In both Europe and the United States we live at a time of great ideological dogma in the form of years of austerity policies, largely at the expense of middle and low income people in already debt drowning countries like Italy, Portugal and Spain. Germany, strong of its manufacturing powerhouse and seat of the ever powerful European Commission, has been a stark supporter of the austerity policy in order to maintain the stability of the Euro currency. In the U.S., recently elected president Donald Trump, did nothing but trying to dismantle – through a slew of executive orders - progressive policies of his predecessor, such us ObamaCare. He then banned immigration from specific countries, tried to end the Deferred Action for Childhood Arrivals (DACA) program protecting the rights of 800,000 undocumented Latino youth who came to the U.S. as illegal immigrants; and most recently signed a tax reduction plan that will benefit already very rich people, including his family and businesses. All these radically neoliberal policies in both Europe and the U.S., will undoubtedly have inter-generational transmission effects for many years to come.
Why are these policies enacted now? To answer this question, I will briefly reflect on Blyth’s reading of Polanyi's “double movement” \cite{Blyth_2004} and claim that we are in the presence of the desperate attempt of the current elite to stay in power by maintaining their rents, a sort of reversed class war, waged by the very rich and the financial institutions that made them so, against everyone else, especially the middle and working class. Then, based on \cite{Rodrik_2013} I will build the argument that this ‘tightening of the shackles’ by power elites, should not underestimate the implementation of new ideas that lurk under the veil of vested interests of those in power.
Blyth showed how institutional change is always in flux according to the crisis at hand. He claimed that Polanyi’s ‘double movement’ did not happen “just as labor and the state reacted to the collapse of the classical liberal order during the 1930s and 1940s by re-embedding the market”. It also happened in the 1970s and 1980s as “business reacted against this embedded liberal order and sought to 'disembed liberalism' once again” (p.6). The double movement, hence, is more of a constant swing.
Since the 1990’s, we had an almost unchallenged rule of neoliberal ideology that led, for instance, to the deregulation of aviation, rail and freight industries in the United States \cite{Eisner}. The policy of deregulation, just like its opposite - government planning - assumes a particular model of how the world works according to Rodrick (2013). Similarly are the following economic restructuring policies that shaped the development path of Latin America and the EU \cite{Haggard}: liberalization of trade, abandonment of fixed rates regime converting capital and labor into tradable goods, privatization of state-owned enterprises and falling rates of public spending due to fiscal constraints and multi-lateral trade agreements. It has been argued that the financial crisis of 2008 was produced by similar policies, guided by the interests of powerful banking and financial sector institutions. A careful analysis however, reveals that vested interests alone would not be able to achieve such tectonic shifts.
Rodrik argues that vested interests make their way into policy by claiming that certain reforms are in the public interest while they are not. Trump’s tax cut plan is apparently for the benefit of families and the business sector, just like financial deregulation was for the benefit of Main Street, and austerity policies in Europe are needed for fiscal responsibility. These arguments are grounded in certain ideas about the value of excessive government intervention (spending in the European case) and the inattentiveness of the market to lower income people. All these policies generate inefficient outcomes that, in turn, protect the economic rents of power elites. Rodrik’s axiom is therefore explained as political interests generate (inefficient) economic outcomes moderated by ‘ideas in the air’. New ideas supplant vested interests when they are able to exploit a loophole in the structure of ideas, institutions and incentives (Leighton & Lopez in Rodrik, 2013) such as welfare reform, aviation deregulation, housing finance. Inefficiencies, hence, create opportunities for political entrepreneurship. As political leaders seek to increase their rents they shift ‘the political transformation frontier’ and relax political constraints that would prevent them to do so.
Ours is a time of crisis, underscored by rampant inequality and nationalistic pathos. Crises are occasions for reconsidering ‘what has gone wrong’ and ‘what is that should be done’ (Blyth in Rodrick); a time of openness to new ideas. This particular crisis is full of ideas, not only those of the power clinging elite. There are other ideas floating in the air. From the narrative of the ‘sharing economy’ (Uber, AirBnb), to distributed markets (via Amazon), the value of your friends’ interests and opinions (Facebook), alternative monetary systems (Bitcoin, Ethereum). Are these the fulfillment of new vested interests? Some argue that the ‘sharing economy’ is largely another incarnation of the P2P market liberalization, embodied in digital peer review via surveillant and punitive ratings systems, and algorithmically mediated, precarious, and ‘entrepreneurial’ contract work. All the while retaining affective associations with community, inclusion, and participation \cite{Cockayne_2016}.
What if these ideas may be fueling the political transformation frontier - the set of maximal economic outcomes – (Rodrik, p.14) of other powerful political players, the tech companies like Google, Amazon and Facebook? Internet technology is certainly the vehicle of these new ideas, through the use ubiquitous internet on our mobile phones . As Rodrik claims, though, the returns of shifting the political frontier outwards, can also be large: Bitcoin, the perfect trading asset and a serious threat to mainstream banking, is at a new high (14,000 euros is equal to 1 Bitcoin at December 2017), causing JPMorgan to retaliate. The existing elite born out of the policies of 1990s is clinging to power, and to some extent, there was no greater time to elect Trump as POTUS. A man who knows nothing about economic and social policy but is savvy in manipulating others moved by greed like him, may just save the status quo.
To conclude, just like market neoliberalism flourished under the influence of mercantile ideas of “People are the wealth of nations” coupled with market fundamentalism, Malthusian biological determinism, led to policies that attacked poor relief \cite{Block_2003}. What is unfolding now is a clash of new merchant capitalists ideas with powerful narratives sustaining them: distributed markets and the sharing economy. The ‘ideological embeddedness’ of these moral narratives is recreating new institutional arrangements that obstacle any State interference, and may just succeed in retelling the narrative of a nation in the flow of history \cite{Somers_2005}.