The end of protest

How free-market capitalism learned to control dissent

Graphic by Istvan Banyai

It has been more than six years since the collapse of the investment bank Lehman Brothers — an event that triggered the most profound economic crisis to afflict the United States in a generation. Many other countries were affected as well, and some governments struggled to contain unrest. There were massive strikes, demonstrations, and riots. “It’s kicking off everywhere,” the BBC journalist Paul Mason observed in 2012. “The protest ‘meme’ . . . is sweeping the world.”

But this was not really true in the United States: while there was unrest here too, it was not nearly as intense as in other countries. By and large, the United States had a quiet crisis. For some observers this was a puzzle. “Why don’t Americans protest when they’re pissed?” one American writer wondered. “Are people not angry enough? Not galvanized enough? Convinced that what they do won’t make a bit of difference?”

This was a reasonable question. Even if we did not look at other countries, and looked only at American history, we might have expected more unrest. Until very recently, it was an axiom of American politics that economic slumps were accompanied by strikes and protests that were difficult to control. Any American politician who practiced his craft in the nineteenth century, or in the first half of the twentieth century, took this for granted. Periodically, the economy would collapse. People would lose their jobs and savings, and then they would vent their anger in the streets. Politicians had to think carefully about how to respond to these recurring bouts of disorder. Should they simply put up with it? Should they crack down on protest, in the name of law and order? Or should they try to appease the angry public with new laws that made up for their losses?

Before 2008, the last great economic crisis to hit the United States was the recession of 1981–82. It lasted only sixteen months, but even then there was widespread unrest. There were more than four hundred major strikes across the United States during that recession. In September 1981, more than a quarter million angry people massed on the Washington Mall to protest the policies of the newly elected Reagan administration, and 100,000 people marched in protest in New York City. In the Midwest, federal officials were cautioned to stay “as calm as possible” as anger erupted over farm foreclosures.

The economic crisis that began in September 2008 was longer and deeper than the recession of 1981–82. The proportion of the workforce that could not find work, or simply stopped looking for it, was higher. Many more families — almost 2 million between 2007 and 2011 — slipped below the poverty line. A Federal Reserve study calculated that the average American family lost all of the wealth that it had accumulated in the previous decade. By 2011, according to the Gallup Poll, nine out of ten Americans were dissatisfied with the way the country was heading. This was a larger proportion than had ever been recorded before.

People were angry. And yet there was little unrest. There were only fifty-four work stoppages between 2009 and 2012 — an eighth of what there had been during the shorter recession of 1981–82. “American workers didn’t take to the streets,” says labor writer Stephen Franklin. “They took Pepto-Bismol instead.” There were some demonstrations in Washington, but none as large as the demonstrations of summer and fall 1981. There were expectations of massive protests at the G20 summit in Pittsburgh in 2009 and the G8 summit in Chicago in 2012, but these expectations did not materialize. There were demonstrations in Wisconsin against austerity measures, which many people thought would trigger a wave of protests elsewhere, but again this did not happen, even as state governments executed the most drastic cuts in spending since the Great Depression.

In September 2011, the Occupy Wall Street camp was set up in Manhattan’s Zuccotti Park. (“What took them so long?” Ralph Nader wondered. He was not alone.) For a moment, it seemed as though Americans’ pent-up frustrations would finally be released in a wave of protest. Within weeks there were similar camps in cities across the United States. The economist Jeffrey Sachs thought it was like 1968 all over again. Others called Occupy Wall Street “the most important progressive movement since the civil rights marches.” As we shall see, however, these early judgments about the significance of the Occupy movement were exaggerated. By February 2012, Occupy Wall Street had been cleared out of American cities, and the movement was fading into history. “For all intents and purposes,” New York Times columnist Joe Nocera wrote one year later, “The movement is dead.”

Many American progressives were mystified by the lack of protest as the economy collapsed. For thirty years, politicians in Washington had pursued policies that were designed to limit government and liberate market forces. This package of free-market policies, often known as neoliberalism, had been exported around the world. Now these policies appeared to be responsible for a spectacular and devastating crash. Problems of rising inequality and declining economic security had been exposed. Many other countries that had followed the United States on the neoliberal path had already experienced a virulent backlash against free-market excesses. But there was no comparable wave of unrest in the United States. “Economic inequality in America hasn’t been this stark since the 1930s,” the labor journalist Sam Pizzigati puzzled in 2013. “But back then Americans by the millions took to the streets in protest. Why aren’t millions of Americans out protesting today?”

There is someone else who might have been surprised by our quiet crisis, if he had lived to see it: the economist Joseph Schumpeter. Schumpeter was an Austrian who immigrated to the United States in 1932. He was not, by any stretch of the imagination, a progressive. He hated Franklin Roosevelt and the New Deal. But Schumpeter also had a cold-eyed view of free-market capitalism. “Capitalist reality,” Schumpeter wrote in 1942, “is first and last a process of change. . . . [It is a process] that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of creative destruction is the essential fact about capitalism.”

In the late 1990s, the revival of free-market capitalism that had been started by Reagan and Thatcher was reaching its high-water mark, and Schumpeter enjoyed a surprising comeback too. His idea of creative destruction seemed to capture the dynamism of the new global economy: crushing old practices, inventing powerful new technologies, and always surging forward. Schumpeter, the business magazine Fast Company said in 2001, was “the poster boy for the post-millennial, hyper speed, shock-a-minute economy.”

But the vision of creative destruction that was popularized in the late 1990s was not Schumpeter’s. It was bloodless and painless. It envisaged “incessant revolution” without suffering, anger, or resistance. Schumpeter’s own view of creative destruction was much darker. Schumpeter admired the vitality of free-market capitalism but understood its capacity to cause anguish and resentment. “The history of capitalism,” he said, “is studded with violent bursts and catastrophes.” Wrenching change inevitably cloaked the “capitalist engine” with an “atmosphere of almost universal hostility . . . [which] increases, instead of diminishing, with every achievement of capitalist evolution.”

Schumpeter took this mounting hostility very seriously. He thought that it would eventually prove fatal to the free-market system. He was not quite right: in the aftermath of the Great Depression, laissez faire capitalism was wounded but not killed. Politicians in the United States and other countries were weary of the cycle of boom and bust, which was not just an economic phenomenon, but also an unending oscillation between social peace and social chaos. After the Second World War, they took steps to guarantee economic and social stability. For many years, these measures worked. They kept the peace. But they also entailed a substantial retreat from free-market ideals of the prewar era.

So here is the mystery that we want to solve today. Call it Schumpeter’s Paradox. After 1980, politicians in the United States and the United Kingdom began to reverse many of the measures that had been set in place after the Great Depression. They wanted a return to free-market ideals. By the early 1990s, that free-market model was being adopted around the world. The result was a liberalized global economy of unprecedented scale and complexity. If Schumpeter was right, however, the return to laissez faire policies also meant unleashing the power of creative destruction. It threatened a return to that “atmosphere of almost universal hostility” about which Schumpeter had written in 1942, and which seemed most likely to boil over when the economy crashed, as it did in 2008.

Many advocates of free-market policies argued that Schumpeter’s dark view of laissez faire capitalism was no longer relevant. The modern free-market economy, they insisted, was less prone to crashes, and generated such wealth that it was easy to compensate people whose lives were upended by market forces. But as the neoliberal model spread, experience showed that none of this was right. Many countries that followed free-market prescriptions after the United States and the United Kingdom did suffer debilitating unrest. This included many advanced economies that were struck by the financial crisis of 2008. In those countries, modern market forces were just as disruptive, and as likely to trigger unrest, as they had been in the United States and the United Kingdom a century ago.

But disorder in the modern age was limited in the United States, and to a lesser degree in the United Kingdom, even after the crash 2008. In those two countries, the link between free-market economics and unrest seemed to have been broken. How did this happen?

There is an answer to this question, but we have to dig to find it. While technocrats in Washington and London were always been happy to provide other countries with detailed instructions on how to dismantle barriers to the operation of market forces, they were never so explicit about the methods that were used to manage the risk of unrest at home. Still, there was a formula. It has three important components. The first involved disabling the capacity to mobilize protest, mainly through measures that weakened the capacity of workers to organize. The second involved the reinvention of policing, to squash the new forms of networked protest that rose up as the power of organized labor declined. And the third involved ceding emergency powers to technocrats so that they could take steps to avoid full-blown economic calamities.

In the two leading free-market nations, this was the unstated formula for keeping the peace. As we will see, there are important ways in which it contradicted our usual understanding of what the promarket reform program was all about. An economic program that aims at shrinking the role of government in general actually depended on making an important part of government (that is, domestic security forces) more robust than ever before. For police forces, in other words, this was the era of big government. Similarly, an economic program that was usually criticized for its doctrinal rigidity — that is, its unflinching attachment to cold principle — proved to be deeply pragmatic in moments of crisis. Experimentation in economic policy was allowed, so long as it was technocrats rather than politicians who did the experimenting.

In other ways, though, this formula for keeping the peace fit well with our preconceptions about what neoliberalism is about. It rested on an unprecedented intolerance for economic and social disruption and a deep skepticism about democratic politics. In fact, it threatened to extinguish crowd politics — that is, the method of expressing political and economic grievances through collective action in the streets. Citizens were told that they had a remedy through the traditional mechanisms of democratic politics. But this was not much of a consolation in an age when democratic institutions were crippled or captured by market forces.

This is the introduction from The End of Protest: How Free-Market Capitalism Learned to Control Dissent (Cornell Selects, $1.99). Alasdair Roberts is a Professor of Law at Suffolk University Law School in Boston, Massachusetts.