

So what would a counter-revolution in ideas involve today?

First, no surprise, it takes ideas—and ultimately, these ideas must cohere into a story that both helps explain how the world works, and points society toward some interventions, and away from others. No one may have that elegant story just yet, but there are a number of encouraging possibilities bubbling up.

One is the reintroduction of questions of power in economics. The neoliberals created the fiction of a market in which all participants have equal standing. But economists from different specialties are now beginning to study how power imbalances shape economic outcomes—take Suresh Naidu’s work on hemming in monopsony power in labor markets, or Gabriel Zucman’s findings on tax avoidance by wealthy corporations and individuals, and the toll it takes on national governments. Philosophers like Elizabeth Anderson and Danielle Allen are beginning to make similar arguments within their fields as well. Drawing on her own early stints working for heavy-handed employers, Anderson rejects the idea that free markets do much better for either individual freedom or equality than does state control. “We are told that our choice is between free markets and state control,” she writes, “when most adults live their working lives under a third thing entirely: private government.”

Accompanying this turn toward questions of power in both economics and philosophy is a creeping popular recognition that markets are not some naturally occurring, pre-political institution. Rather, it is we who make markets, and we are always shaping them to advantage some actors and thereby necessarily disadvantaging others, even—perhaps especially—by omission, as with deregulation. That this even needs saying is, of course, a testament to neoliberalism’s reach. But a growing set of institutions like the Roosevelt Institute, Demos, Open Markets Institute, and others have been instrumental in propounding these deeper structural arguments about markets and power that are now migrating into mainstream politics—and not just on the left. In January 2019, Fox News host Tucker Carlson issued an improbable broadside against free-market dogma, stirring one of the most interesting debates among conservatives in years: “Market capitalism is not a religion,” Carlson warned. “Any economic system that weakens and destroys American families is not worth having.” President Trump’s willingness to go after prescription drug pricing is a similarly important example of this emerging view that, at least on some matters, we are not content to resign ourselves to the vagaries of market outcomes.

Second, fairly deep criticisms of neoliberalism are emerging within specific policy areas. Take antitrust, for example, where work from law, economics, and political science is converging on the idea that simply focusing on consumer welfare, as measured by the price of goods, omits important democratic stakes. The fetishizing of consumer welfare also seems to fail on its own terms, thanks to the way in which a number of technology sectors are characterized by increasing returns to scale. The same is true within trade—economists like Ralph Gomory and William Baumol show how, for sectors characterized by such increasing returns to scale, neoclassical ideas like comparative advantage producing a single equilibrium point, as well as Kaldor-Hicks efficiency (the idea that trade is efficient so long as the gains are sufficient enough that the losers could theoretically be compensated) no longer apply. This would mean that much of the theory we’ve understood about trade as necessarily win-win no longer holds.

Another example is industrial policy. Wherever the policy particulars of the Green New Deal land, it marks an important rejection of the idea that we can look exclusively or even primarily to markets to solve climate change. The basic question it poses is one of industrial policy—Do we, as a country, want to get back in the business of attempting big things? That is itself a direct rejection of neoliberalism’s skepticism toward large societal aims. The Green New Deal’s scope of ambition and unapologetic role for the state are also a demotion of the values markets prioritize—efficiency and choice—in favor of other values, like innovation and certainty. There may be times when it makes sense to value efficiency. But there are also times, as in war, and we can now add climate change, when being sure of success matters more than finding the most efficient path.

Many of these “new” ideas aren’t actually new. The question often arises, then: Why can’t we simply go back to Keynesianism? Even if imperfect, wouldn’t it be a good enough salve? Whatever anti-neoliberal intellectual framework emerges will almost certainly draw heavily from the playbooks of Keynes, Karl Polanyi, and others who argued for a more active state role. (Notably, the neoliberals were also self-conscious revivalists—resuscitating the strict libertarianism of the early twentieth century and updating it to their time.) But simply dusting off Keynes is insufficiently ambitious. For starters, any solution will need to begin by explaining what’s changed such that neoliberalism no longer works. Any such account of change should probably explain why we can no longer rotely embrace a recipe that suited a world where most households were still supported by a single-earner, or that had not yet awoken to the dangers of climate change, or digital disinformation.

A second, more practical reason why a straight Keynesian redux is insufficient is that dominant ideas must be broadly persuasive across a range of ideological factions. But because the Keynesian formula is by now so associated with the progressive left, its reach will likely be limited. One might respond that if progressive politicians are able to once again win elections based on this formula, the center-right will fall in line, as Democratic and British Labour leaders did following the electoral successes of Reagan and Thatcher. But to view the Clinton and Blair concessions to neoliberalism and the Third Way movement as mere political exigency shortchanges the extent to which they embraced these ideas willingly—because they believed in them.

Today’s new ideas are just beginnings. Hence the need for philanthropic investment. One challenge is to get academics to work differently. In Hayek and Friedman’s day, creating beachheads at places like the University of Chicago and George Mason was necessary in part because the academy was fairly hostile to their ideas. Today’s situation is more one of distraction and benign neglect than outright hostility; the question is whether the most promising academics can reject pressures of over-specialization in favor of asking bigger questions, and can come to see themselves as part of a common project spanning relevant disciplines. Against this task, the role for philanthropy is less straightforward than financing a critical mass of endowed chairs at a couple of well-chosen universities.

Developing new ideas is only one front in this movement. If developing ideas is difficult, moving them in the world is more so, partly because it means contending with the power structures underpinning neoliberalism. Historians like Angus Burgin and Quinn Slobodian explain how neoliberalism’s rise was ultimately a marriage between libertarian intellectuals, big business, and white evangelicals. The amalgam that resulted was generous enough for each faction to take what suited their purposes and largely ignore the rest.

Upsetting this coalition will involve creating immediate stakes for what can often feel like abstract ideas. This is where social movement and grassroots organizing groups come in. Yet these groups are the first to admit, returning to Michael Shuman, that “Too little is being invested today in answering a fundamental question: What exactly are we organizing for? Many of our pat ‘answers’ are obsolete…. One unanswered question looming large, for example, is how to provide decent work to everyone without destroying our ecological base. Can anyone say, with confidence, what our economic program is?”

It’s not difficult to make out what these groups are against—consider the array of campaigns targeting the predatory behaviors of Wall Street or specific corporations. To the extent that campaigns do have affirmative aims, they tend to be for better minimums—the Fight for $15, for example, or paid sick days. To be sure, this is critical work and should continue. But these fights do not add up to, nor derive from, any coherent answer to neoliberalism.

Such is partly the nature of campaigning; outrage mobilizes. But at least part of the blame also falls on philanthropy—the foundations that tend to invest most heavily in economic and social justice work tend to support specific campaigns. There is too little focus on building power, and too little focus on ideas.

Arguably the lack of focus on ideas also partly stems from the fact that it has traditionally not been seen as the competency of these groups to be the idea generators. But that seems increasingly less true: The current push for reparations probably would not be mainstream if not for the Movement for Black Lives, just as teachers strikes in Oklahoma, West Virginia, and elsewhere are breathing new life into the labor movement.

There is much to learn from the wisdom of angry crowds in America today, it seems. And philanthropy is well situated to help bring about a new set of relationships linking organizers and activists and academics. Through thoughtful funding of post-graduate career paths, it might even be possible to generate a new mold of organizer, who is some blend of the two. Take Ady Barkan, called the “most powerful activist in America.” Barkan studied social movements in college and law school, and went on to found Fed Up, a campaign premised on three insights: one, the Federal Reserve wields far more power over the economic well-being of the country than does any other single institution, including Congress; two, partly for that reason, monetary policy should be a topic of political discourse; three, the rules of the economy have sufficiently changed that it is possible to allow for much more expansionary monetary policy than most economists have advocated, without nearly the same risk of inflation. Affirmative, structural campaigns of this sort—ones that target key institutions of power and rewrite the rules over how the economy is managed—are possible.

But they are not easy. It is safe to assume they would be easier with less uniform opposition from the business community. There are rumblings of a new willingness to depart from the highly partisan, staunchly conservative activism business has adopted over the past four decades. The ultimate test of whether these rumblings amount to anything will likely center on business itself—specifically, on whether business is willing to dispense with one of neoliberalism’s most insidious ideas: shareholder primacy. There is an emerging policy agenda importantly grounded in the notion that “Corporations are creatures of public permission,” as economist Lenore Palladino has put it. And “The privileges granted to large corporations are just that—privileges—not rights, and they are granted by the government so that corporations can accomplish public purposes that otherwise would be hard to meet.”

Not least, any worthy successor to neoliberalism must involve a moral dimension. The most important periods of social and political struggle have always fought not just over who should have power, but over which ideas about morality should dominate. In the late twentieth century, as market logic pervaded more and more spheres of human life and became fused to moral arguments about freedom, markets assumed a moral force of their own. As this happened, other ideas about morality not tethered to markets receded. A course-correction may be brewing, though. “We ripped the market out of its moral and social context and let it operate purely by its own rules,” one prominent observer wrote recently. “We made the market its own priest and confessor.” Another put it this way: “The first thing we must recognize, is that economic justice is a moral issue. And economics can’t be separated from moral questions. It was never intended that way.”

The first quote belongs to conservative New York Times columnist David Brooks, and the second to Rev. William Barber II, leader of the Poor People’s Campaign—lending weight to the notion that some of the best arguments against market fundamentalism today are moral ones, and they are found on both the right and the left.

All of this adds up to a pretty different picture of philanthropy. We need foundations willing to try something different than issue-specific programs. We need to invest in institutions and individuals—academics, think tanks, movement actors, business leaders, moral and religious figures—willing to prioritize ideas over policy, and willing to see themselves as part of a common project.

William Simon, who served as president of the John M. Olin Foundation, saw clearly what it takes to wage a battle of ideas. “The alliance between the theorists and men of action in the capitalist world is long overdue in America,” he wrote 40 years ago. “It must become a veritable crusade if we are to survive in freedom.”

He convinced his fellow funders. They won, and they reshaped just about everything in the process. If we are again to survive as a free society—this time prevailing over unchecked private, as well as public, power—today’s funders will need to take a similar gamble.

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Jennifer Harris directs the Economy and Society Initiative at the Hewlett Foundation, and co-founded BuildUS, a $50 million-plus fund focused on maximizing the economic benefits of the Inflation Reduction Act. She previously served as special assistant to the President and senior director for international economics in the Biden White House.

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