Critical social theory and the challenge of neoliberalism
by Roger Foster Capital & Class November 2016
My article offers a sustained critique of the idea of critical social theory presented by Axel Honneth in Freedom’s Right: The Social Foundations of Democratic Life. My article articulates three specific criticisms: (1) the focus on normative relations of recognition obscures the class-based forms of power that pervade contemporary advanced democracies, (2) the method of normative reconstruction cannot make sense of the open-ended nature of class struggle that drives social change in capitalist societies, and (3) Honneth’s political and social prescriptions ignore the consequences of the failure of traditional progressive politics. My article makes an important and original contribution to the literature on Honneth’s recent work in two major respects. First, I argue that Honneth’s descriptions of the fate of the family and the market today betray a failure to understand the configuration of class power in contemporary neoliberal societies. Second, I make the case that the basis for a more successful theory of class power, identity formation, and social change can be found in the ‘first-generation’ critical social theory of Erich Fromm.
Axel Honneth (2007) has consistently argued that a distinguishing feature of critical social theory is its dependence upon an element of ‘intramundane transcendence’ (pp. 64–65). Critical social theory is charged with the task of identifying within social reality itself the missing counterpart to its own critical perspective on the society. This guiding idea survives in Freedom’s Right, although only in a form that is severely weakened by the deterministic implications of the methodological principle of normative reconstruction. In Freedom’s Right, as in previous works, Honneth sets up this critique as a challenge to the abstraction of contemporary political philosophy, which focuses on normative principles in isolation from the concrete practices and institutions comprising social reality. Honneth discovers in Hegel’s mature notion of Sittlichkeit or ‘ethical life’ a view of moral norms as essentially embedded in the practices and institutions of daily life. Honneth (2014) argues in Freedom’s Right that the universal value expressed in the institutions and practices of modern society is freedom or the ‘autonomy of the individual’ (p. 15). In Hegel’s political philosophy, this is allegedly developed into the form of a theory of ‘social freedom’, that is, of the social and intersubjective conditions that make possible the freedom of each. Subjects, in Honneth’s formulation, come to perceive the free action of others as the condition of their own freedom. A subject is free, on this conception, if it encounters another subject within the framework of institutional practices, to whom it is joined in a relationship of recognition (Honneth 2014: 45). By participating in such practices, subjects become aware of their mutual dependence; they learn that the condition of their own freedom is the exercise of freedom by others. This can be seen fairly straightforwardly in the case of the modern idea of romantic love, for example, where the quest for a partner can only succeed when the other’s love is freely given, as the result of a complementary process of self-discovery and self-realization. More fundamentally, however, participating in institutional relationships of recognition allows individuals to develop an intersubjective understanding of their own freedom (Honneth 2014: 49). Rather than perceiving themselves and others as pursuing purely private aims under conditions of state neutrality, individuals now begin to view themselves as ‘self-conscious members of communities that guarantee freedom’. The three relational systems of action that guarantee freedom in modern society are, for Honneth, the sphere of personal relationships, the market, and the political public sphere. Honneth’s method of normative reconstruction attempts to disclose the background normative assumptions that enable these spheres of social existence to work as guarantors of social freedom. This reflects Honneth’s belief that the social order is rendered legitimate to its members by its adherence to certain ultimate values, which are realized not only in publicly declared principles but also in the habits and institutions of social existence. The book acquires an element of moral urgency from the fact that the current configuration of neoliberal capitalism has undermined the material conditions of autonomous life for much of the population.
Honneth’s method of normative reconstruction focuses on disclosing the normative infrastructure of a social order, as embedded in its central institutions. This reflects a deeper assumption within Honneth’s theory of recognition, namely that the intersubjective relations sustained through normatively embedded social practices enable individuals to realize themselves as autonomous individuals. In love relations, individuals acquire the confidence to assert their needs, in legal forms of recognition they come to see their claims to autonomy as universally respected, and, finally, they are granted self-esteem through the social recognition of the worth of their unique traits and abilities. Honneth supports these claims with an interpretation of the relational paradigm in psychoanalysis, drawing especially on Bowlby’s attachment theory and Winnicott’s object relational theory that establishes affective relations in childhood as critical to self-development (Meehan 2011: 90). I argue in this article that the focus on social relations of recognition is too thin to furnish access to the class-based forms of power that pervade modern societies. The core of the problem is that the relational paradigm of psychoanalysis, on which Honneth grounds his social theory of recognition, cannot encompass the power of society to shape the emotional life and affective commitments of individuals. The imprint of society and its norms on individual self-development must be thought in much broader terms than the acquisition of specific intersubjective capacities. In the intersubjective paradigm, as Funk and McLaughlin (2015) have argued, a person’s sociability is defined ‘only from the interactive social position, and not from that which the person has to develop in terms of irrational pathogenic drives to adjust to the demands of a pathogenic society’ (p. 22). This is a task, however, for which the ideas of another critical theorist who also made the ‘relational turn’ away from Freud’s biologically rooted theory of drives are particularly well suited. Erich Fromm’s theory of social character, I shall argue, captures this deeper process in which pressing social needs manifest themselves as powerful strivings within the individual, leading individuals to reproduce the pathological structures of class exploitation, racism, and gender injustice alongside the acquisition of crucial intersubjective capacities. I shall lay out this argument in detail when I discuss Honneth’s one-sided portrayal of the postwar era as the growth of social freedom. The problem is not simply the fact that intersubjective capacities were intertwined in the postwar period with constitutive forms of social inequality and exploitation. The deeper issue is that in a deeply class-stratified society riven with various dimensions of social power and group conflict, the social development of intersubjective capacities is going to be deeply affected, and eventually distorted and corrupted, by the fears and anxieties triggered by the experience of living in such a social order. I argue that this offers a far more plausible story of the birth of the neoliberal era than Honneth offers in Freedom’s Right. This difficulty is exacerbated by a second problem in Honneth’s account. The notion of normative reconstruction as it is conceived by Honneth appears too deterministic to make sense of the process of social struggle and its role in the transformation of capitalist societies. The open-ended and contingent nature of social change is given short shrift by the imposition of a fixed normative progression on the interpretation of modern institutions. Countering Honneth’s suggestion that neoliberalism represents an ‘autonomization’ of economic and financial power, I argue that what has actually happened is a re-embedding of the economy, but one which has replaced the protective institutions of social freedom with notions of personal responsibility and self-provision that have been derived in part from the now dominant subculture of finance. The third problem on which I focus is Honneth’s unwillingness to think carefully about the consequences of the failure of the progressive project in the neoliberal era and the exhaustion of the typical political strategies of progressive liberalism.
The failure of Honneth’s project is significant because of what it reveals about the current state of critical social theory. This article will make a broader case that the possibility of constructing a compelling form of critical social theory in the present will mean returning to the key insights of the early Frankfurt School. The roots of a more satisfactory theory of social change and of the operation of class-based social power, I argue, can be found in the work of Erich Fromm. As the collectivist traditions of the postwar ‘Fordist’ era recede into historical memory, I argue that it is the insights of earlier critical theory on the capacity of capitalism to shape desire and identity that offer the prospect for a more satisfactory form of critical social theory in the neoliberal era. I make a case for Fromm’s theory as the most promising scheme for renewing the tradition of critical social theory in the face of contemporary challenges.
The theory of social freedom
Honneth argues in Freedom’s Right that there is a moral grammar guiding the behavior of participants as they make their way within different systems of social action. Its substance is to be found in the complementary role obligations which allow individuals to recognize the dependence of their own freedom on the freedom of the other. These obligations may be legally or contractually mediated, depending on the sphere in question. In his treatment of the sphere of personal relationships, Honneth provides an outline of normative development that speaks quite convincingly to some of the major cultural changes that have driven the transformation of the family in the last century. However, the problems with Honneth’s approach immediately appear in the failure to take account of the constitutive role of socioeconomic relations in the formation of the contemporary family. The focus on normatively laden relations of recognition cannot get deep enough into class-based processes of identity formation to understand the forces that have torn through families in recent decades.
Honneth (2014) describes the modern family as driven by a ‘normative promise’ that has accompanied it since its origins in the concept of romantic love (p. 164). This promise consists in the decoupling of the normative obligations that family members bear each other from fixed, institutional roles. Rather than obligations and expectations of family members toward each other being set by the requirements of fixed social roles, the individual members of the family take part in communicatively working out their respective responsibilities and expectations of each other, depending on the needs of each individual. As Illouz (2008) has argued, the freeing up of family relations from the entanglements of fixed gender roles and expectations in the postwar era gave a massive impetus to the shift toward open and communicative relationships in marriage. The success of marriage, Illouz argues, decisively shifted from a dependence on moral attributes to a dependence on personal qualities, that is, the capacity to navigate the free and open communication in which role obligations are mutually decided.
In the last four decades, however, the effects of these normative changes on the family have been intimately tied to the effects of the deep socioeconomic changes that have radically restructured the nature of family formation in advanced Western nations. By severing the normative logic at work in this transition from its socioeconomic roots, Honneth ends up offering an implausible reading of the situation of the contemporary family. Honneth (2014) explains the precariousness of the modern family structure, as evidenced, for example, by the rates of divorce, cohabitation, and delayed marriages, by reference to the fact that ‘egocentric motives of self-realization or individual advancement increasingly prevent individuals from making the commitments that are constitutive of long-term intimate relationships’ (pp. 151–152). Honneth’s reference here to changing work patterns and greater cultural value attached to mobility does not really come to grips with the structural changes that have generated what Cherlin (2014) called the ‘casualization’ of working-class life. Honneth (2014) argues that ‘the indisputable fact remains that greater care and demands on flexibility, mobility, and constant availability have made it more difficult for couples to put into practice the normative rules of socially emancipated intimate relationships’ (p. 153). But this completely ignores the fact that the stability and success of marriage have, in recent decades, come to be closely associated with social and economic status. While the demands of flexibility and mobility, as well as desires for self-fulfillment, might be making married life untenable at the middle and lower end of the class structure, they have not made a dent in the stability of marriages among individuals with a college degree. Whereas today in the United States, the divorce rate among college graduates is back down to where it was in 1965 (before no-fault divorce and the widespread availability of over-the-counter birth control), the divorce rate among the non-college-educated continues to climb (Carbone & Cahn 2014: 16).1The fortunes of individuals with a high class status and those with a low class status have begun to sharply diverge. Children from high socioeconomic status backgrounds now have, by age 3, twice the vocabulary of children from lower socioeconomic backgrounds (Fernald et al. 2013: 235). Lareau (2011) has argued that divergent parenting styles have now begun to emerge among the affluent and the non-affluent which she labels, respectively, ‘concerted cultivation’ and the achievement of ‘natural growth’. Exacerbated by assortive mating (the increasing tendency of partners to marry someone of the same social class), the divergent fortunes of high and low class families have begun to turn the family into an essential institution for the transmission of massive social and economic inequality across generations.
Presumably, these class-stratified repercussions of the modern family would count as what Honneth calls a misdevelopment (Fehlentwicklung). However, the notion that these problems are merely dysfunctions that are destined to disappear in the progressive realization of a normative process fails to take sufficiently seriously the rootedness of both the normative process and the alleged deviations in deeper socioeconomic developments. It is plausible to argue that the working-free of personal and intimate identity from fixed social roles in recent decades and the class stratification of personal relationships, family, and marriage are in fact both consequences of those same deeper-lying socioeconomic changes. The individualization of identity in personal life, for example, is clearly linked to the increasing demands for self-fulfillment and autonomy that have become a part of struggles in the workplace.2 These demands, in turn, are linked to the broader, decades-long decline in collective identities and collectivist attitudes. In short, the same underlying socioeconomic processes are driving the radical exacerbation of class inequality and the individualization processes that have freed individuals from the binding constraints of social roles. It is, then, deeply implausible to say that the regressive features are somehow not as deeply entrenched or essential as the processes that further individualization.3 This suggests a serious misunderstanding of the manner in which individualization and the long-term dissolution of class and collective identity are materially inseparable. Unless the underlying structure of class domination in capitalist society is addressed, individualization processes in personal life will naturally undermine class solidarity and collective identity, leading inevitably to the radical exacerbation of class divisions.
Honneth, of course, faces even more of an uphill struggle in setting out his argument concerning the moral background of the market economy. Drawing on Hegel and Durkheim, Honneth develops an interesting argument about the institutional principles of pre-contractual solidarity that moralize the market system. Hegel and Durkheim, according to Honneth, both believed that market activities could not derive their justification merely from the success of the economic system (higher gross domestic product (GDP), for instance). Rather, processes of exchange must be judged ‘according to whether they satisfy the demands of the shared, cooperative life’ that is assumed to be fulfilled in market transactions (Honneth 2014: 196–197). These normative demands include discursive procedures for coordinating interests and equal opportunity laws and regulations. However, Honneth (2014) is aware that this view is likely to seem deeply anachronistic today, when the market has come to be universally viewed as an arena of competition in which the aim is to maximize individual utility (p. 251). While it is impossible to deny Honneth’s assertion that the market has been emptied of the collectivist moral substance it had acquired in the course of the 20th century, the description of this process as ‘autonomization’ causes serious problems. The reference to ‘autonomization’ suggests that the market economy has outgrown its moral casement and reverted to being a purely systemically ordered sphere comprising the individual pursuit of instrument goals. This interpretation fits in with a prevalent, but deeply misleading view of neoliberalism as a return to classic 19th-century laissez-faire. The problem with this reading is that it frames the role of social institutions primarily in terms of their capacity to embed market processes in social and cultural life-worlds through the scheme of social protection. The experience of economic life in the last four decades has rendered this view untenable. The increasing social and cultural dominance of market processes and their associated self-understandings have been achieved through an intensified institutionalization of markets in everyday social and cultural life. Konings (2011) makes this argument persuasively with regard to the explosive growth of finance in the 20th century. The effects of wage stagnation and inequality have been exploited by finance to embed structures of credit and debt ever deeper into the rhythms of everyday life. By the time of the 2007 Financial Crisis, finance was no longer a realm of idle speculation for elites and had become ‘a fact of everyday life for almost everyone around the world’ (Haiven 2013: 53). Mirowski (2013) suggests that an interpretation of neoliberalism as the removal of constraints by way of the deregulation of economic life brings with it ‘a raft of unexamined impediments concerning the nature of markets, a dichotomy between markets and governmentality, and a muddle over intentionality, voluntarism, and spontaneity that promulgates the neoliberal creed at a subconscious level’ (p. 16). What is often called ‘deregulation’, Dardot and Laval (2013) argue, ‘is in fact a new ordering of economic activities, social relations, conduct, and subjectivities’, not the becoming-autonomous of economic behavior from social relations and infrastructures of regulation (p. 157). Neoliberalism did not free the market from society but embedded its imperatives more deeply in society through the extensive use of government power. Hence, as Cahill (2014) has argued, the popular conception of neoliberalism as the return of 19th-century laissez-faire ‘mystifies the actual trajectory of state transformations during the last three decades’ (p. 27). Honneth’s reading of the market’s autonomization fails to grasp how what has transpired is in fact the reconstruction of social relations through the principles of competition, responsibility and accountability.
Perhaps the most disappointing aspect of Freedom’s Right for those committed to the tradition of critical social theory is its failure to think deeply about the problems that beset the tradition of progressive liberalism under the neoliberal incarnation of capitalism. The notion of a pre-contractual moral background that is instituted through legal and political reform harks back to the ‘golden age’ of postwar liberalism when ‘progressives provided the moral foundations and political cohesion that the capitalist economy did not generate’ (Konings 2015: 86). What is most striking here is that Honneth continually demonstrates the historical failure of the reformist project, that is, the gradual disappearance of its governing assumptions and identities from social space, but refuses to allow that failure to serve as a judgment on the viability of reformism as a whole. Honneth (2014) suggests that the only way to arrest the regressive developments of recent decades is to organize the struggle to impose constraints on the labor market at the transnational level (p. 253). It is not clear, however, what is likely to make this project more successful than the failed attempt to impose those constraints at the national level. But more fundamentally, it fails to come to terms with the inescapable fact of the increasing corporate capture of national political institutions and discourses. The postwar political system in European and North American nations was receptive to popular progressive pressure largely because of the impressive institutional power of trade unions. It is unlikely to be successful today due to the decimation of union power in the private sector (particularly in Anglo-American countries). This is obviously compounded by the fact that corporate interests have become expert in ‘rolling back’, through backdoor channels, gains that may have been achieved in the political arena by progressive groups.4 It goes without saying that there are no easy answers to this problem, but it is certainly insufficient to keep pretending that progressive strategies that worked in the past are still going to work in a radically altered political and social context. Instead of expecting a transnational project to do what a failed national project could not, it might well be about time that progressive thinkers began to think about more imaginative ways to harness local, small-scale forms of democratic power (Alperovitz 2013). It makes little sense to continue to rely on traditional reformist politics and expect different results.
The implausibility of Honneth’s political prescriptions can be attributed in part to the difficulty for the method of normative reconstruction to leave room for the open-ended and unpredictable nature of social change. The language of ‘misdevelopments’ is particularly unhelpful in this respect, suggesting as it does that regressive developments are deviations from a pre-ordained path, rather than consequences of the social and cultural adjustment to the dynamic nature of capitalism. This is somewhat surprising since, in an influential earlier work, Honneth (1995) had drawn upon the young Hegel’s theory of recognition, developed during his Jena years, to construct an understanding of social conflict among groups as a form of moral struggle. The understanding of social change in this earlier work is rooted in the moral tension between groups that sets social conflict in motion. The absence of a comparable notion of social struggle in Freedom’s Right leaves nothing on which to pin the account of social change other than the quasi-determinist scheme that guides the normative reconstruction. As I shall argue shortly, we find a much more plausible account of social change in Erich Fromm’s view of a struggle for ascendancy among social groups. Fromm’s open-ended account of social change is far more helpful in making sense of the deeper social and cultural forces at work in the transition from postwar welfare liberalism to a neoliberal society. Another crucial problem in Honneth’s account, as we saw, is its failure to formulate a satisfactory theory of the formation of subjectivity in class-stratified capitalist societies. Understanding the link between identity and the discourses and institutions of economic power was of course a central motivation in the early years of the Frankfurt School. Fromm was appointed to direct the psychological work of the Institute in 1930 and began work on a study of the political attitudes of the German working class (Wiggershaus 1995: 57–59). Fromm argued when the work was published many years later that the studies’ findings of conservative and conventional attitudes among the working class had demonstrated a psychic lack of readiness for political change that explained in part the political failure of the left in the post-First-World-War era. However, it was Fromm’s work on social psychology in the 1930s, portending a definitive break with orthodox Freudian psychology, which laid the groundwork for an insightful theory of the capacity of economic power to shape identity in a manner conducive to its own ends.
Erich Fromm: the psychic consequences of postwar capitalism
Honneth has difficulty getting access to the constitutive role of class relations in capitalist society because of his reliance on a theory of recognition that obfuscates the role of economic power in forming identities. The problem with recognition is that it cannot grasp how the class structure of capitalist society generates psychic affects that actually shape and form identity in modern society. As we saw in Honneth’s normative reconstruction of the sphere of personal relationships, the stark class divisions of neoliberal society have radically intensified the role of the family in the reproduction of class hierarchies. What is needed, then, is a more penetrating account of the manner in which the material and institutional structures of capitalist society are able to shape identities for their own purposes. This requires an understanding of the capacity of a highly stratified, rapidly changing society to generate emotional effects, particularly in the form of anxiety and insecurity about status, which threaten constantly to undermine and overwhelm the containing power of society’s normative infrastructure. As I argue below, this is precisely what happened in the postwar period. Social freedom was not, as Honneth claims, blindsided by a new, market-friendly form of individual freedom. In a deeply class-riven society that was the postwar United States, the institutionalization of economic and social rights based on human equality and individual freedom inevitably triggered deep anxieties that eventually undermined the postwar order and prepared the cultural ground for neoliberalism.
Fromm’s perspective on this problem follows directly from his social-psychological revision of Freud in the 1930s. At this time, Fromm made a definitive break with Freud’s libido theory and began to develop a view in which the important drives and character traits defining a person are not to be seen as the direct consequence of biological drives, but are rather formed from the individual’s participation in the common life practice and experience of the social group. Just as individual analysis would explain the individual on the basis of his or her own unique history, so, Fromm held, social psychology was tasked with explaining the role of the social and economic structure in inculcating the common, shared character orientation of a social group. This meant, for Fromm, that the traditional division of labor between psychology (the individual) and sociology (society) was untenable. Psychology always deals with a socialized individual, and sociology must take account of the role of psychic structure in the process of social integration (Fromm 1970: 115). In the late 1930s, Fromm began to refer to these shared psychological traits of a group with a common and shared life practice as ‘social character’. Social character, for Fromm, was not simply an assemblage of traits and habits that a group happened to share. It represents the dynamic adaptation of the individual to the specific needs and requirements of social existence. This means that, in adapting to specific social conditions, ‘man develops those traits that make him desire to act as he has to act’ (Fromm 1941: 311). Character, then, is far more than a series of shared characteristics because its social function is to enable the individual to find satisfaction in the performance of what is socially required and expected. Fromm also began to separate physiological needs (food, sexuality) from psychic impulses which are not rooted in biological instincts, but rather arise from the unavoidable existential need to participation in forms of human relationship. The latter, for Fromm, are products of the historical process rather than rooted in biology and are associated with the impulses, fears, and anxieties that are triggered by the search for satisfactory forms of relatedness.
The social-psychological theory that Fromm begins to develop in the 1930s starts with this insight into the psychic fundaments of human relatedness. This point emerges from Fromm’s existential appraisal of the human situation. The animal’s life, Fromm argues, is lived in a perfect accord with its environment because its instincts and equipment give it the means to thrive and prosper in its natural setting. In the case of human beings, however, this unity of the creature and its environment is definitively broken. Consequently, humans have the task of constructing forms of relatedness that will allow the human creature to establish forms of connection with its environment and other members of the group. It is important to note that relatedness is not, like recognition, equivalent to the normative structure of social relations. Relatedness, for Fromm, encompasses pathological or what Fromm calls ‘symbiotic’ forms of relatedness (sadistic or masochistic relationships to authority, such as authoritarianism), as well as the healthy forms that Fromm associates with love and productivity. This means that Fromm’s theory is rooted in a more basic level of identity formation where the desire for positive and affirming social relations and the distortions of the operation of economic and social power are not completely distinguished. Relatedness embodies a striving for equality and reciprocity, but it is always possible for this striving to be perverted by the insidious workings of power on the formation of social identity. The concept of relatedness should then be able to encompass the constitutive workings of the social and economic structure on the basic and fundamental human impulse to participate in social relationships.
Although Fromm (1941) often talks of social character as ‘cementing’ a social structure by providing the internal motivation to fill the social roles required by society, this does not imply that individuals are merely ‘puppets’ directed by social circumstances (p. 317). Psychoanalysis, Fromm (1970) argues, ‘can show how the economic situation is transformed into ideology via man’s drives’ (p. 127). It is vital to see, however, that this is not a simple matter of functional adjustment; Fromm is talking about a dynamic process in which prevalent ideas circulating in a society make use of the needs, anxieties, and fears thrown up by changing economic circumstances in order to draw psychic energy into a particular pattern of thought and action. In post-reformation capitalist society, for example, Fromm (1941) argues that society made productive use of individuals’ insecurities by channeling the psychic energy generated by new economic conditions into the ‘compulsion to work, passion for thrift, [and] the readiness to make one’s life a tool for the purposes of an extra personal power’ (p. 122). Psychoanalysis can demonstrate, Fromm (1970) argues, ‘that the impact of an idea depends essentially on its unconscious content, which appeals to certain drives’ and that it is the ‘libidinal structure of society which determines the social effects of an ideology’ (p. 128). Fromm’s emphasis on the capacity of ideas to attract psychic energy places his work in close proximity to the contemporary ‘affective turn’ in the social sciences (Hoggett & Thompson 2012: 1). An important aspect of the renewed focus on affect has been a greater tendency to question the standard progressive view of neoliberalism as a disembedding or, in Honneth’s terms, an ‘autonomization’ of the realm of the market. This view of an economy stripped down to the cold instrumental logic of monetary calculations represents a disastrous underestimation of the capacity of capitalist society to generate emotional investments in the identities and commitments it requires of citizens. What goes missing in Honneth’s account of the market is a sense of how individuals’ shared socioeconomic experiences can generate psychic effects that may entrench their emotional commitment to ideas that ultimately further pathological rather than healthy forms of relatedness.
Honneth’s account of how the institutionalization of social freedom was rolled back in the late 20th century is oblivious to the way that the psychic effects of conflict-riven capitalist society can undermine democratic and universalist commitments. Honneth (2014) argues that the ‘sudden disappearance’ of visible outrage over flexible labor markets reflects a cultural shift in the ‘public perception’ of the market (p. 250). But Honneth’s explanation for this fact is entirely bereft of the psychodynamic insights that might trace such a cultural shift to the anxieties of the postwar order. Instead, we get a top-down explanation of elite influence, where ‘measures taken by business and the state’ in initiating flexible Capitalism brought about a ‘generalization of strategic self-optimization’, leading to the cultural shift to an individualization of responsibility (Honneth 2014: 251). But this explanation only holds if one adheres to an untenably rosy view of mid-20th-century Capitalism. Almost from the beginning, postwar society was vulnerable to the criticism that its framework of social protection in fact represented a bureaucratic-managerial extinguishing of the possibility of autonomy. Fromm (1955) warned early on about the ‘severe symptoms of mental disturbance’ that appeared to plague the world’s wealthiest and most stable democracies (p. 19). The critiques of the compliant, ‘outer-directed’ personality (Riesman et al. 1950), ‘organization man’ (Whyte 1956), and ‘one-dimensional man’ (Marcuse 1960) were equally as vociferous in their denunciation of the dismantling of the conditions of autonomous life. The postwar family ideal of suburban domesticity, as Tyler May (1988) has argued, was undergirded by an ideology of containment that traded security for autonomy. Security encompassed far more than the economic security which men could win for their families in unionized jobs paying a family wage. The suburban home also offered protection against anxieties about women’s sexuality, moral weakness, and the temptations of communism for the sexually degenerate (Tyler May 1988: 95). Alongside these anxieties about gender and sexuality, the racial stratification of society that was deliberately entrenched by the New Deal led postwar White citizens to think of social and economic rights not as basic, universal rights, but rather as rewards for those citizens who had earned their status. Subsidized loans and mortgage guarantees that were available to White citizens, but not African Americans, convinced the former to see the construction of all-White suburbs as crucial to their economic security.5 The racist structures of the New Deal reinforced Whites’ expectations of favored treatment, expectations which would create massive resentment and resistance when the push to expand democratic rights to previously excluded groups occurred in the 1960s and early 1970s. The postwar order, as Cohen (2003) has argued, encouraged individuals to think of citizenship in terms of the public benefits of consumption. Hence, workers were forced to cede shop floor control and corporate governance to management in return for social and economic protection, and corporate welfare in the form of pensions and health insurance substituted for a more robust and democratic social welfare state. Over time, the dependence on a dynamic, mass consumption economy to solve social problems through economic growth ‘wove inequalities deep into the fabric of prosperity, thereby allowing, intentionally or not, the search for profits and the exigency of the market to prevail over higher goals’ (Cohen 2003: 403). When the economic crisis hit in the 1970s, the anxieties and resentments that had been building in the postwar period were unleashed, and lent their energy to the dismantling of the postwar order. In one sense, then, the lack of visible outrage is explicable in terms of the fact that the postwar era pushed citizens to accept the idea of market solutions to social problems, severely curtailed the notion of the public interest, and encouraged citizens to think of themselves as self-interested consumers, preparing the way for the finance-driven reshaping of Capitalism in the neoliberal era. But the reliance on markets to solve social problems also created widespread class, racial, and ethnic segmentation, generating anxieties and resentments about status that would lead to the political rejection of the postwar scheme of social protection when voters embraced the New Right.
Critical theory and the birth of neoliberalism
The main problem with Honneth’s method of normative reconstruction is that it lacks a conception of how economic change can generate a new ‘spirit’ of capitalism by altering the affective dispositions of the subject. What is needed is an account that is able to properly identify the psychodynamic underpinnings of the shift in class power in neoliberal capitalism and one which is also able to explain the reconstitution of subjectivity in the wake of the repurposing of social and economic institutions to serve the new hierarchy of class interests. On this question, as we will see, Erich Fromm’s psychodynamic theory of social change is particularly insightful. The notion of neoliberal capitalism as possessing a new ‘spirit’ was notably discussed by Boltanski and Chiapello (2005). Their account emphasizes the role of the critical ideas, such as autonomy and authenticity, brought into the public sphere by social movements, which subsequently lent legitimacy to neoliberal projects of workplace reorganization and the elimination of the social wage. An important element of this transition that is not discussed by Boltanski and Chiapello is the process of financialization. However, I shall briefly make the case that the hegemony of finance is crucial for making sense of how the new spirit of capitalism is able to draw the psychic energy of subjects into the work of constituting and reproducing the institutions and expectations of a heavily class-stratified society.
Freedom’s Right often reads like a paean to the postwar ‘Fordist’ society that embodied institutional protections and rights for labor and, in many cases, a role in corporate governance. Honneth (2014) certainly recognizes that the political sphere in the postwar period settled into an undemocratic ‘political corporatism’ that replaced democracy with corporate bargaining over the spoils of economic growth (p. 324). But this understates the extent to which the moral dimension of postwar society, its incipient scheme of social and economic justice, had long since collapsed into an elitist managerialism. As Keynesian economic policies were increasingly cut off from their moral underpinnings, ‘the ideas themselves became increasingly vulnerable to conservative assault’ (Block & Somers 2014: 23). When the economic crises of the 1970s hit, Keynesianism simply lacked the popular democratic foundation of support that might have defended it. It was therefore in the 1970s, as Pat Devine (2007) has noted, that the left lost its historic role as the ‘standard bearer of freedom and progress’, as the energy for social transformation came to be hegemonized by the New Right (p. 33). Once the particular psychic dynamics of that transformation are understood, it becomes clear why the task for critical social theory cannot possibly comprise the restoration of the managerial project of postwar liberalism. A solution to contemporary problems must begin from an insight into the nature of capitalism’s new spirit.
The neoliberal era has involved a large-scale transfer of class prerogatives from industrial workers who were favored under the Keynesian regime to finance capitalists (Crouch 2009: 389). It is from within the realm of finance that we can find the spiritual roots of the class insurgency that finally killed off postwar social capitalism and inaugurated the neoliberal era. In the postwar period, large corporations were characterized by a large degree of managerial autonomy, and management was broadly focused on growth and obligations to stakeholders rather than (exclusively) creating value for shareholders. As Duménil and Lévy (2011) argue, the alliance between the management class and the popular classes ended in the late 1970s as the notion developed that shareholders are the ‘owners’ of corporations and the exclusive claimants to profits of the enterprise. Through innovations like performance-based pay, managers were encouraged to enter a new alliance with the owners of capital. The takeover movement of the 1980s executed this new discipline on corporations and managers by creating an open market for top management, representing the stick that, along with the carrot of massive increases in pay, cemented the new alliance of the managerial class with the owners of capital.
This class realignment, which was obviously to the detriment of the working class, might have been expected to meet with massive resistance (Honneth 2014: 247–248). One very significant reason why it did not is that the long-simmering resentment of the hierarchy and uniformity of bureaucratic power was tapped and rechanneled into a popular version of shareholder liberation. In the popular fable that guided this productive redeployment of psychic suffering, the Wall Street trader appeared as a popular revolutionary sticking it to the sclerotic white-shoe establishment (Fraser 2015). Shareholder value was not simply a new theory of corporate ownership. It was a form of spiritual purging, carried out on the unwieldly and bloated conglomerations built by a managerial class now perceived as having sacrificed the creative energies of enterprise to the task of methodically building up their own power. Individual workers were now encouraged to undertake this spiritual purging themselves, that is, to harness their resentment of bureaucratic power in the service of a project of spiritual transformation. The neoliberal subject was formed in this breaking-loose from the habits of collectivism. In the transformative project in which all individuals had now been enlisted, the institutional protections of ‘social freedom’ were now redefined as dependence, laziness, negativity, and docility. Rather than being blindsided by a ‘misdevelopment’, social freedom was deliberately attacked and dismantled by an insurgent form of class power that was able to draw productively on the lived indignities of managerial capitalism in order to engineer a form of psychic identification to its transformative ambitions. As Self (2012) has argued, the prospect of rights-based social change in the 1960s and 1970s, especially around gender and sexual freedom, triggered anxieties that made postwar liberalism seem to many like a moral threat rather than a system of economic protection. Rather than the condition of full citizenship, guaranteed rights protected by government power were increasingly seen as sapping the nation’s moral strength. Conservatives successfully shifted the issue of protection and security from economic interests to the traditional family values that could flourish only with a weak government that would absent itself from the market and the family. Postwar anxieties exploded in the 1970s when liberalism’s push for expanded citizenship came to be seen as a usurping of private morality and its seat in the traditional family – the same family, of course, that postwar citizens had learned to see as the secure haven from the threats of communism, deviant sexuality, and other forms of moral weakness.
The narrative I have outlined here of the birth of neoliberalism, involving a protracted class struggle combined with a war of ideas that seeks to enlist the populace in a project of transformation, fits perfectly into Fromm’s psychodynamic theory of social change. Fromm’s theory begins with the notion of social character as, in ordinary circumstances, cementing the cohesion of society by furnishing individuals with the internal motivation to do what is socially required. However, the perpetually dynamic nature of capitalism means that, at some point, the state of socioeconomic development and the prevalent social character will be misaligned. This produces what Fromm calls a ‘lag’, in which the social character now appears as a disruptive rather than a cohesive element. Fromm describes the social struggle that ensues as a form of ‘social selection’ (on a rough analogy with the idea of natural selection). Basically, Fromm suggests that new socioeconomic conditions, bringing with them new threats and opportunities, make an opening for a ‘heretofore deviant character type’, who can perhaps prosper in the new conditions. It is worth quoting in full Fromm and Maccoby’s (1996) analysis:
As a result, the ‘ex-deviants’ become the most successful individuals, and the leaders of their society or class. They acquire the power to change laws, educational systems, and institutions in a way that facilities the development of the new trends and influences the character formation of succeeding generations … What happens in fact is that the ex-deviants succeed in polarizing the whole society and attracting, within a short time, if not the majority, at least a critical mass of the population; in this way their dominant position becomes increasingly a popular one. (p. 232)
The social character of finance was kept in a box in the postwar period because of powerful regulations that limited the capacity of the financial class to obtain social and economic power. This began to shift in the 1970s, in the context of severe economic crisis, when a new set of ideas and policies began to gain credence which sought to enable the acquisition of power by finance. The dominance of finance is reflected not only in its steady growth during the neoliberal era but also in its capacity to capture 30% of total corporate profits, a figure far in excess of its relative size (Konzcal & Abernathy 2015: 10). Furthermore, as Krippner (2011) has argued, this dominance is also reflected in the fact that non-financial corporations are increasingly earning profits through financial services rather than through more traditional forms of production.
It follows from Fromm’s analysis, however, that a social class seeking to win power must also transform major social institutions and be capable of attracting a critical mass of support. Scholars have begun to use the term ‘financialization’ to capture the manner in which the economic and social dominance of finance has expanded itself into a remaking of society’s institutions and of the aspirations and fears of its citizens. Following Van der Zwan (2014), we can distinguish three main approaches of the financialization literature. The first of these understands financialization as regime of accumulation in which profits increasingly flow through financial channels. Very high levels of debt, rising levels of income inequality, and a growth regime focused on asset bubbles rather than wage-led growth are among the characteristics of finance under this perspective. A second approach looks at the effects of financialization on non-financial corporations. Much scholarship in this area has focused on agency theory propounded by financial economists such as Michael Jensen and Eugene Fama in the late 1970s and which was to morph into the idea of ‘shareholder value’ in the 1980s. Perhaps the most significant consequence of the shareholder movement was to shift the focus of corporations from growth through the reinvestment of profits, to ‘cashing out’ profits in the interests of institutional investors (Mason 2015). Large corporations now routinely cash out the majority of earned profits through dividend payments and stock buybacks (which push up the share price). The third approach focuses on the financialization of culture and the everyday world. It is here that we can begin to see how finance began to engineer an important shift in subjectivity, as an entire slew of new discourses and practices sought to norm a new, financialized understanding of the self and its place in the social order. As more and more people began to participate in financial markets, Davis (2009) argues, there began to emerge a new ‘portfolio society’, in which ‘the investment idiom becomes a dominant way of understanding the individual’s place in society’ and in which individual talent and communities get turned into human capital and social capital (p. 6). Portfolio thinking, the imagining of ourselves as investors faced with diverse forms of risk rather than, say, citizens or neighbors, has insinuated itself deeply into contemporary social institutions. The financialization of households, meanwhile, has been driven by large increases in debt (for mortgages, consumption, housing, health) and the expanded holding of financial assets (pensions, insurance, money market funds), leading to the increasing mediation of worker spending by the financial system (Lapavitsas 2013: 39).
While it is clear that finance has engineered a ‘systemic transformation’ of the economy in the last four decades (Lapavitsas 2013: 169), Fromm’s idea of social selection directs our attention to the fact that this process has been subtended by a cultural transformation, through which a subculture establishes its own values as socially dominant. This transformation has successfully re-embedded the market through the dissemination of the values and expectations of the subculture of finance. Important resources for such an interpretation can be gleaned from Karen Ho’s (2009) ethnographic approach to the culture of Wall Street. Ho deliberately undermines the conceit that capitalist organizations are peopled by perfect rational actors engaged in a quest for maximum profit (a conceit that survives and prospers, as we saw, in Honneth’s depiction of neoliberal economic changes as ‘autonomization’). Instead, they turn out to be complex, sociocultural organizations undergirded by complex, cultural worldviews and sustained through multifarious organization practices. Ho observes that the self-representation of investment banks as proximate to and intimate with ‘the market’ and market cycles is in fact a misrepresentation of Wall Street’s own corporate culture. Investment banks and their employees hypostasize key elements of their internal culture, such as its volatility and short-termism, through their identification of themselves as identical with the market (Ho 2009: 292). The constant downsizing and restructuring on Wall Street encourage bankers to see themselves as quicker, more adaptable, and more ‘liquid’ than the slow and plodding pace of the average worker. Here again, a worldview which emerges from the volatility of investment banking culture is misunderstood as though it were simply identical with the operation of ‘the market’. Furthermore, Ho argues, bankers tend to see their own culture as normative for the rest of society. It is no surprise, then, to find that ‘Wall Street’s larger social – and market – purpose is also the necessary evil of forcing the average worker to become more liquid’ (Ho 2009: 245). The particular culture and worldview of investment banks, together with compensation structures underlining short-term commitments and volatility, generates ‘an approach to people and to corporations (including themselves and their own companies) that is based on generating quick, short-term rewards’ (Ho 2009: 291).
While financial wealth has played an important role in previous iterations of capitalism, what is new about the current context is that finance is now more deeply ingrained in everyday life than at any time previously. Prior to the 2007 financial crisis, Davis (2009) argues, many individuals, trained to think like investors, had come to regard their homes as ‘just another class of asset in their portfolio’ (p. 230). Whether through payday loans, credit card debt, auto loans, college or housing debt, individuals have come to live in a world of individually managed risk from which the very idea of collective responsibility and collective security has been evacuated. Haiven (2011) argues that these developments allow us to speak of the growth of a ‘culture of financialized individualism’, according to which ‘full economic subjectivity means a “care of the self” based on economic “risk management” and the transformation of personal horizons into economic investments’ (p. 95). Underlying this shift, Haiven claims, is the capacity of financial capitalism to colonize social imagination, transforming shared visions of the future, and anticipated possibilities for collective action, into metrics of risk to be managed and organized by individuals responsible for their own security. Indeed, Haiven (2011) argues that the hold of finance on the imagination today is such that ‘social problems seem to have few answers intelligible outside a market logic’ (p. 116). The social dominance of what Honneth calls ‘individual freedom’, as witnessed by its capacity to monopolize visions of future possibility, derives from its capacity to influence culture and identity formation. Fromm’s theory of social struggle as social selection shows how we can understand this transformation as the work of an insurgent class which was able to profit from changing economic conditions to grasp the levers of economic and social power. Subsequently, the cultural understandings that had characterized the subculture of finance, its emphasis on short-termism, the value of volatility, and the importance of speed were made normative for the rest of society.
In Freedom’s Right, Honneth develops in detail his argument that social reproduction depends upon a set of shared fundamental ideals and values. These ideals and values, furthermore, are not freestanding claims, but embedded into the different spheres of social practice such that they structure how individuals relate to one another. In terms of the ethical theory of recognition underlying this idea, this means that individuals are able to see the actions of others as confirming their own freedom. Honneth argues that this comprises more than a theory of justice because it identifies the objective conditions, in terms of the structure of social practices and institutions, that must hold if individuals are to be capable of living out this idea of social freedom. However, when we follow through on this idea, or when we ‘etch into relief those individual spheres of action in liberal democratic societies in which the value of individual freedom has taken on institutional shape’ (Honneth 2014: 66), we find that the spheres in question as well as the individuals circulating within them have always been constituted at a deep level by the operation of class-based forms of social and economic power. I argued that in the case of the family, we see these elements of the shifting significance accorded to individual freedom and the stratifying effects of power developing together. Processes of individualization have realized to some degree the notion of personal relationships as egalitarian arrangements of mutual recognition of the uniqueness of the other, but at the same time they have generated a deeply class-stratified arrangement of family and marriage particularly in Anglo-American societies. Fromm’s psychodynamic theory of social character, I argued, helps to explain why, in a society stratified and hierarchized by class, race, gender, and sexuality, the achievements of social freedom are always vulnerable to the emotional forces triggered by experiences of anxiety and insecurity. Through his psychodynamic account of how economic circumstances channel psychic energy in certain distinct ways, Fromm shows how the psychic consequences of living in a deeply class-stratified society paradoxically become constitutive of the mortar holding a fundamentally unjust society together. In doing so, Fromm’s theory offers a very promising answer to the question that Max Horkheimer (1993), in a 1931 essay, laid down as the crucial concern of a future critical social theory, the question, namely, of ‘the connection between the economic life of society, the psychical development of individuals, and the changes in the realm of culture’ (p. 12).
The failure to conceptualize the operation of social and economic power and its role in forging identities in capitalist society is compounded by Honneth’s method of normative reconstruction. The main problem with the latter is that it cannot encompass the open-ended and class-driven nature of social change. This renders deeply implausible Honneth’s account of the social transition from the postwar era of increasing social rights and economic inclusion to the neoliberal era of growing class stratification and the retrenchment of collective economic and social rights. The language of ‘misdevelopments’ fails to capture the role of class power in driving changes in capitalist society, and gives the misleading impression that a moral scheme of development can operate in capitalism independently of the shaping effects of class struggle. Once again, I argued that Fromm’s psychodynamic theory of social change offers a credible interpretation of the transition to neoliberalism as the insurgency of a ‘heretofore deviant character type’, which was able to profit from economic shifts in capitalism to acquire control of the levers of economic and social power. Through processes that scholars have described under the umbrella of ‘financialization’, the new dominant class began the project of remaking social institutions and subjectivities to reflect the values of the new social character. Ordinary people far from the realms of high finance have experienced the binding imperative to make themselves into investor subjects who, rather than confronting collective problems with their common labor, are tasked with reinterpreting the future as an assemblage of investment opportunities with different gradations of risk. I argued that democratic citizens were encouraged to disidentify with the collective identities and solidarities, iconically represented by trade unions, which were powerful forces in the postwar period. Neoliberal discourses were able to draw on the psychic suffering of managerial capitalism in order to generate subjective commitment to its transformative ambitions.
This brings us to a third and final problem with Freedom’s Right. The book’s argument for an embedding of capitalism in intersubjective structures of freedom that guarantee interdependence and reciprocity must appear today like an exhortation to restore the managerial project of postwar liberalism. It is difficult to see how such a project might be revived today, partly because the discourses and institutions of neoliberal society have forged a subject that has come to associate social dependency and collectivism with moral weakness, but also because the history of social-democratic attempts to use national electoral victories to reengineer the operation of social and institutions without fundamentally altering the deep-lying class structure of capitalist society has proved itself to be largely a failure. A moment’s reflection on the serious deterioration in the inclusiveness, trustworthiness, and effectiveness of democratic institutions in the last four decades is enough to confirm that neoliberalism has made an uphill struggle into a Sisyphean task. Typically, the progressive project has sought to correct the systematic injustices of capitalism through ex-post-facto economic redistribution. As increasing class stratification has led to an increasing dominance of the electoral and political process by the wealthy and powerful, the typical strategies of progressive politics are facing a social environment that makes them weaker by the day. A central task for critical social theory in the near future will be to find more effective and imaginative ways of conjoining widespread opposition to social and economic injustice with analyses of the deep-lying forms of class power in liberal societies that regularly thwart the transformative ambitions of progressives. Ultimately, it may be the implicit idealism of Honneth’s belief that it is possible to moralize capitalism which is responsible for much of what goes wrong in Freedom’s Right.
The author would like to thank the reviewers of Capital and Class for their constructive and helpful comments on this paper.
1. I am using the distinction between the college and non-college educated as a rough proxy for social class.
2. Boltanski and Chiapello (2005) explain this in terms of capitalism’s appropriation of the ‘artistic critique’ of 1968. Fleming (2009) discusses the prevalence of discourse concerning authenticity and self-fulfillment in the contemporary workplace.
3. See McNay (2015: 175) for a similar critique of Honneth’s normative scheme.
4. A perfect example of this are the current efforts of corporate groups in the United States to ‘roll back’ the constraints of the Dodd–Frank Act. See Turbeville and Palladino (2015).
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