Book Reviews

Markets and the Law

Neoliberalism isn’t just a set of economic precepts—it’s also an architecture of laws passed to reinforce those precepts. Those laws must be changed.

By Amy Kapczynski

Tagged Economicslawneoliberalism

The Quiet Coup: Neoliberalism and the Looting of America by Mehrsa Baradaran • W.W. Norton • 2024 • 464 pages • $32.50

Neoliberalism, an ideology and form of governance that came to power in the 1970s and ’80s, is commonly associated with the thought of a few influential economists—people like Friedrich Hayek and Milton Friedman. But how did the ideas of a small group of academics actually come to exert power in the world?

Neoliberal ideas had impact because they changed not only minds, but also laws. That might seem like a simple process: Ideas shape people, and then people lobby for legislation. This is the Schoolhouse Rock story of how ideas get into law, but a great deal of legal change occurs in ways much more obscured from public view. Judges interpret statutes and create constitutional rules that shape laws or invalidate them. Agencies reshape the law by making rules or giving official guidance to regulated entities. What lawyers believe the law requires has influence too, even where matters never get to court, because so many people today rely upon lawyers to tell them what they may do or say. Law schools train a great many elected officials and policy elites in the United States, making legal education a profoundly important place of political acculturation.

Legal academics and historians, many of us associated with a new “law and political economy” scholarly movement, are beginning to trace the story of how ideas from the Mont Pelerin Society and neoclassical economics became lodged in legal texts of all kinds. The Quiet Coup, by Mehrsa Baradaran, arrives as the first mainstream book to draw together and elaborate that work. It impressively weaves complex ideas into readable stories, and should help bring a critically important history to a wide audience. But it also has some gaps, and suggests at the end—though not in so many words—that there may be no real way out of the world that neoliberalism has wrought.

Baradaran, a professor of law at the University of California, Irvine who teaches banking and contract law, is known for her work on the racial wealth gap. In this book, she assimilates a vast amount of material that seeks to show how, as she puts it, neoliberal ideology “infected our politics, creating a complex and impenetrable network of laws and regulations that has created a system which is inherently unfair.”

The book is powerfully narrated and offers readers a fast-paced introduction to a series of radical ideas and reforms that reshaped the law of markets over this period. Notably, too, she situates these developments inside of an American politics that was indelibly committed to both protecting racial hierarchy at home and projecting American power abroad. One of the major contributions of the book is the work that it does to show that neoliberalism was not accidentally but intrinsically shaped by racism, and that it provided a means to reassert domination over former colonies in the postcolonial period. At its best, the book also describes and makes strange many of the formative ideas that structured legal education and debate over the last few decades—ideas at the heart of the “law and economics” movement, for example. These theories—commonly taught in law school classes, such as first-year staples property and contract—are premised on the assumptions that humans are all self-interested economic agents, and that the law should focus solely on values like efficiency. These values were subtly defined to elevate the interests of the wealthy, enable new waves of corporate consolidation and financialization, and shift risk onto middle-class and poor workers, many of color. Critically, Baradaran shows that these ideas were not confined to a conventional “market” realm, have also reshaped debates in “public law” domains like administrative and constitutional law.

The book offers readers a fast-paced introduction to a series of radical ideas and reforms that reshaped the law of markets over this period.

To do this in a way that can engage readers who have no particular background or interest in rarified academic debates is a real achievement. Yet the book also has some flaws, the most important of which generate a kind of crisis inside of the text itself. Most notably, when it gets to the obligatory “what is to be done” chapters at the end, there is a plot twist that it almost seems a shame to spoil. After a few hundred pages about the role of law in constructing out-of-control markets that are fueling wildfires, oppressive corporate power, financial crises, and racialized dispossession, Baradaran announces that “[T]he way to defeat free market dogma is through the market.” It’s hard to escape the sense that the ending is a symptom of the very processes Baradaran narrates. Neoliberalism succeeded in part by working its way into law schools and legal debates, and attacking the very idea that the public or state could be a vehicle for something other than self-interested pillage—and then it helped make our politics more like the caricature that it described. What should we make of a book that seeks to critically retell that history, and yet seems to reproduce it at its end?

What is neoliberalism anyway? One common understanding of the term describes neoliberalism as an ideology of “free markets” and “deregulation.” But this definition mistakes advertising for reality. A better understanding, and the one Baradaran implicitly invokes, sees neoliberalism as re-regulating, not deregulating. Rather than getting the state out of the way of natural market forces, neoliberalism was precisely about deploying state power in new ways—on the side of capital. Or as historian Quinn Slobodian puts it in his influential book Globalists, “encasing” markets against democratic demands.

One key contribution of Baradaran’s book, in fact, is that it helps us decisively see the wisdom in this latter way of viewing the paradigm of the last few decades. Neoliberalism came wrapped in an ideology of freedom and choice. Instead, it rearranged power to enable some groups to gain at the expense of many others.

In an early chapter, for example, Baradaran introduces us to a key neoliberal idea that helped to reshape corporate law—the “Friedman Doctrine,” which argued that the sole purpose of the business corporation was to increase its profits. Before this, the Delaware Chancery Court, which oversees a great deal of corporate law because so many corporations are chartered in that state, repeatedly blessed corporate efforts to address social problems, even when they diminished profits. In the 1970s, mainstream corporations like General Motors, in part pressured by shareholder activists, appointed outside directors to represent “the public interest” and announced new plans to take on issues like racial inclusion and environmental sustainability. Milton Friedman’s innovation was to argue that corporations should not be allowed to pursue aims beyond profit-maximization. As Baradaran shows, this is a theory that constrains corporations from taking actions that their directors and even shareholders might want to take when those conflict with the commands of neoclassical economists. Directors and shareholders had fewer choices, not more, when Friedman’s “shareholder value” theory took over. Baradaran skates over the details, and sometimes misses the chance to engage with scholarship on these critiques. (Lynn Stout’s formative work, for example, argues that shareholder value theory came to power as constraining myth, not hard law.) But the chapter gets the point across, here as elsewhere prioritizing the sweep of the story.

That strategy allows the book to sketch how similar ideas move across many different areas of law. A chapter on the Supreme Court describes how the Court, starting in the 1970s, adopted radical new interpretations of the First Amendment that conflated speech and money, in order to strike down campaign finance laws. These decisions quite literally empowered corporations over democracy, a political system premised on the equality of persons. Another chapter describes the rise of “public choice” theory, associated with University of Virginia economist James Buchanan. Here, scholars drew upon key neoclassical assumptions—that all people are driven by self-interest and are competing for scarce goods, for example—to redescribe lawmaking and legislatures, and even government itself, in these terms. Because of these scholars’ influence, law students commonly learn to talk about the problem of “rent-seeking” in conversations about administration and regulation today. Legislators, in this account, cannot be expected to debate ideas or represent the public, but should be understood as cynical, self-interested maximizers who are simply seeking benefits like reelection. And finally, the government is commonly little more than a suspect kind of monopolist—one that can be “captured” by “special interests,” a term that collapses any distinction between those interests (firms versus unions, notably) and dissolves the very idea of the citizen. Baradaran points out that Buchanan described democracy itself as a dangerous vehicle for “cartels” of ordinary people to coerce and “discriminate” against property owners and taxpayers.

Scholars drew upon key neoclassical assumptions—that all people are driven by self-interest and are competing for scarce goods, for example—to redescribe lawmaking and legislatures.

These ideas presaged how conservatives have commandeered the language of discrimination today. If we put these moves together, we see not a withdrawal of the state, or simple deregulation, but rather new ways that state power is deployed: to empower firms while reshaping them toward an ever more laser-like focus on profits, and to fortify capital against troublesome interventions from democratic publics and values.

Chapters discussing banking, the rise of crypotocurrency, and the evolution of contract law offer rich overviews of other legal debates and doctrines that helped drive today’s crises. A chapter on “the legal coup” describes the role of donors and conservative politics in the rise of several schools of thought with profound influence in law schools and the courts, including law and economics, originalism, and textualism. Baradaran does a real service in pulling these strands together and bringing them alive for people with no interest in legal academic debates. We are told not just about the ideas, but also the initiative known as the Judicial Education Program, which brough these ideas to nearly half of the federal judiciary. She also illustrates how influential the initiatives delivering these new ideas were even to liberals because of their technocratic cast, invoking Ruth Bader Ginsburg’s unfortunate rave reviews of the program. (It “lift[ed] the veil on such mysteries as regression analysis,” Ginsburg said, and advanced “both learning and collegial relationships among federal judges across the country.”) And we learn not just about some of the key ideas introduced by perhaps the most influential scholar of law and economics in our time, Richard Posner, but also that he admitted to not having read John Maynard Keynes’s magnum opus, The General Theory of Employment, Interest, and Money, until after the 2008 financial crisis.

There is much to admire in the rich account woven here, but it also has some important gaps and flaws. While the book is particularly acute about some of the domains Baradaran herself teaches and writes about, including contract law and banking, it includes little on labor, or the law of public benefits, or the carceral state. As a result, it misses important aspects of how law in this era helped lock in forms of racialized dispossession and chronic poverty. An early chapter that describes neoliberalism as a form of neocolonialism points briefly to seismic shifts in the transnational legal order, such as the U.S. withdrawal from Bretton Woods in 1971. But readers will have to go elsewhere to learn how new international treaties and regimes were created to help firms protect investments and property, to liberalize capital flows, and to protect creditors from default—while neither those treaties nor others provided comparable protection for workers, migrants, or the environment.

Readers familiar with debates on neoliberalism will find aspects of the book frustrating. It can be evasive at times, coming to conclusions that are voiced but not really explained. Early in the book, for example, Baradaran asserts that in the wake of neoliberalism, “[C]apital has gained viral qualities and the legal system is no longer capable of restraining it.” A few pages later, she writes that “market magic” in fact could have lifted all boats, leading to “global peace and freedom,” if only Western nations had “taken the risk of trading with the newly ‘freed’ sovereign nations.” Claims like these, both sweeping and in some tension with one another, come and go at a rapid clip.

And then there’s the jack-in-the-box ending. After hundreds of pages that effectively describe the free market as a contradiction in terms, Baradaran asserts that “[T]he way to defeat free market dogma is through the market.” And she tells us, further, that she is at work now “designing investment vehicles that could invest in people and communities using simple structures and complete transparency.”

The idea of social investing is not new, and it’s not clear what about this new program would escape the most common objection to such funds: They are less profitable than other investments and so will always be marginal. Baradaran suggests that investors who can stick in it for the long run—pension funds, for example—could invest in things like affordable housing and still earn a good return. But why should we be so sure of this, if the law has given us corporations that can suppress wages, industrial landlords who are buying up properties across the country, and a shredded safety net, too? As scholars focused on debt have pointed out, the American ideal of credit as a kind of social provision ignores the fact that many low-income Americans today have no real prospect of future prosperity. What will social investment funds do if, in a financial crisis, millions of poor and middle-class homeowners cannot make mortgage payments on the affordable housing those funds created—will they foreclose, as for-profit banks did? How can they help if grinding poverty means that poor Americans need subsidy, not credit, to achieve homeownership? Social investing also defers to the choices of investors, empowering the wealthiest Americans to choose for the rest of us—hardly the kind of democracy Baradaran elsewhere urges us to try.

The whipsaw effect comes from just how sharply this turn contradicts earlier parts of the book. How can an investment fund curb the risks generated by crypto or the shadow banking system? Or address the decline of the administrative state and the rise in monopoly corporate power? In an early chapter, Baradaran criticizes Richard Nixon’s ideal of “Black capitalism,” and in earlier work she has argued that Black-owned community banks could not ultimately compete with big national banks because they served poor communities—meaning major government interventions, including reparations, were needed. In other work, she and others also urged a new wave of public postal banking—providing a public option for banking services to millions of Americans and creating an alternative to predatory lending—and helped to put that idea on the political map.

Of course, postal banking and reparations, like many other major reforms proposed to bring us beyond neoliberalism or even to a different accommodation with capitalism itself, have not yet come to be—and it’s easy to sympathize with the frustration and sense of sublimated hopelessness that marks the end of the book. Ironically, one more marker of the power of the ideas The Quiet Coup describes is that the book ends with the subliminal return of an idea of shareholder supremacy, and the ideal of a market that can govern over politics. At its best, though, the book gives a wide readership the tools to think and act differently, and a smoldering sense of the reasons that we, collectively, need to do just that.

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Amy Kapczynski is Professor of Law at Yale Law School, and faculty co-director of the Law and Political Economy Project and the Yale Global Health Justice Partnership.

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