A central, perhaps the central, question in political economy today is how forces of democracy, including organized labor and its allies, can regain a degree of control over corporate capitalism in the neoliberal era. Equally pressing (and related) is our need to confront climate change and replace fossil fuels with alternative energy resources. While the silos of academia have splintered political economy from studies of energy, the beauty of Timothy Mitchell’s Carbon Democracy lies in his eloquent and comprehensive study that merges these two essential aspects of industrial production and modern society into an integrated analysis.

To strengthen labor movements today, it is helpful to follow Mitchell’s tale of the key role played by coal miners in creating a chokehold on production and capitalist accumulation through controlling transport of coal during the era of steam power. To imagine a more equitable and democratic international economy, we need to understand how access to cheap oil made the Keynesian era possible, how labor lost leverage over energy production in the age of oil, and how bankers, oil companies and US policymakers manipulated the oil crisis of 1973–74 to allow the world’s largest debtor nation to gain hegemony over other states, creating the neoliberal order we live in today.

This book, which is essential reading for anthropologists, describes the complex and critical connections among hydrocarbon energy, modern democracy, and class politics over a period of 150 years, providing a magnificent vision of how the rise of capitalism and mobilization of new energy systems around first coal and then oil stimulated industrial expansion, urbanization, and increased production of social wealth—while simultaneously enabling new oil monopolies increasingly aligned with American neo-colonial empire. Mitchell makes important contentions about the role of oil politics in the processes that led to the so-called oil crisis of 1973–74, and the advent of neoliberalism as a governing ideology in the West. His work offers a challenge to accounts of the neoliberal turn by political economists, such as David Harvey (2003, 2005) and Manfred Steger (2005), who gloss over the role of energy in capitalist restructuring.

One of Mitchell’s major claims is that modern political democracy in the West came into existence as a result of organized miners leading a successful workers’ struggle to “assemble” a strategy of political demands leveraged on their power to interrupt the supply of coal for industrial capitalist production, beginning in the late nineteenth century in the UK, elsewhere in Europe, and in the United States, and continuing until the 1970s (Mitchell 2013: ch. 1). As British, American, and European labor unions came to control the working conditions of mining and coal’s transport and supply lines, their capacity to use such control for strikes and sabotage of coal’s supply led not only to capitalist wealth being more widely shared by the working population but also to the modern institutions of Western political democracy, such as the vote, labor unions, and political parties. (We would point out that Mitchell’s treatment of social movements does injustice to the many other ways labor power shaped democracy, such as “sewer socialism” from the early 1900s to the 1930s in the United States [Nichols 2011], labor and socialist movements in the UK and Europe in the late 1940s, and the efforts of labor unions in the United States and Europe to form links of solidarity with union and independence movements of the colonized states [Mitchell 2013: ch. 3].)

However, and this is the second important related contention of Mitchell, by the 1960s oil corporations and allied industries (e.g., steel, chemical, railway, auto) introduced new technologies around the use, extraction, and logistics of oil, which blunted labor’s capacity to interdict supplies of energy for industrial production. Oil proved to be a fluid susceptible to being transported via pipelines and tankers organized into redundant imperial/global networks, rather than along the limited regional “dendritic” supply lines that existed for coal, whose chokeholds organized labor had been able to seize and control. Oil’s use in shipping also supported containerization, which allowed capitalists to regain control over the logistics process from the militant longshoremen’s unions. Further, oil production is more capital-intensive—especially at the exploration and drilling stages—and more dependent on experts (Mitchell 2013: 151–155). As a result, new oil production has often disappointed host areas eager for local jobs because the large companies rely more on specialists and migrating guest-workers, making the organization of place-based labor in communities all the more difficult.

In Mitchell’s account, the historic defeat of labor through the reorganization of capitalism to deploy oil instead of coal as a source of energy for production was a protracted process, which occurred in two stages. First, from World War I until the 1960s, the assertion of American and British oil corporations’ governance of oil flows developed into a complex system that brought together Western oil companies’ control over the extraction and refining of oil from the Middle East, US and British imperialism, new technologies for extracting, refining and transporting oil (especially via transnational pipelines), the invention of the Cold War, and the emergence of the new discipline of Keynesian economics, which established, according to Mitchell, the “economy” as a new object for governance.

Mitchell argues that since the United States produced the bulk of the world’s oil after World War II, the dollar’s value was propped up by cheap American oil. This dominance had been strengthened when the bulk of British gold was shifted to US reserves after the war to pay debts for armaments and gasoline to Britain during the war. The Bretton Woods Conference of 1944 reinforced this new arrangement through fixing the dollar against gold in the name of postwar humanitarian aims. Mitchell makes the acute observation that this logic allowed economics, rather than energy or labor, to become the rubric used to define capitalist relations with society. Narratives by economists and state officials increasingly linked the growing circulation of money to calculations of the gross national product (GNP), encouraging the public assumption of an (otherwise inexplicable) infinitely expanding consumption of goods and services (Mitchell 2013: ch. 5). In addition, Western oil companies influenced the design of the Marshall Plan, which ended British domination of the European coal economy and required Europe to favor new roads for cars over spending on railroads and mass transit (Mitchell 2013; see also Nikiforuk 2012: 46, 55).

The same period was marked by the dominance of the United States as a major supplier of oil to its own domestic markets while relying on major oil companies as an effective arm of foreign policy regulating oil supplies and control in the Middle East, at times to the detriment of European buyers. Mitchell points to the increasing capacities of the transnational oil companies to create structured scarcities in oil through their strategic development of new technologies of oil exploration, extraction, refining and transport—and manipulation of their hidden chokepoints—allowing companies to supplant labor in gaining power through “sabotage” of supply (Mitchell 2013: 39–40, 163).

In the second stage of his analysis, Mitchell shifts the focus to the 1960s and 1970s, when the newly independent Middle East oil states formed the Organization of the Petroleum Exporting Countries (OPEC) and gradually took over oil extraction and refining from US and European companies. This allowed states in the region to more equitably tax oil exports and created new pressures on the companies to enhance revenue streams to enable exploration in Alaska and the North Sea.

At the start of the 1970s, the United States experienced much tighter domestic oil supplies (which increased prices, exacerbating existing inflation from the Nixon administration’s high Vietnam War debt). Oil companies pushed the Nixon administration to lift restrictions on oil imports to deal with the supply crunch. At the same time, US corporations encountered increased competitive pressures from Germany and Japan.With millions of petrodollars loaned abroad and now the basis for new loans by European banks, the US Federal Reserve found itself unable to manage the inflation, which made a mockery of the Bretton Woods gold standard of $35 per ounce. European countries that held dollar-denominated investments feared adevaluation and began to demand gold in return for dollars. Finally, Nixon, backed by bankers and US oil companies, ended the gold standard (as a preemptive move to avoid default) and opened the door to the neoliberal era of floating dollars and financial speculation (Debier et al. 1991; Eichengreen 2007). The dropping of the gold standard created new instability in Middle Eastern cash flows, helping to set the stage for OPEC’s push for higher prices, which culminated in its 1973–74 oil embargo as a protest against US intervention to aid an Israeli victory in the Yom Kippur War.

Despite the restoration of global oil supplies to pre-crisis levels by January 1974, only four months after the October oil shock, US domestic prices for gasoline stayed high thereafter, effectively stabilizing the dollar for banks and providing windfall profits for the companies as costs were shifted to consumers (Noreng 2002). Mitchell traces how elite narratives led by the Nixon administration and the oil companies blamed high prices on foreign agents—a shifty Arab conspiracy—and on a more generalized “energy crisis” (taking the onus off oil and helping to forestall shifts to other fuels), leading him to refer to the oil shock as “the crisis that never happened”.

The precise logic of Mitchell’s argument that connects lobbying of the Nixon administration by the oil industry and banks to the decision to drop the gold standard leaves gaps to be filled by other scholars. Likewise, many details about the role of oil in Kissinger’s shuttle diplomacy in the lead-up to the 1973 Israeli war with Egypt remain hidden in secret archives. But Mitchell’s work lends strength to contentions by other scholars (Engdahl 2004 [1992]; Cooper 2008) that by the fall of 1973 the White House became the key orchestrator of these developments, led by Henry Kissinger with Nixon’s approval. Here, Mitchell offers support for an argument earlier made by Debeir et al. (1991) that energy prices were “the only card the Nixon administration had left to play in the mid-1970s,” a period when the US government had little leverage over labor wages and interest rates. In their cogent phrasing “oil rent came to the rescue of profit as the deflationary purge was carried out, in a first stage, not by lowering wages, but by new levies on people’s purchasing power due to a succession of price and tax increases justified by the oil price increase (138)” (Smith-Nonini 2014).

Under Kissinger’s watch, the economic interests of oil companies and bankers and the geostrategic interests of the United States governing elites converged around the need for deregulation and higher oil prices. Several factors contributed to this convergence, including new awareness of declining domestic oil production in the US mainland (Hubbert’s peak theory), the need for new oil imports and a new balance of payment arrangement to recirculate petrodollar flows through Western banks, and the United States need to placate Saudi Arabia, Iraq, and the Shah’s Iran by supplying arms to these regimes while continuing to support Israel’s land grabs and expulsion of Palestinians (Mitchell 2013: 170–186). One might make the case from Mitchell’s analysis that the 1970s was the moment when a new era of real oil scarcity, as distinct from structured scarcity, began.¹ And this disruption of industrial production, in conjuncture with other political, economic, and social forces of the times, played a crucial role in ushering us into the era of restructured capitalism (Smith-Nonini 2014).

Of course, for unemployed workers and failing businesses in the United States after 1973, “the crisis that never happened” was quite real. Mitchell argues that having consumers pay for the new increased incomes of oil-producing countries saved the oil companies from any reduction in their revenue flows. The companies scrambled to invest new profits into alternative fuel industries (nuclear, natural gas, and solar) in an effort to profit from these industries and to position themselves to intervene in policy and industrial development to forestall competitive threats to the oil economy (Mitchell 2013, ch. 7)

Mitchell’s study offers new insights into the making of neoliberalism from the early 1970s onward. As Harvey (2003, 2005) has argued, neoliberalism did not emerge full blown from objective market conditions, but was constructed through a repositioning of elites in an effort to restore pre-crisis levels of profit. This book innovates beyond Harvey by demonstrating the linkages with oil in the political and intellectual work behind that repositioning. Mitchell also shows that significant profits that flowed to oil magnates after the price hikes of 1973—including the Mellon family, Edward Noble, and the Koch brothers—went to elect Reagan and fund the creation of the Heritage Foundation, the Cato Institute, and other conservative think tanks that developed neoliberal policies.

In the United States, the advent of neoliberalism provided financial and industrial brokers with a solution to their systemic problem. By the late 1970s and early 1980s deindustrialization and capital flight to Mexico and the Asia Pacific proceeded under the new dispensations of state-induced “free trade” and the state’s breaking of strikes (e.g., Reagan’s firing of PATCO air controllers), while in the UK, the discovery of the North Sea oil fields led to the historic defeat of British coal miners by Thatcher in 1984. Labor’s capacity to successfully command an increased share of capitalist prosperity, and to support democratic institutions, declined severely.

A similar dynamic was to follow abroad. By the mid-1970s New York banks, flush with petrodollars, began a lending spree by sending teams of economic advisers to convince allied states in Africa, Asia, and Latin America to borrow large sums for national development projects. Dozens of countries were hurting badly after the oil shock and took the money, despite high risks of default if interest rates later rose, which they did. The new international petrodollar circulation strategy (and continued arms for oil circuit) led to irresponsible development loans and new debt relationships, which helped the United States maintain leverage over poorer countries as a counterweight to its otherwise vulnerable position as an increasingly dependent importer of foreign oil. Debt servicing in these countries and World Bank/IMF-imposed implementation of neoliberal policies inflicted enormous suffering on their working populations and curbed the power of their labor unions. This helped insure US hegemony through monetary policy during the debt crises of the 1980s, and trade in oil has helped prop up the dollar despite high deficits ever since.

To summarize, Mitchell’s book is a brilliant tracing of important connections among oil, corporate power, and the geostrategic interests of US state elites in the making of both the Keynesian era of industrial capitalism and its neoliberal restructuring since the 1970s. More work remains to be done, however, to flesh out these relationships and their outcomes. It is now incumbent on us to rethink the implications of this study for the power of labor and the potential for democracy during the new period we now find ourselves in—of oil scarcity and of rapidly occurring global climate change. Mitchell’s book has given us invaluable clues as to where to begin such rethinking.

Sandy Smith-Nonini is Adjunct Assistant Professor of Anthropology at the University of North Carolina, Chapel Hill.

Don Nonini is Professor of Anthropology at the University of North Carolina, Chapel Hill.

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Cite as: Smith-Nonini, Sandy, and Donald M. Nonini. 2014. “Fueling the neoliberal turn: why we need to engage Timothy Mitchell’s Carbon Democracy,” FocaalBlog. August 29, www.focaalblog.com/2014/09/04/sandy-smith-nonini-donald-m-nonini-fueling-the-neoliberal-turn-why-we-need-to-engage-timothy-mitchells-carbon-democracy.