Actually existing capitalism

Ian Buchanan, Charles Darwin University

Doug Henwood After the New Economy, The New Press, 2003 (269 pp). ISBN 1-92076-918-8 (paperback) RRP $26.95.

What is—or, perhaps we should say was—the New Economy? Tom Frank, author of What’s the Matter with Kansas? (2004), the recent bestselling account of the rise of conservativism in the former Democrat strongholds of the American heartland, has tracked the first use of the phrase ‘New Economy’ to a speech Ronald Reagan gave at Moscow State University in 1988. Reagan proclaimed that in the New Economy, that is, the economy his administration was ushering in, human invention would increasingly make physical resources obsolete (p. 8).

Reagan’s implication, as Robert Brenner has argued with admirable clarity in The Boom and the Bubble (2002), was that US economists had looked into the future with panicked eyes and seen that the manufacturing sector, hitherto a seemingly unstoppable engine of growth, could no longer be relied on to secure national prosperity. Competition in Europe and Japan had taken its toll, but there was a new hope: the so-called Information Revolution.

Technology came to be credited with generating new sources of wealth, but as Henwood shows in After the New Economy, this was really a sleight of hand. It was the changes to the governance and regulation of capital markets, both domestic and international, which actually fuelled the long bull run of the 1990s. But it was a convenient ideological ruse to allow people to think it was all down to computers. As incredible as it now seems, in 1988, faxes, mobile phones, and email were novelties, and it was easy to think that these things were causing rapid change in society and the economy.

These days the phrase ‘New Economy’ has largely fallen into disuse, or disrepute as one might equally well say, but its many synonyms and buzzwords continue to thrive. None more so than that hoary shibboleth ‘globalisation’, a concept that as Henwood puts it, has had a busy decade or so, and ‘needs a long rest’ (p. 186). Almost everything that is good or bad about the present state of Western society is, apparently, attributable to globalisation/New Economy—most notably the ‘labour squeeze’ that has resulted in the export of many manufacturing lines and, more lately, a host of back office functions to the Third World.

In 1988, faxes, mobile phones, and email were novelties.

But, Henwood asks, ‘What did “globalisation” have to do with Teddy Kennedy and Jimmy Carter pushing transport deregulation, or with Reagan’s firing the air traffic controllers, or with Clinton’s signing the welfare bill?’ (p. 152). He shows that the traditional ‘blame the foreign competition’ tactic obscures the real culprits, namely the portfolio managers on Wall Street, whose constant demand for higher rates of profit from stocks has transformed the way industry is understood. One may add here that, as Robin Blackburn’s magisterial Banking on Death (2002) has shown, the drive towards the privatisation of welfare only exacerbates matters by creating vast pools of money in pension funds that needs must seek the highest possible returns.

On the upside, if you happen to live in one of the ‘world cities’, globalisation is supposed to have transformed the workplace, making it both more interesting and remunerative. As Henwood puts it:

One of the supposed benefits of the New Economy is a new egalitarianism. Driven by dynamic markets, not stodgy old welfare states, it has reportedly given us the toppling of old hierarchies, the erosion of inherited privileges, and the democratization of wealth. In fact, the distribution of income in the U.S. in the early 2000s is about the most unequal it’s ever been—and the same can be said of the distribution of world income. (p. 79)

A friend of mine told me the following delicious story which, although probably apocryphal, goes some way to illustrating the deep fault line in popular thinking about globalisation. Technology is trumpeted as the source of an enhanced productivity in virtually every sector, but in many cases using the technology to downshift into a cheaper labour market made the real gain. The story goes like this. A certain European entrepreneur working in the IT sector made his fortune selling an instant transcription service over the internet. Claiming he was using state of the art voice recognition software, he advertised the real-time transcription of verbal texts. The idea was, you speak into a microphone and the computer rapidly spews back your text in written form. But it turns out that no such software exists. Rather what happens is your text is transmitted by firewire to a sweatshop in India where hundreds of data-entry people sit at desks listening to and transcribing calls. This story highlights two salient points often lost in the hype of the so-called information age—the productivity gains technology makes available don’t always occur the way we think they do; however dependent on computers we think we’ve become, we still haven’t rid ourselves of labouring bodies.

Overturning hype is Henwood’s specialty.

Overturning hype is Henwood’s specialty. Few people are as well placed to criticise the new economy as Doug Henwood—he is the author of Wall Street: How it Works and For Whom (2000), the founding editor of the trenchantly acerbic answer to the hype of The Wall St Journal, The Left Business Observer and host of a weekly radio program on WBAI in New York. But After the New Economy doesn’t so much criticise the New Economy as disprove it ever actually existed, at least in the form its proponents claim it did. Henwood’s real fight is with all those pundits who bought into its rhetoric and helped to give the idea credence in the 1990s as a buzzword to conjure with. Through an assiduous evaluation of the underpinning economic data, Henwood makes good on his aim of revealing that a ‘good bit of the New Economy discourse was a product of fantasy’ (p. 6):

It would be nice if organisations could be made non-hierarchical, work be made spontaneous and fun, and everyone be cut into a share of ownership. That enthusiasts circulate these ideas and that others accept them is testimony to their persistent appeal. But these things are unlikely to happen under actually existing capitalism. (p. 38)

Henwood describes his book as an exercise in kicking the thing while it’s down, to make sure it won’t get up again (p. 3). Although the economic evidence overwhelmingly shows that the New Economy is indeed down (slowed job growth and an escalating trade deficit is in the United States today), there are still plenty of punters, like the chest-beating Richard Florida (2002), who not only continue to believe in the existence of the ‘New Economy’, but constantly find new reasons to extol its virtues.

In some respects, it isn’t hard to see why this might be: the New Economy proclaimed itself to be the weightless, frictionless economy in which ideas rather than infrastructure reigned supreme. Florida’s notion of the ‘creative class’ is the perfect exemplar of the new kind of people working new kinds of jobs that the allegedly New Economy was supposed to have created. At its hyperbolic best, the New Economy claimed to put the individual first, thus laying to rest—once more—the perennial bogey of ‘the organisation man’. ‘Which is, perversely,’ as Henwood discerns, ‘a way of saying that the New Economy discourse appeals to utopian impulses in these largely anti-utopian times’ (p. 37).

At its hyperbolic best, the New Economy claimed to put the individual first.

The enduring symbol of the New Economy is the smart, ‘creative worker’ spurning his/her office in the city for a country retreat where, by virtue of the wonders of the new global interconnectedness of technology, they continue to prosper handsomely by trafficking their ideas on the internet. But its real effect has been to disseminate a model of corporate governance congenial to US interests but toxic to many of its newer adherents. Post-Soviet Russia is a stand-out example of the real cost of opening a national market to an unrestricted flow of foreign finance (p. 225).

After the New Economy should be read as a timely tonic to an alluring image of economic and social change that has sustained its appeal in certain policy circles (long after the bust and Asian crisis put paid to all or most of its claims), precisely because its faith in the potential of new technology to reduce costs and open up new markets seems to promise a low-cost way out of a developmental slump. But as Henwood points out, the New Economy was anything but friendly to developing economies—in addition to ravaging Russia, the New Economy’s forced dismantling of finance regulation in so-called Asia ‘Tiger’ nations proved nearly ruinous.

The image of the New Economy as a bold new future is, however, only alluring if you buy former Citibank chair Walter Wriston’s idea that the internet improved democracy because it is like ‘a “giant voting machine”, which allow[s] capital to stay where it is well treated and promptly leave places where it isn’t’ (p. 22). The reality was of course quite different. The movement of money has been anything but democratic in operation or effect. More importantly, the focus on wealth creation rather than distribution has resulted in an appalling concentration of vast wealth in the hands of the few. George Monbiot’s (2003) widely cited statistic that today the combined incomes of the poorest half of humanity (that is, more than three billion people) is less than the total wealth of the world’s richest 500, encapsulates this point perfectly.

If that fails to prickle the conscience, then Henwood’s account of the way the middle class have been excluded from the New Economy’s wealth creation will certainly niggle the hip-pocket conscious (p. 88). Faced with steep mortgages, increased cost of living (particularly for health and education as these services are privatised), and declining real wages, the middle class may have experienced a ‘wealth effect’ in recent years, but have done so without the income needed to go with it.

Henwood has more than the hucksters in his sights.

But, and this is the part of the book that concerns me most as an academic myself, Henwood has more than the hucksters in his sights. He reserves an especially stern telling off for academics in economics, politics, and the humanities, particularly those in that impossible-to-define field calling itself ‘Cultural Studies’, who presumably should have known better than to accept the New Economy’s proclamations at face value.

Henwood singles out Cultural Studies because, in his view, it has failed to acknowledge the degree to which its often breathless celebrations of the opportunities for new forms of self-expression and new conceptions of identity provided by email, the internet, and various other digital technologies, are complicit with the aims of capitalism itself. This is not to say that right-wing attacks on Cultural Studies for writing about Reality TV or Barbie Dolls are on point; they are not. It is, however, to say that old-fashioned left-wing calls to pay attention to the economic base of culture remain as cogent as ever.

This critique of Cultural Studies can be put another way. Cultural Studies’ concern with ‘creative content’ (that is, with the intellectual capital or ideas underpinning films, books, games and so forth) has led it away from labour—but as Henwood reminds us, there are more truck drivers in the United States than computer programmers and more steel workers than movie people. We might be post-industrial, but that doesn’t mean blue collar work has disappeared (p. 28). Blue collar work has been profoundly ethnicised as Mike Davis shows in his various Los Angeles case studies, a factor that has contributed powerfully to wage depression.

It is also worth remembering that ‘content’ exists only in order to sell manufactured goods—DVDs, DVD players, PCs, X-boxes, et cetera, are manufactured goods, even if their actual product is ‘virtual’. Historically, television programming had to be invented in order to sell television. Nothing much has changed in that respect. The difference is that nowadays there is greater ‘value’ in manufacturing content than machines, but content still hasn’t liberated itself from machines. The cyberpunk fantasy of inserting computer chips directly into the brain should perhaps be seen not so much a machine-human interface as the path toward the triumph of a machine-free economy in which content producers could finally snap free of their dependency on old-fashioned manufacturing.

There are more truck drivers in the United States than computer programmers.

So why has Cultural Studies embraced New Economy rhetoric? In Australia this might be explained by the practical need to survive—only by embracing it could Cultural Studies continue to obtain funding in an increasingly instrumentalist environment. This tendency in the Australian Research Council is plain to see in its funding criteria and the make-up of its college of experts charged with assessing grant applications: the former includes such non-academic criteria as ‘national benefit’ (a question humanities scholars often fail to answer—after all, what is the national significance of a new book on the French philosopher Gilles Deleuze, say, which expects a readership of only a couple of hundred worldwide?); while the latter now quite pointedly includes non-academics whose task is to bring a ‘real world’ perspective to proceedings.

But even within the confines of the Australian national situation this is only a partial answer. It has also to do with an ambiguous response to Marxism itself—the New Economy rhetoric is filled, as Henwood says, with vaguely Leninist phrases, such as the constant exhortations to ‘change’, to ‘break the old paradigms’, and so forth; and is studded with labour-friendly notions like ‘flexibility’ (the reality of which we know is something very different); so, it allows left-oriented critics to continue to think of themselves as leftists without at the same time having to confront the failures of left politics in China, the USSR, and so on (p. 230). In its ‘liberal’ outlook, Cultural Studies promotes the ruse that there really is a ‘good’ form of capitalism, that is, the (similarly obsolete) ‘Third Way’.

The New Economy hasn’t delivered meaningful, enjoyable work, self-management and flattened hierarchies for all, as its boosters promised. But in the middle of an era that was politically conservative and socially polarising (the rich got much richer and everybody else, including the middle class, got poorer), New Economy discourse appropriated the language of revolution and evoked fantasies of abundance and stoked hopes for global linkages (p. 229–230). And, as Henwood says, these are not unworthy aims. We should not give up on them just because they didn’t materialise. Rather, what we have to do is keep alive these utopian ‘seeds’ and try to figure out a practical means of getting them to germinate in our time.


Blackburn, R. 2002, Banking on Death or, Investing in Life: The History and Future of Pensions, Verso, London.

Brenner, R. 2002, The Boom and the Bubble: The U.S. in the World Economy, Verso, London.

Florida, R. 2002, The Rise of the Creative Class, Basic Books, New York.

Frank, T. 2004, What’s the Matter with Kansas? How Conservatives Won the Heart of America, Metropolitan Books, New York.

Henwood, D. 2000, Wall Street: How it Works and For Whom, Verso, London.

Monbiot, G. 2003, ‘Le monde, c’est nous’, The Guardian, 2 September.

Ian Buchanan holds the foundation Chair of Communication and Cultural Studies in the School of Creative Arts and Humanities at Charles Darwin University. He is author of Deleuzism: A Metacommentary (Duke University Press, 2000) and Michel de Certeau: Cultural Theorist (Sage, 2001).