There is an argument that breaks out from time to time between the critics of global capitalism (often represented by left-leaning NGOs) and economists. It starts with the former comparing the size of multinational corporations to that of national economies. So, for example, Microsoft’s market capitalisation is now larger than the GDP of France. At this point an economist is guaranteed to show up to rubbish such comparisons on the basis that they compare a corporation’s “stock” (market capitalisation) with a country’s “flow” (output over the course of a year). The former represents a quoted asset price that may or may not be realised; the latter represents the sum of goods and services that have been sold.
These rhetorical games came of age during the brief period of the “anti-globalisation movement” – the time of the 1999 Seattle protests against the World Trade Organisation and Naomi Klein’s No Logo. That movement spoke to a rising anxiety that, regardless of which measurement tools one used, multinational corporations had acquired a level of autonomy and clout that exceeded that of many nation states. While US car giants were exploiting the Nafta trade deal to move production across the Mexican border, corporations such as Nike and Starbucks seemed intent on flooding every spare corner of public space with their brands, unconstrained by geography or politics. Polemics such as Thomas Frank’s One Market Under God and novels such as Jonathan Franzen’s The Corrections (in which a dotcom start-up seeks to sell Lithuania to investors) expressed a kind of anti-capitalism that resolved largely into a critique of corporate power.
Today, the comparison of financial stocks with productive flows looks a lot more interesting than big-brain economists are willing to admit. Indeed, it is precisely this kind of comparison on which the post-2008 era’s definitive work of political economy, Thomas Piketty’s Capital in the Twenty-First Century, is built. But one key difference is that corporations are no longer such a focal point. Piketty’s memorable proposition, R>G, states that returns on capital typically outstrip growth in income: stocks grow faster than flows, resulting in an exponential trend towards oligarchy. Those returns don’t only manifest in the form of corporate profits or dividends, and may accrue almost invisibly in the form of asset appreciation (especially of real estate) that is not always easy to measure. The mood at the turn of the millennium, that corporations were now bigger or more powerful than states, has given way to a different anxiety: that there is plenty of money out there, but it’s been effectively withdrawn from circulation and stored indefinitely as wealth, evading public scrutiny and taxation. A 2022 Financial Times headline put it most succinctly: “Britain and the US are poor societies with some very rich people.”
To this daunting thought, Melinda Cooper’s Counterrevolution adds a more provocative one: what if this was the plan all along? What if the neoliberal revolution of the past half-century was never really about increasing GDP growth, productivity or industrial profitability, but only ever about nurturing asset appreciation? Critics of various stripes continue to fixate on growth as the central indicator of progress, whether they are bemoaning this obsession (on environmental and social grounds) or complaining that policymakers have failed to deliver enough of it, as everyone from Liz Truss to Rachel Reeves now agrees. Notions of “secular stagnation” and the “long downturn” continue to judge economic performance in terms of productive output. And yet we know from Piketty, or the world depicted in The White Lotus, or a brief glance in any London estate agent’s window that stagnation is not for everyone. It is this combination of “extravagance and austerity” that Cooper seeks to explain politically and historically.
[See also: Thomas Piketty: “The Labour Party is too conservative”]
Cooper’s story begins in the United States of the mid-1970s, at a time when it appeared to a variety of critics and stakeholders that capital was scarcely able to grow at all. Inflation ate into the value of assets, while inflation-busting wage agreements squeezed out profits. Taxation on income, capital gains, inheritance and property seemed to devour all prospects for the accumulation of private wealth. From the perspective of conservative intellectuals such as James M Buchanan and sympathetic business lobbies, this was all in the service of an increasingly bloated, over-unionised public sector that drove up public borrowing and destroyed incentives for private-sector investment. The unsustainability of this Keynesian-industrial settlement was demonstrated in the 1970s by the New York City debt crisis and the Californian revolt against property taxes.
Much of what followed is well-known: the election of Ronald Reagan, the monetary “Volcker shock” of high interest rates that gutted the industrial Midwest and generated mass unemployment, along with sweeping tax cuts for high-earners and the wealthy, financial deregulation, and a boardroom fixation on shareholder value. Bill Clinton won the plaudits of his erstwhile critics on the right when in 1998 he achieved the federal government’s first budget surplus since 1970. Neoliberal economic principles became enshrined in the doctrines of the Federal Reserve, which moved under Alan Greenspan from hawkish inflation-busting to an era of cheap money aimed at pumping up asset values. This escalated following the global financial crisis to full-blown monetary financing, in which the Fed underpinned the value of government debt and other financial assets by taking trillions of them on to its own balance sheet. More recently, the conservative counter-revolution has delivered a frightening ideological radicalism in the form of the Tea Party movement, President Trump, the repeal of Roe vs Wade and the 6 January insurrection.
Cooper’s account is distinguished by her emphasis on what those who fretted about the issue in the 1970s referred to as capital formation. At every turn, from the moment that the Ford administration told New York City to “drop dead” in response to its pleas for federal assistance in 1975, through to the Trump tax reforms of 2017, the problem to be solved was of how privately owned capital – in all its forms and at every scale – could grow more rapidly and reliably. On the face of it, this is an unsurprising claim to make about neoliberalism, which has long been theorised by Marxists as a political project waged on behalf of capital to restore the rate of profit. What’s unusual about Counterrevolution and what makes Cooper such an endlessly intriguing scholar (a rare combination of historian, sociologist and economist, but none of these in particular) is the recognition that capital comes in all shapes and sizes, producing exotic political coalitions of hedge funds with small businesses, of speculative property developers and homeowners, that defy conventional class stratification. Once this is understood, the democratic upheavals of the past decade start to make much more sense.
What enables capital to grow and survive over time? Orthodox political economy would suggest that it needs to be invested in productive processes and technologies, for instance through the sale of corporate equities. Cooper shows that, at least in the American context, the pursuit of “capital formation” since the 1970s has been far more devious than this, and far more reliant on the insidious hand of the state. There is both a fiscal and a monetary wing to this project. Fiscally, the ideas of supply-side economics (whose genealogy Cooper traces in detail, and whose influence in Washington DC remains far stronger than is often realised) drove a tax-cutting agenda that didn’t simply put more money into the pockets of the rich but offered a handout to property owners, who were encouraged to blame the public sector for their lack of asset appreciation. One reason why asset appreciation took off in the 1980s was that the owners got to keep more of their capital gains and their inherited wealth.
Monetary policy would eventually prove an even more potent tool for the same purpose. While the Fed had spent much of the 1980s seeking to reduce inflation through driving up unemployment (weakening organised labour at the same time), by the late 1990s, Alan Greenspan was sufficiently reassured that the unions were broken to flood the US economy with cheap money and stand back as it was converted into asset appreciation. While the rising price of labour and goods had been a problem, the rising price of assets – including real estate – “now represented the ideal horizon of Federal Reserve crisis management”. The entire US state had now pivoted towards facilitating asset-price appreciation. Far greater monetary largesse would follow post-2008 in the form of quantitative easing, when the Fed (and the Bank of England) pumped trillions into equities and house prices, while wages stagnated.
Who benefited from all this? Cooper is sensitive to the shifting sands of Reaganism, how it drew on aspects of the New Deal coalition (including some unionised elements) to bring small businesses, factions of the white working class and big business together and set them against fiscal authorities and public-sector workers, using gendered and racial divisions to drive the opposition home. An economic model in which wealth appreciates indefinitely ultimately shores up an institution that Cooper had already addressed in her instant classic of 2017, Family Values. Over time, it is the family and the family-owned business that accumulates wealth and political power in an economy no longer preoccupied with production or productive investment, and where wealth is defended and swelled by whatever means available. Cooper is brilliant and original in her analysis of how the private, family-owned firm now sits at the heart of America’s rapidly fraying democracy, and how it is this entity (and not the publicly traded corporation) that contextualises the descent towards 6 January and beyond.
Large private businesses, such as Koch Industries, offer their owners a level of political autonomy as campaign donors and “philanthropists” that shareholder-owned companies do not. These have become vehicles for dynastic, oligarchical power, that extends its reach via attacks on all forms of property tax. At the other end of the spectrum, the small family-owned firm sat at the heart of the Tea Party movement. Feeling squeezed between “big business” and “big government”, these modest private companies exhibit the petit bourgeois resentment that has long been recognised as a potent ingredient of radicalisation on the right. The combination of private, dynastic wealth with radical Christianity has injected further toxicity into movements that, post-2008, gave up claiming to favour democracy at all.
But what is perhaps most striking about Counterrevolution is the economic sector present in virtually every scene in the play: real estate. Cooper is too fixated on the ideas, intellectuals and political protagonists that drove the rise of the asset economy to suddenly mutate into a geographer or housing studies scholar, but this could almost have been a book about why (in Fredric Jameson’s words) “today, all politics is about real estate”. Cooper shows that the enforced solution to the New York debt crisis involved opening up the city to property developers. Among those who benefited most lavishly from the tax cuts and incentives that followed was a developer called Donald Trump.
The supply-siders reserved their greatest animosity for property taxes. As early as the late 1970s, Greenspan had noticed that rising house prices offered a warped form of Keynesian stimulus: homeowners could remortgage, releasing cash for consumer spending. It was construction workers, organised into small, private businesses, that were at the forefront of Reagan’s blue-collar Republicanism, and most seduced by supply-side populism (and who made a surreal reappearance in the form of the anti-government “Joe the Plumber” during John McCain’s ill-fated 2008 campaign). So dominant was real estate in the US economy that between 2001 and 2005 40 per cent of new private-sector jobs were in residential construction and related sectors such as mortgage brokering. As Margaret Thatcher understood as well as anyone, real estate has a unique ability to remake electoral and class divisions, producing confusions that disorientate us to this day (why is a retired steelworker who purchased his council house assumed to be working class? Why is a teacher struggling to pay their rent considered middle class?).
The status of real estate, housing especially, in contemporary capitalism is so prominent and divisive and sucks up so much of our attention that it can sometimes be hard to get any critical distance on this madness. The vote for Brexit was ultimately a vote by homeowners; rates of depression and anxiety are far higher among renters than among owners; intergenerational relations are being transformed in the desperate hunt for housing security and housing equity. So much now seems to hang on it that it can be hard to find the concepts and narratives to account for this state of affairs. Counterrevolution provides an exemplary history of ideas and elites, but in foregrounding the asset form with which we are most intimately connected, it also offers a crucial history of our unhappy present that makes complete sense.
Counterrevolution: Extravagance and Austerity in Public Finance
Melinda Cooper
Zone Books, 568pp, £28
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This article appears in the 05 Jun 2024 issue of the New Statesman, The Left Power List 2024