Business Today
Loading...

Deconstructing Neoliberalism I: What is Crab-walk strategy; is it relevant for India in present times?

This is first of a four-part series that seeks to unravel neoliberalism. In this part, focus is on some of the strategies of neoliberalism, from undermining the state to promoting free-market in running an economy

twitter-logoPrasanna Mohanty | June 22, 2020 | Updated 21:19 IST
Deconstructing Neoliberalism I: What is Crab-walk strategy; is it relevant for India in present times?
Neoliberalism is sweeping both developed and developing economies, including India, and crab-walk is a distinct and discernible feature of it

For years, American scholars have been spooked by the sustained popularity of radical right's neoliberal doctrine - small government, low corporate tax, deregulation of labour and product markets, promotion of financial sector etc., despite its obvious failures to better growth or living standards for the past 40 years.  

For example, Nobel laureate Joseph Stiglitz (2001), a liberal economist, has been predicting the death of neoliberalism for more than a decade.

During the Great Recession of 2007-08, he explained why in an article, 'The end of neo-liberalism?' thus: "Neoliberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy."

In June 2019, he was at it again, more definitive this time, declaring that the 40 years of neoliberalism in advanced economies "has been a spectacular failure" with growth lower than what was in the quarter-century after World War II, most of it accruing to the very top, adding, "...neoliberalism must be pronounced dead and buried".

Also read: Fitch revises outlook of SBI, PNB, ICICI Bank to negative; affirms long-term ratings

In November 2019, he wrote again in an article, 'The end of neoliberalism and the rebirth of history': "The credibility of neoliberalism's faith in unfettered markets as the surest road to shared prosperity is on life-support these days. And well it should be..." Then added, "Neoliberalism has undermined democracy for 40 years", referring to the "autocratic rulers and demagogues leading countries that contain well over half the world's population".

Many American scholars have searched for answers to the overwhelming dominance of neoliberalism, while many others have searched for the master plan and mastermind providing intellectual arguments, goals and actions behind radical right's widespread and multipronged assaults which, if successful, would "hobble (labour) unions, limit voting, deregulate corporations, shift taxes to the less well-off, and even deny climate change".

One such search by a history professor at Duke University, Nancy MacLean, led to a low-profile Nobel laureate (1986) James McGill Buchanan (died in 2013) and his crab-walk strategy for the radical right.

She wrote her findings in the book, 'Democracy in Chains: The Deep History of the Radical Right's Stealth Plan for America' published in 2017.

Here is an account of Buchanan's crab-walk from this book.

What is crab-walk and how it works?

A little background information first.

America's public Social Security programme, launched in 1935 as part of President Franklin Roosevelt's New Deal that provides protection to elderly, disabled and other vulnerable people, has been the target of the radical right for decades.

The programme is not only hailed by Stiglitz as evidence of public sector efficiency as against private sector efficiency, it is generally acknowledged as one of the most successful, popular and effective programmes. The radical right realised that opposing it openly would mean "political suicide" and hence the crab-walk.

It was 1981 when Ronald Reagan was the President. By now the American neoliberals had got Chile's military dictator Augusto Pinochet (1973-1990) to dismantle and replace public pensions with private ones. MacLean writes that inspired by this development American billionaire Charles Koch's Cato Institute (a Washington-based think tank) "turned to Buchanan to teach its staff how to crab walk".

Buchanan devised the plan. His first step to "undermine the existing structure" was to alter beneficiaries' view of social security's viability because that would "make abandonment of the system look more attractive".

Also read: India stares at 5th recession: How is it different from the past downturns?

This would be done through subliminal messages that try to create doubts to diminish the reputation of the system, soften people's views so that when benefits are reduced they are less likely to feel that something is being taken away.

The second step was to apply a classic strategy of divide and conquer.

For this, Buchanan divided beneficiaries/recipients into three groups for different treatments. The first group would be current recipients and those close to retirement who should be "reassured" that their benefits would not be cut,  in order to get them out of the fight and enfeeble the rest.

The second group would be high earners (wealthy) to whom it would be "suggested" that they would be taxed at higher rates than others for their benefits to sully the image of the programme. Progressives would likely support this (that the wealthiest pay more) without realising the damage to the programme and if repeated enough that the wealthiest are not paying their fair share of tax, they would be less opposed to altering it.

The third group would be younger workers who would be "constantly reminded" that their payroll deductions were providing "a tremendous welfare subsidy" to the aged.

And for those who would just miss the cut-off for the old system, they should be targeted for short-term changes, increase in retirement age and increases in payroll tax to irritate recipients at all income levels.

A follow-up plan was written down by Buchanan's two followers at the Heritage Foundation (funded and run by Koch Industries ), called, "Achieving a 'Leninist' strategy".

It added a new element to isolating and weakening the opponents: finding people who would gain from the end of social security. That would be the financial sector in this case. Savings for retirement would be taken away from the government to private financial institutions and end employer contributions, as had been done in Chile.

To achieve this, an "incremental strategy" was proposed.

First, push legislation making private retirement savings easier and more remunerative to the industry and then, pull into the fight the financial corporations to profit from it (private Social Security system).

The Cato team translated Buchanan's ideas into a battle plan. Phase I: Top priority is to assure current recipients that they wouldn't lose anything. Phase II: "Guerrilla warfare" of legislative kind to break up the coalition that sustained social security by "buying out, or winning over" various elements, failing which they are to be weakened and defeated. Phase III: Cultivate new partners in the private sector who would benefit from shifting money.

The goal was a "triple win": (i) break down citizen's lived connection with government (ii) weaken the appeal of collective organisation that had looked at government for solutions to their common problems and (iii) putting a vast pool of money into the hands of private corporations, enriching them to make them eager to lobby for further change and willing to shell out dollars for advocacy.

MacLean summed up Buchanan's crab-walk as "more circuitous and sequential - indeed, devious and deceptive - approach". She shows that crab-walk has been a lifelong work of Buchanan, not restricted to this 1981 episode alone but more of that later.

Also read: Border backlash on trade! Duty hike coming on all Chinese imports except medicines

By the second half of 1980s, MacLean quotes political scientist Jeffrey Henig as writing that the Virginia school of political economy (Buchanan founded and ran it during 1965-68), in particular, had helped "the intellectual de-legitimisation of the (New Deal) welfare state".

The radical right's fight to undermine public social security continues.

Stiglitz writes in his 2019 book 'People, Power and Profits: Progressive capitalism for an age of discontent' how the right uses a derogatory term 'entitlement' to describe social security (recall Buchanan's first step in crab-walk); "trying to reframe the programme as a gift rather than something that has been earned: individuals have made contributions to social security for their entire working lives, just as if they had purchased a retirement annuity".

Instead of cutbacks in social security or asking Americans to rely on markets for their retirement (while reminding them of the great market crashes of 1929, 2007-08 and many others that wiped out savings of millions of people) Stiglitz suggests "revitalising" it.

He concurs with McLean's assertion that the radical right's goal is to put "democracy in chains" while referring to the neoliberal policies being adopted by the Republic Party: "regressive taxation (taxing the rich at lower rates than the rest), to cutting back on social security and medicare, and cutting back on government more generally". These policies, he writes, aim at establishing "a permanent rule of the minority over majority".

How is crab-walk relevant for our time?

Neoliberalism is sweeping both developed and developing economies, including India, and crab-walk is a distinct and discernible feature of it.

Buchanan's Public Choice theory and small government

Attack on America's Social Security is part of neoliberalism's goal of having a limited or small government because of 'government failure' - a concept that emerged from Public Choice theory.

Professor of economics at the University College London (UCL) Mariana Mazzucato writes in her 2018 book 'The Value of Everything: Making and Taking in Global Economy': "Public Choice theory argues that government failure is caused by private interests 'capturing' policymakers through nepotism, cronyism,  corruption or rent-seeking, misallocation of resources such as investing public money in unsuccessful new technologies (picking losers) or undue competition with private initiatives ('crowding out' what might otherwise be successful private investment)."

Public choice theory is a set of ideas associated with Buchanan, for which he won a Nobel in economics in 1986, and the University of Chicago (known for formulating and advancing neoliberalism) where he had studied. It dwells on 'government failure' but not 'market failure'.

One of Buchanan's better-known books on 'public choice theory' is 'Calculus of Consent: Logical Foundations of Constitutional Democracy' (1962), co-authored with Gordon Tullock.

MacLean notes, this book is a "work of political theory that barely discussed standard economic questions" and that its conclusions are drawn from "abstract thought experiments, not from any research on political practice".

Buchanan and Tullock themselves wrote in the introductory chapter of 'Calculus of Consent': "Our theory is "economic" only in that it assumes that separate individuals are separate individuals and, as such, are likely to have different aims and purposes for the results of collective action."  The Nobel citation of 1986 said Public Choice theory "lies on the boundary between economics and political science".

MacLean writes, Buchanan and Tullock were "inseparable in their shared mission: to expose the foibles of government as the best way to protect the market (and property) from popular interference (the majority)".

Another instance of crab-walk.

Indeed, Mazzucato points out in her book that the 1980s backlash against the government (especially in the US and UK) was partly driven by the concept of 'government failure' that emerged from this theory.

The fear of 'government failure' was so great that, she writes, it inexorably resulted in government shedding responsibilities, reducing investment in its capacity building and eventually leading to privatisation of government's many functions.

So much so that from 1980s private sector measurement of efficiency were applied to the public sector, and "in the process 'marketised' government".

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close