Law and Neoliberal Politics
A Yale law professor's enlightening perspective (and a little Amazon bashing, as a treat)
I recently discovered the Law and Political Economy Project. This blog founded by Professor of Law at Yale Law School, Amy Kapczynski, is something I didn’t realize I needed until now, but now I feel like I have a lot of reading to catch up on.
One of my main motivations to start my own blog on Substack was several fruitless conversations about issues with the structure of US capitalism. Afterwards, I kept reading and trying to get a better grasp on the evidence around wealth concentration and monopolies to see if maybe I was wrong and those factors aren’t as harmful as I suspected (they are harmful). Or, in the case of one common argument, if monopolies were actually (counterintuitively) good because they were more efficient and could offer lower prices to consumers (they aren’t good, low prices only last a short time before monopolies use their market power to extract as much money from consumers as they can, and the argument completely ignores the impact on workers wages and other negative effects). So far I haven’t written too extensively on the topic because I didn’t feel qualified. However, I realize now that what I can do is highlight qualified people’s work and hopefully add my grain of sand to a conversation about shaping our economy in ways that help regular people, not the 1%.
So, back to the qualified people. Professor Kapczynski did a great interview about the intersection of law and economics (her area of expertise). Specifically the interview revolves around neoliberalism and how it clashes with democracy. But first, what is neoliberalism? Professor Kapczynski says:
I define neoliberalism as a logic of governance that is oriented to increasing the power of market actors and diminishing public authority over those actors. Wendy Brown has this lovely term, “reformatting capitalism.” It's a reformatting of capitalism broadly to not only increase the power of private actors – and therefore also their ability to extract profits – but also to disable democratic control over those actors.
I think of it that way, as opposed to, for example, a deregulatory move. Neoliberalism is in fact quite regulatory. It's regulatory with a particular paradigm and purpose in mind. It’s important that we see the ways in which there's an overt regulation of the economy – reorienting labor law, antitrust law, other kinds of law – to optimize for a profit-seeking impulse.
Another great definition is provided in this review of several books about the US economy from Nonprofit Quarterly:
Among all three books, one finds many areas of overlap and common threads. In particular, all trace the roots of neoliberalism back decades before it became dominant in the 1980s.
But what is meant by neoliberalism? Orestes and Conway offer a conventional answer. It’s about shrinking the state—or its social programs, at least rhetorically. Musgrave offers a more satisfying answer, writing, “I understand neoliberalism as a governing rationality that directs state action in favor of the market” (177).
In other words, according to Musgrave, neoliberalism is not concerned with shrinking the state—something which, data show, clearly has not happened over the past 40 years. Instead, neoliberalism favors large corporations over working people by outsourcing services to private contractors; supporting tax, trade, and regulatory policies that maximize corporate earnings; and using the state to limit the rights of unions and working people.
To oversimplify it, neoliberalism is the political-economic ideology that has been dominant across the US since the 80s. The intellectual founders of this tradition are Friedrich Hayek and Milton Friedman (more on them later). This ideology has been very much present in every administration since the 80s, and was very egregiously on display in the Obama administration’s response to the 2008 financial crisis. Rhetorically it’s often indistinguishable from free market or laissez-faire approach to the economy, but in reality it has manifested as a consolidation of corporate power over government. Its proponents generally call for less government regulation, but in practice the only regulations removed are those that prevent corporate consolidation and wealth accumulation. And new regulations are acceptable if they protect private interests (see the continued extension of copyright protections). According to Professor Kapczynski “It’s also important to see that it's connected to regulatory paradigms that are manifested through the welfare state, through the carceral state, and so forth. This is not a broadly deregulatory period, particularly in American life.”
The main problem with this ideology is that it seems to intentionally lack an analysis of power. It fears only government power (the only democratic power we have), but completely ignores the fact that wealth is power in a capitalist system and the accumulation of wealth in a few individual’s or a few corporation’s pockets is a more dangerous form of power if there is no democratic governance to limit it. There is a quote which I can’t find the source for now, but it goes something like “we won’t suffer the tyranny of a king, why should we suffer the tyranny of a monopoly?” A deep understanding of power is the main thing that Professor Kapczynski brings to her analysis.
[We] need to be talking about neoliberalism as a reformatting of state power. In that sense, it's a politics and not a pure logic, I absolutely agree.
When you look closely at the logic of efficiency as it’s used in law, as I have done, it turns out that it is actually used to mean many different things in many different legal contexts. With intellectual property, the kind of efficiency that people talk about prioritizes innovation over everything else; but it doesn't have much to do with the kind of efficiency that's talked about in antitrust law, or the kind of efficiency expressed by cost–benefit analysis. They're actually all different.
They're all different, I think, because what they're ultimately responding to are ideas about the predominance of a certain kind of power: the power of markets over democratic kinds of governance. These understandings of efficiency then get expressed in different ways, depending on what advantages those forms of power. In that sense, I very much agree that there is not a pure expression of logic here, but rather many expressions of a political project that take different forms in different contexts.
The whole interview is worth reading, however one mild critique I had is that Professor Kapczynski engages with only two, very limited center-left and center-right proposed solutions. She has some very strong critiques of the failing, privatized healthcare system in the US, but seems hesitant to propose a more radical solution to the interconnected problems brought about by neoliberalism. Having not read more of her work, I believe that more solutions are discussed in the LPE blog and look forward to reading and learning more.
To finish up this post, and because I want to inject some hope into my posts, I’d like to take a quick look at another expert. Current FTC Chair and Yale law school graduate, Lina Khan. Specifically, I want to talk about a paper she wrote about antitrust law in the Yale Law Journal in 2017 called Amazon’s Antitrust Paradox. I don’t agree with some things that Biden has done, but I firmly believe that appointing Lina Khan to chair the FTC was the smartest thing he has done in his presidency, and hearing the news of the FTC’s successes bring me hope that we are slowly taking back our economy from massive corporations (Matt Stoller of the American Economic Liberties Project has a great newsletter which details the various ways that monopolies make life worse for Americans and highlights antitrust news).
The power of Khan’s Yale Law Journal paper is the deep research she did and the mountains of evidence she brings to support every claim she makes. You can see the care and rigor of her work today in the recent FTC proposal to make non-compete clauses illegal which includes a detailed 65-page rationale to support the legality and material benefits of the rule. The title of Amazon’s Antitrust Paradox is a play on Robert Bork’s 1978 book title, The Antitrust Paradox, which was highly influential in bringing about the dominance of neoliberalism, especially in the courts. Another influence was a series of fancy resort trips for judges to learn a specific type of economics from Milton Friedman and other neoliberal economists starting in the 80s. This led to around 40% of federal judges learning a very theoretical (many real-world experiments have provided evidence undermining the main tenets) version of economics that just happened to serve the interests of the wealthy.
Drawing from a variety of studies on the real-world effects of the lack of anti-trust enforcement, and using Amazon as a concrete example, Khan undermines both the foundation of neoliberal theories of the economy, and makes a strong case for what I stated above. Looking at consumer welfare through reduced prices is a narrow and ultimately useless measure to determine whether a company should be allowed to create a monopoly. As we can see with the case of Uber, Lyft, Amazon, WeWork, Walmart, and many other examples, with enough investor capital a company can undercut competitors and offer better prices to consumers (that this often comes at the expense of worker pay as well is another downside). Once they drive out or buy up competition in the market, they do not keep prices low. The entire goal of providing low prices to consumers early on is to gain enough market power that they can claw back the losses and ensure perpetual high profits. The only thing stopping them is a democratic system of accountability and antitrust laws that we have had since the 1800s (though from the 80s to 2020 they were enforced very sporadically). Khan even shows that Amazon’s “low prices” were due to them using market power to force UPS to ship their products at a loss, causing UPS to raise prices on other shippers to subsidize Amazon as well as Amazon requiring sellers to not offer discounts on other sites, driving up prices across the economy so their prices would maintain competitiveness.
A smart, capable FTC Chair like Khan gives me hope because she shows how our democracy can work for the people if we put the right people in charge. If you liked this post and want to add your two cents, please leave a comment below.