In early 2017, when Xi Jinping, the darling of Davos, extolled the virtues of liberalization, openness and free trade, it seemed that, whatever was happening in the West, at least the Chinese version of neo-liberalism was safe. Instead, the past two years have delivered what appear to be blatant departures from the playbook: the steady rise of dirigisme, and a leader (for life?) who has in recent months called for a strengthening of the state-owned enterprises (soes) and a recommitment to the Chinese Communist Party’s version of Marxist-Leninism. Actually existing neo-liberals in China have fared poorly as well. The leadership’s 2012 attacks on neo-liberal positions, along with other subversive currents—universal values, constitutional democracy, et al—cheered at the time by many on the left, have sharpened. The editors of Yanhuang chunqiu, the primary organ for pro-reform, pro-market, liberal intellectuals, founded in 1991, announced in 2016 that their journal would close, due to excessive government interference (publication continued under a different editorial staff). Neo-liberalism’s most prominent think-tank in China, the Unirule Institute, had to suspend its popular websites and blogs in 2017. Economist Mao Yushi, Unirule’s founding director and China’s most celebrated neo-liberal, has been forbidden to publish, and in the summer of 2018, the Institute’s Beijing headquarters were shut down, doors and windows barred.
The past year has also witnessed stepped-up surveillance of the universities, where liberal and neo-liberal ideas have long had far greater purchase than most in the West realize, with monitoring of syllabuses and class content, and with the threat of reports on faculty misconduct by the volunteer security-service informants in nearly every student body. Wang Hui and a number of other leftists once saw in the Xi regime portents of the rise of ‘the people’, marking a turn away from the neo-liberalism that had appeared entrenched since the mid-90s. This is a harder position to maintain today, given recent attacks on the left—the closing of websites, the arrest of feminist and worker activists, and even the threatened closure of the Beijing University Marxist Society—as well as Xi’s retreat, in the face of economic headwinds, from earlier promises of steadily stronger welfare protection. Still, though criticized for crudeness and over-reach, Xi has been fairly successful in promoting neo-authoritarianism at home, tightening the screws on left and right alike, while trying to present himself on the global stage as protector of free trade and a harmonious international economic order. No wonder that feminist cultural critic Dai Jinhua has described the current political-cultural landscape as being ‘without coordinates’.footnote1
A landscape without coordinates, though, may be one in which neo-liberalism thrives. Its core political-economic doctrine—the market as information processor and revealer of truth; competition as guarantor of optimum performance; state intervention to maintain appropriate forms of competition; a generalization of entrepreneurial values at the institutional and individual levels; and explicit or implicit anti-egalitarianism—has taken root worldwide in a variety of political contexts. Indeed, ‘normative neo-liberalism’—the actualization of neo-liberal values in state policy—has arguably required Third Way or Democratic Party governance, rather than overtly market-fundamentalist parties, to thrive.footnote2 Neo-liberal economists and ideologues have not necessarily needed positions of political power in order for neo-liberalism to serve as a pole of attraction; few if any of China’s key economic policy makers are overtly hostile to it. This intervention will argue that China’s post-reform trajectory is indeed legible through a neo-liberal optic, but it is a limit case as well.
Clearly, state intervention in the economy persists in China, and its recent trajectory would appear to contradict the predictions of economists across the spectrum—from neo-liberals to industrial-policy specialists to straightforward Keynesians—of a gradually lessening role for soes, or at least a greater rationalization of their access to credit. Yet neo-liberalism as a doctrine has undergone numerous historical mutations—the anti-monopoly orthodoxy of the Ordo-liberals giving way to the monopoly-tolerant orthodoxy of the Chicago School, for example—coterminous with alterations in the fundamental but surprisingly fungible concept of competition. In a period like the present, with the ‘Ordo-globalist’ regime that Quinn Slobodian describes entering a period of (temporary?) eclipse, we might expect a proliferation of national variants of the neo-liberal dominant.footnote3 And of all the thinkers in the neo-liberal pantheon, perhaps the most open to multiple, variant versions of neo-liberal governance was Ronald Coase.
Coase did not, to my knowledge, ever identify himself as a neo-liberal, and in general avoided doctrinal orthodoxy and socio-philosophical speculation. A great admirer of Hayek and a respected member of the Mont Pèlerin Society, in the latter half of his life he became the mainstay of the law and economics orientation at the University of Chicago, teaching in the law school. His lucid and relentlessly systematic empiricism—deployed with an unassuming modesty, in contrast to many of his colleagues at Chicago—helped several of his articles to become field-defining; he was awarded the Nobel Prize for economic science in 1991. From a modest background, Coase was born in 1910 in Willesden, north London, the son of a Post Office telegraph clerk, and described himself as a socialist in his youth. He studied at the London School of Economics under Lionel Robbins, Hayek and, most influentially, the South African economist Arnold Plant, and taught there until the 1950s, his research focusing on the economics of public utilities—broadcasting and the postal services, as well as water, electricity and gas.footnote4
Coase’s seminal study, ‘The Nature of the Firm’, mentioned in his Nobel citation and published when he was only twenty-six, was the upshot of a year spent touring factories and businesses in the us in 1931–32, with the aim of exploring the different ways in which industries were organized. Instead, Coase questioned why the coordination provided by the firm’s management was needed at all, if competition, acting through the price system, was supposed to supply all the coordination necessary.footnote5 The opening lines of the article could almost come from Marx: ‘Economic theory has suffered in the past from a failure to state clearly its assumptions. Economists in building up a theory have often omitted to examine the foundations on which it was erected.’footnote6 Coase would remain unsurpassed among neo-liberals as a ruthless interrogator of foundations. To the question, ‘Why do firms exist?’, he replied that it was due to the ‘transaction costs’ of using the price mechanism: a firm would conduct functions in-house if this lowered the cost of obtaining the labour or services through market exchange. The concept of transaction costs opened up new fields of inquiry and shaped the New Institutional Economics, so called to distinguish it from the early 20th-century Veblen variety.
After a wartime stint at the Central Statistical Office in London, which only confirmed his scepticism about nationalized industry, Coase moved to the us in the 1950s, teaching first at Buffalo and then at the University of Virginia. In 1964 he settled at Chicago, assuming the editorship of the Journal of Law and Economics.footnote7 By then the triumph of the second article mentioned in his Nobel citation, ‘The Problem of Social Cost’ (1961), had enshrined his reputation. Arguing, like a lawyer, from actual cases, Coase provided a rebuttal of the prevailing view, formulated in Arthur Pigou’s Economics of Welfare (1920), that government action was required to restrain businesses whose actions created ‘negative externalities’, with harmful effects on others. Coase claimed instead that negotiations between the two parties would lead to a settlement maximizing wealth, irrespective of the rights involved. ‘The Problem of Social Cost’ became one of the most cited articles in the discipline of economics, opening the way for us neo-liberalism’s radical anti-regulatory agenda and ‘out-Chicagoing Chicago’.footnote8