How Law Made Neoliberalism
If we are to emerge from this era of crisis, we need legal thinking that operates on fundamentally different presumptions.
February 22, 2021
Feb 22, 2021
19 Min read time
If we are to emerge from this era of crisis, we need legal thinking that operates on fundamentally different presumptions.
We live in an era of intersecting crises—some new, some old but newly visible. At the time of writing, the COVID-19 pandemic has already caused nearly 500,000 deaths in the United States alone, with many more deaths on the horizon in the coming months. Since its arrival in the United States, the virus has intersected with and magnified long-neglected problems—radical disparities in access to healthcare and the fulfillment of basic needs that disproportionately impact communities of color and working-class Americans, alongside a crisis of care for the young, elderly, and sick that stretches families and communities to the breaking point.
These crises are often analyzed in terms of the political economy of neoliberalism. This analysis too often overlooks the critical role that law plays in constituting neoliberalism.
These crises arise from the chronic failure of political institutions to respond democratically to public needs. They are rooted in decades of politics, policy, and law. For many Black, brown, rural, indigenous, and working-class Americans, this democratic failure is business as usual. But over the last four years, and especially since the storming of the Capitol, fear of democratic failure has become mainstream.
These crises are often analyzed in terms of the political economy of neoliberalism, an ideology of governance that came to predominate in the 1970s and ’80s. Neoliberalism is associated with a demand for deregulation, austerity, and an attempt to assimilate government to something more like a market—but it never was as simple as a demand for “free markets.” Rather, it was a demand to protect the market from democratic demands for redistribution.
This analysis of neoliberalism too often overlooks the critical role that law plays in constituting neoliberalism. Law is the essential connective tissue between political judgment and economic order.
Many people recognize that the law has changed in anti-egalitarian and anti-democratic ways in recent decades—for example, that Citizens United amplified the role of money in politics, or that the construct of “colorblindness” has become entrenched in constitutional doctrine and helps sustain structural racism. In our view these are not isolated changes, but part of an orientation—an ideology about markets, governments, and law that has become foundational to our legal infrastructure. We call this orientation the “Twentieth-Century Synthesis” in legal thought.
Under the Twentieth-Century Synthesis, areas of law that concern aspects of “the economy”—for example, contracts, corporations, and antitrust—were given over to a “law and economics” approach that emphasized wealth maximization. Meanwhile, other values—such as equality, dignity, and privacy—were supposed to be realized in constitutional law and areas of public administration. Shaped by these ideological currents, constitutional law turned away from concerns of economic power, structural inequality, and systemic problems of racial subordination. Other “public law” areas did the same. The result was that deep structures of power at the meeting place of state and economy were shielded from legal remedy and came to seem increasingly natural.
Our ambitious hope is to replace the current “common sense” of legal scholarship with a new set of default ideas that will prove more responsive to the crises that we face.
A number of us—legal scholars, practitioners, activists, and academics gathered under the rubric “Law and Political Economy”—have begun rethinking the relationship between law, economy, and politics suggested by the Twentieth-Century Synthesis. Our ambitious hope is to replace the current “common sense” of legal scholarship with a new set of default ideas that will prove more responsive to the crises that we face.
Law must move from trapping us in accelerating crises toward providing paths to new and more adequate ways of setting democratic terms for a common fate. The U.S. Constitution, for example, should be interpreted and amended to align with democratic principles and become a platform for actual and democratic self-rule. Other changes—from constitutional doctrine, to voting rights, to legislative procedure—are also urgently necessary if the country is to become more democratic. Simultaneously, lawyers must advance values of democratic empowerment in institutional settings that have, for decades, been defined as insular, technical, and, if at all political, relating to expert “governance.” The Twentieth-Century Synthesis has obscured the significance of this work. But, if we are to emerge from this era of crisis, we need legal thinking that operates on fundamentally different presumptions.
• • •
The history of post-war economics and its intellectual predominance are partly responsible for the growth of the Synthesis. The Synthesis is also a story of the relative economic success of the decades following the World War II, when the market economy seemed to be reliably expanding, with broadly shared increases in income. Both Democrats and Republicans increasingly came to see the economy as an object of routine expert management. Persistent issues of inequality, such as racial hierarchy, were recast by many mainstream thinkers in the 1950s and ’60s as problems of inclusion in a system that basically worked. That idea persisted long after any empirical plausibility was undercut in the mid-1970s, when wages stopped increasing for ordinary workers. Its legitimacy was further undermined by the inequitable results of the financial crisis of 2007 and 2008, the aftermath of which persisted even as we careened into the present COVID-19 recession.
Persistent issues of inequality, such as racial hierarchy, were recast by many mainstream thinkers in the 1950s and ’60s as problems of inclusion in a system that basically worked.
The Synthesis comprises three presumptions that structure much of conventional legal and policy discourse. The first presumption is that the economy is a potentially autonomous system in principle—self-correcting, efficient, and largely serving the common good. On this view, government “regulation” interrupts the system and should be treated with suspicion unless it simply solves “market failures.” Those failures may be widespread, and the state’s role in shaping and maintaining the economy extensive, but the law is to be oriented toward an approximation of the self-sufficient ideal of economic order. This presumption erases the growth of unequal income and wealth that is the empirical tendency of market economies, as well as the “private government” of managers dominating workers and monopoly firms, such as Amazon, increasingly dominating whole sectors of the economy. From this perspective, antitrust regulation gets between giants such as Amazon and their willing customers; unions regiment the labor market, boxing out individual at-will employment; financial regulation curtails innovation among investment managers. This posits that liberty and the general welfare will be advanced by getting the state out of the way—by “deregulating.”
Of course, the Synthesis arose during an era not of deregulation but of selective re-regulation. Certain parts of the state grew larger and more restrictive, redeployed to advantage the powerful few. For example, regimes of intellectual property and transnational investment protection—regulatory, if anything—were constructed to empower powerful businesses in the global North. At the same time that the government scaled back social services, it deployed expensive systems of incarceration and penal welfare. The state refined systems of parole and child support to make poor people, disproportionately of color, “get to work or go to jail.” Extractive immigration laws gave bosses more control and made workers, authorized and unauthorized, more vulnerable. The stories of Flint and Ferguson are not about deregulation and market freedom, but about privateering business interests finding a foothold in a degraded public sphere, implementing new ways to extract wealth from ordinary people, and denying basic entitlements to freedom, equal care, and democratic voice. The result has been the greatest economic inequality and concentrated economic power in a century. At every step, law has been central to these developments—not only providing the rules for new systems of extraction and upward redistribution, but also elaborating the ideas used to rationalize them.
The role of law in weakening the welfare state and expanding incarceration is clear, but the shifts in law and legal logic that operate farther from the spotlight have largely been obscured. Take two examples from economic law: antitrust and labor law.
Law has been central to these economic developments—not only providing the rules for new systems of extraction and upward redistribution, but also elaborating the ideas used to rationalize them.
The Sherman Act, which regulates the level of concentrated ownership in any given industry, was passed and enforced on the theory that corporate concentration was a threat to democracy. Justice Louis Brandeis’s perhaps apocryphal claim that “we may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both” could have served as a motto for the field. Beginning in the 1970s, under the influence of conservative scholars (including Professor, later Judge, Robert Bork), antitrust law abandoned this original theory. In its place, it refocused on the goal of low prices (called “consumer welfare”). Antitrust law followed neoclassical economics in assuming that behemoths are generally large because they are delivering good value, not because they are accumulating too much power. This conviction also presumed that corporate shortcomings would be revealed by new competitors, reinterpreting the waning of competition as attributable to the efficiencies of dominant business.
Now our banks are too big to fail, Amazon and Facebook are public infrastructures in private hands, and the super-concentrated meat industry is producing supply-chain breakdowns as COVID-19 devastates slaughterhouse workers. This regime is not serving the general welfare, let alone the purposes of freedom and democracy that were once its anchors.
The keystone of twentieth-century labor law, the Wagner Act, was passed in 1935 to support the creation of unions and promote collective bargaining. As Senator Robert Wagner put it, “Democracy in industry means fair participation by those who work in the decisions vitally affecting their lives and livelihood.” This idea of “industrial democracy” aimed to correct the “inequality of bargaining power” between workers and employers. For many decades it did just that, as unionization rates rose steadily in the decades following the Act, peaking at about 35 percent in the 1950s and early ’60s.
Today, with private-sector union membership at 6.3 percent, the most salient bodies of law for most employees have nothing to do with unions. Take for example the series of court decisions that allowed employers to extend arbitration agreements from disputes among companies and sophisticated actors to employer-employee disputes. This means that whatever rights employees theoretically have must be asserted in private forums that reliably favor employers. Another example is the permissive category of the “independent contractor,” which both new companies (such as Uber and Lyft) and many longstanding outfits have used to reclassify those they employ as free agents—free, chiefly, from the legal protections employees still enjoy.
A legal regime intended to balance power and promote democracy has given way to one that ignores the huge difference in power between companies and individual workers.
A legal regime intended to balance power and promote democracy has given way to one that ignores the huge difference in power between companies and individual workers. Law ignores this discrepancy and, thus, deepens it. This shift in law has helped create our world of low-wage and insecure jobs that endanger workers’ health and safety. As COVID-19 has shown, this endangers all of us.
The second presumption of the Synthesis is that legal equality, especially constitutional equality, is best understood as formally equal individual treatment, against a backdrop of a market reified as natural, rather than in light of the deep, structurally conditioned, and market-embedded differences that actually constitute the lived experience of race, gender, and class hierarchies. Formal equality forbids explicitly differential treatment of individuals in different groups, such as Jim Crow segregation, which means that it effectively requires “everyone to play by the same rules” on an unequal playing field. Shaped by this premise, much of the modern jurisprudence of equality turns a blind eye to the cumulative weight of historical systems, biases, and policies that perpetuate disparities in wealth, health, power, and privilege—from the segregated structure of our cities to the racial wealth gap.
In the 1970s the federal courts asked whether the Constitution allowed unequal school funding, whether racial equality was consistent with “color-blind” policies that reproduced racial gaps, and whether Congress could undercut the effective right to abortion by banning abortion funding while covering the costs of childbirth with public funds. The Supreme Court answered “yes” to each question. Through these decisions, equality came to mean having the same opportunity to win or lose in the marketplace. But this was burdened, of course, by unequal histories of poverty and discrimination.
Through Supreme Court decisions, equality came to mean having the same opportunity to win or lose in the marketplace. This was burdened by unequal histories of poverty and discrimination.
Finally, the third presumption of the Synthesis was that democratic politics was best understood, in practice, as a vehicle of irrational and opportunistic decisions, which should be constantly subjected to technocratic and juristocratic oversight. Some of this skepticism reflects the influence of “public choice” theory, and some of it implicitly reflects a longer history of technocratic condescension to democratic publics. Skeptics believe that the public is too ill-informed and ill-equipped to handle modern complexities, contending that we instead need insulated expert decision-makers—whether at the Federal Reserve or the Supreme Court.
The public was redefined as a collection of discrete “interest groups,” then shut out of rooms where trade deals were negotiated or interest rates were set. For example, reigning trade theory from the 1980s into the last decade asserted that all “interest groups” had to be held at bay—treating both citizens and corporations as “rent seekers” who would disturb the grand bargains and decrease efficiency. In practice, though, the public was shut out of treaty negotiations while corporations were brought to the inside and allowed to set the table. This resulted in trade regimes that gave capital priority—for example, access to transnational arbitration to protect their investments, to which labor had no similar claim.
But this logic was not limited to trade. Government during this period came to be seen not as a vehicle for public will, nor politics a place to debate, form opinions, and seek the public good—rather, both were assimilated to the logic of the marketplace, where the only “rational” choice is maximizing one’s own individual benefits. Here, government—with its monopoly on the use of force and certain public institutions—was a suspect kind of monopolist. Free from the disciplining force of “competition,” it would inevitably become corrupt—a trough where “special interests” go to seek spoils.
The public was redefined as a collection of discrete “interest groups,” then shut out of rooms where trade deals were negotiated or interest rates were set.
On this thinking, it made sense to try to roll back government (read: labor and civil rights protections, environmental regulation, etc.) to enable market competition and have government function like a market. The Supreme Court and public institutions, enabled by both parties, blessed a range of moves to promote this ideal, most beyond the glare of constitutional law. This was the general rule: government would be rolled back at the same time that it was also rolled out. The point—sometimes implicit, sometimes explicit—was to enable market logics to rule over more of public life. All the while, the marketplace increasingly became a locus of concentrated power.
These three presumptions emerged from a combination of intellectual networks and, yes, interest group politics. On the one hand, scholarly debates about concepts such as cost-benefit analysis, economic efficiency, and public choice shaped the terrain of debates about law and public policy. Then, partisan actors and interest groups leveraged these debates to advance specific political agendas. Business lobbies used the rhetoric of efficiency, regulatory capture, and the veneer of academic expertise to lobby for policies that benefited their bottom line. The process was at many moments driven by the right and propelled by the power of well-funded formations—from the Olin Foundation to the Federalist Society. But these ideas could not have become hegemonic without key establishment figures on the left. It was President Bill Clinton, after all, who delivered workfare, “financial reform,” and full-throated neoliberalism in international trade. It is only today that a position on money, budgets, and finance that could truly serve justice and democracy is starting to emerge from the wreckage of years when progressives conceded that there was no alternative to the neoliberal paradigm. The greatest success of neoliberal ideology may have been to make the state appear all the more like its caricature in neoliberal thought: the results provide more proof of the “failure” of the state and of democracy itself.
• • •
There are three principles that might help us move toward a new legal imaginary. Though these do not provide a methodology for scholarship or decision-making, they do represent a principled shift of legal inquiry to counter the precepts of neoliberal thought and the familiar discourses of legal neutrality. They also orient law toward a more democratic future, where the central task is not optimizing wealth and technocratic rule, but creating a more equitable and inclusive democracy and economy.
The process was at many moments driven by the right and propelled by the power of well-funded formations. But these ideas could not have become hegemonic without key establishment figures on the left.
The first step is a reorientation from efficiency to power. Whereas, for decades, we have been asking what legal regimes are “efficient,” we should instead be asking what regimes produce the kind of widely shared political and economic power that is fundamental to a democracy. This is not to insert politics and law where they were absent before, but rather to ask how we can deploy them toward the freedom of all, not just the ruling autonomy of a few. Markets are not “free”; they are riven throughout with power disparities which are, themselves, products of law and policy. We construct the kinds of markets we want—and that means that we should embrace the capacity of law and politics to construct a radically more inclusive politico-economic order.
This shift helps make sense of why, for example, a new approach to labor law and anti-trust law should be central to a just political economy program. The revived attention being given to corporate power and anti-monopoly policy points towards a renewed use of public authority to check concentrations of private power. Similarly, this commitment to rebalancing economic power manifests in the fights over worker rights—from their evisceration by measures such as Prop 22 in California, to the efforts to expand labor’s ability to organize and secure benefits for all. Labor law and the law of finance and money are suddenly among the most dynamic in the legal academy today, as LPE scholars have begun newly mapping the state power at the heart of our systems of market coordination, finance, and banking, and theorizing how they might be designed to distribute, rather than concentrate, power.
Second, we must recognize the ways that formal equality fails and ask how our laws might cultivate a deeper form of equity—the equality of status and dignity that comes from dismantling historical structures of class exploitation and racialized and gendered subordination. There are many challenges here. We must unravel how racism, the marginalization of social reproduction, and the coercion of care are entangled with our political economy. We must work against the grain of liberal thinking about inclusion that has deeply marked law and mainstream legal theory, and simultaneously against an older tradition of political economy that encoded a racialized and gendered conception of the nature of production and the economy. We must theorize the relationships between the carceral state and capitalism and ask how we can constitute democratic publics in a global system that was designed for exploitation and exclusion. We need to bring these insights to bear upon a constitutional tradition that enacts the very “encasement” of the economy to which we are opposed—all in the midst of a legal culture that celebrates tactics like litigation over strategies of movement-building and legislation. But the generativity of this work is also clear, as scholarly debates about reparations, dismantling the carceral state, and intersectional strategies for labor organizing command a new conversation within and beyond the academy.
We construct the kinds of markets we want—and that means that we should embrace the capacity of law and politics to construct a radically more inclusive political economic order.
Third, we must limit the familiar anti-politics of legalism and technocratic decision-making through a commitment to democratic politics. Democracy has to mean more than the manufacture of public opinion alongside elections. At its heart it means that majorities set the country’s direction, not the constitutionally gerrymandered pseudo-majorities of the senate and electoral college or the conclusions of neoliberal trade theory. Democracy also means deeper political empowerment, such as the capacity of communities to mobilize against the hoarding of political decision-making power in wealthier (and often whiter) constituencies.
How can we counter the power of technocratic elites without abandoning the need that any democracy has for expertise? And how can we build more participatory and inclusive political institutions without hampering the exercise of state power, and without simply reproducing class and racialized biases? As we reformulate the central question in fields such as administrative law, new campaigns for community benefits agreements, wage boards, and participatory budgeting are taking root. Emerging work emphasizes the relationship between social movements and law reform. At the same time that participatory politics and movement-building are critical to legal change, we must recognize that—as the recent attack on the Capitol reminds us—we cannot have a democracy without a commitment to constitutional forms. And democracy necessarily always means that our favored cause may lose.
Our three proposals for reorientation are not novel. They owe a great deal to prior generations of critical legal thought, critical race and feminist approaches to law, and prior waves of political economy scholarship dating back to legal realism and the Progressive Era. But in this moment of upheaval and crisis, it is crucial for legal thought and action to reclaim and foreground these orientations. They do not solve these problems; they draw attention to them and suggest terms in which we might engage them with our eyes on the right imperatives and hazards.
Indeed, recognizing the deep structural constraints that led to the present political crisis entails seeing that the four years of Donald Trump’s presidency were less a catastrophic aberration than the culmination of much longer-standing ideologies—including, in law, the Twentieth-Century Synthesis. If they were merely an aberration, we might hope that a good election cycle or two would get things “back on track” without fundamental change. But the current crisis is a symptom of unresolved structural inequities and forms of political disempowerment, stretching back decades and centuries. Trump’s defeat will only set the stage for more conflict.
If we do not find ways to reckon with these issues, then the country’s recent bout of nativist kleptocracy portends something far worse.
The last four years have intensified longstanding trends: the collapse of democratic politics into marketing and democratic rule into capitalist power; rampant inequality in a landscape of unmet needs; structural racism and other forms of subordination; the increasing weaponization of racism by political elites to help legitimize the hoarding of wealth; and the resulting failure to create a community of equals capable of collective self-government. With a new administration and Congress in place, there are opportunities to grapple with these deeper structural issues. But if we do not find ways to reckon with them, and with the ideologies that have made them seem tolerable or even inevitable, then the country’s recent bout of nativist kleptocracy portends something far worse.
The authors thank K. Sabeel Rahman for his collaboration on earlier drafts prior to his recent government appointment.
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February 22, 2021
19 Min read time