Under the heading of “neoliberalism,” scholars across the social sciences have charted how the economic has progressively infiltrated the political, reorganizing it around market practices, values, and imperatives. Yet most accounts of this transformation abide by the very divisions and demarcations that neoliberalism collapses. Phenomena such as finance that now permeate, even dominate, liberal democratic politics remain categorized as economic and have not been recast by liberal political thought in a distinctly political register. The advance of the market into politics and especially the parameters of governing demands that we rectify this. Only an integration of political theory and political economy will enable us to grasp the deep transformations of the last several decades and the predicaments it generates for democracy.Using a combination of historical analysis, empirical case studies, and theoretical engagements, my dissertation explains how the public assumption of financial risk generates “neoliberalism by default” and at the same time exposes a fundamental limitation of all liberal government, namely its depoliticization of distributive conflict. The dissertation deploys this concept of distributive conflict to denote the general condition of liberal citizenship in which subjects vie for increasing shares of the social product. In liberal orders, the process of producing and distributing the material requirements of human life is imagined to be governed by “the market” which ensures both fairness and efficiency and obviates overt political valuation, contestation, or control. But in contrast to the happy image of depoliticized fairness and efficiency, liberal civil society harbors powers that make it unequal, insecure, violent and predatory. Liberalism institutionally secures and discursively consecrates this condition in the name of freedom, individual rights and state neutrality. In this way, conflict and domination do not vanish but are instead prevented from manifesting politically or being the subject of public deliberation, decision making, and authority. Distributive conflict is not abolished but depoliticized, a depoliticization that is an essential premise of liberal government. Distributive conflict encompasses more than the familiar category of class conflict because it occurs along multiple intersecting, overlapping, and even contradicting axes of social power. These include, among others, race, gender, nationality, immigration status, geography, education, income, credit score, occupation, and homeownership. Within liberalism, distributive conflicts cannot be managed politically because their political resolution would require exactly what liberalism is founded to oppose: the tactical deployment of sovereign power in accordance with public values.
Financialization—manifest in such forms as public debt, financial deregulation, and indirect subsidies for private financial risk-taking—promises to defuse and depoliticize such conflicts by providing immediate material relief and replacing difficult and contentious political questions of relative need and desert with formal parameters of proper technocratic management. However, this solution enacts a far-reaching transformation. Once financialized, liberal democracies are reoriented around market logics and market imperatives, because financial logic demands that creditors be privileged over political constituencies and that social priorities be subordinated to calculations or speculations about present and future market valuation. Any political action that risks failure to meet financial obligations imperils the ability to access financial markets. This means that financial claims take precedence over all other claims in a material, immediate, and tangible way.A financialized liberal democracy must meet its financial obligations; it must think in terms of profit and loss or return on investment; it must privilege creditors over political constituencies; and it must conduct itself in terms of a monetary bottom-line. This is how democratic politics are replaced by financial market governance and neoliberalism takes hold. When tax revenue falls in the wake of economic crisis, public employment is cut, public assets are privatized, and a pervasive discourse of entrepreneurialism takes hold in an effort to meet financial obligations. Rather than an ideology deployed by specific political agents, it is an effect of financialization, hence “neoliberalism by default.” This argument inverts conventional formulations of financialization as an effect of neoliberal de-regulation; as it does so, it also unfolds a very different account and theory of financialized governing.
Concretely, the dissertation proceeds as follows. Chapter one outlines the deeply disavowed problematic of distributive conflict in liberal political thought. I show how Locke, Mill, and Rawls all use some version of “the market” to depoliticize the tension between liberal political equality and economic inequality. Additionally, they all explicitly rely on economic growth to maintain popular investment in liberal orders. Through the lens of distributive conflict, Chapter two revisits the inflationary crisis of the 1970s that is widely regarded as the antecedent for the neoliberal and financial revolutions. I decompose the statistical measure of inflation to reveal how price increases were caused primarily by contingent events propagating through politically constructed markets rather than by fiscal and monetary policy. I examine the ways that financial deregulation and financial innovation soothed the distributive conflicts aroused by these disruptions. Inflation and financialization expose feature of liberal democratic politics that neoliberal theorists and reformers were able to exploit, but do not themselves explain. Chapter three develops a theory of financial power in the context of liberal government through engaging the work of Michel Foucault. I use not Foucault’s theory of neoliberalism but his analytics of power to explain how finance disseminates market logic, values, and imperatives to nearly all domains of human life. Chapters four and five are case studies. They examine the recent political history of the city of Stockton, California and the California Public Employee Retirement System as cases of neoliberalism by default. I show how the identifiably neoliberal transformations that occur in both cases were the result of financial risk taken to defuse distributive conflict arising in the wake of external economic shocks. The final chapter argues that finance and democracy are essentially opposed methods of governing liberal orders. I evaluate recent calls for the democratization of finance as a corrective to neoliberalism in this light.
