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The Origins of Neoliberalism
David Harvey
Neoliberalism as a break from Keysianism
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Mar 16, 2018 | www.amazon.com
Hardcover: 400 pages
Publisher: Harvard University Press (March 16, 2018)
Language: English
ISBN-10: 0674979524
ISBN-13: 978-0674979529From introduction
...The second explanation was that neoliberal globalization made a small number of people very rich, and it was in the interest of those people to promote a self-serving ideology using their substantial means by funding think tanks and academic departments, lobbying congress, fighting what the Heritage Foundation calls "the war of ideas." Neoliberalism, then, was a restoration of class power after the odd, anomalous interval of the mid-century welfare state.
There is truth to both of these explanations. Both presuppose a kind of materialist explanation of history with which I have no problem. In my book, though, I take another approach. What I found is that we could not understand the inner logic of something like the WTO without considering the whole history of the twentieth century. What I also discovered is that some of the members of the neoliberal movement from the 1930s onward, including Friedrich Hayek and Ludwig von Mises, did not use either of the explanations I just mentioned. They actually didn't say that economic growth excuses everything. One of the peculiar things about Hayek, in particular, is that he didn't believe in using aggregates like GDP -- the very measurements that we need to even say what growth is.
What I found is that neoliberalism as a philosophy is less a doctrine of economics than a doctrine of ordering -- of creating the institutions that provide for the reproduction of the totality [of financial elite control of the state]. At the core of the strain I describe is not the idea that we can quantify, count, price, buy and sell every last aspect of human existence. Actually, here it gets quite mystical. The Austrian and German School of neoliberals in particular believe in a kind of invisible world economy that cannot be captured in numbers and figures but always escapes human comprehension.
After all, if you can see something, you can plan it. Because of the very limits to our knowledge, we have to default to ironclad rules and not try to pursue something as radical as social justice, redistribution, or collective transformation. In a globalized world, we must give ourselves over to the forces of the market, or the whole thing will stop working.
So this is quite a different version of neoliberal thought than the one we usually have, premised on the abstract of individual liberty or the freedom to choose. Here one is free to choose but only within a limited range of options left after responding to the global forces of the market.
One of the core arguments of my book is that we can only understand the internal coherence of neoliberalism if we see it as a doctrine as concerned with the whole as the individual. Neoliberal globalism can be thought of in its own terms as a negative theology, contending that the world economy is sublime and ineffable with a small number of people having special insight and ability to craft institutions that will, as I put it, encase the sublime world economy.
To me, the metaphor of encasement makes much more sense than the usual idea of markets set free, liberated or unfettered. How can it be that in an era of proliferating third party arbitration courts, international investment law, trade treaties and regulation that we talk about "unfettered markets"? One of the big goals of my book is to show neoliberalism is one form of regulation among many rather than the big Other of regulation as such.
What I explore in Globalists is how we can think of the WTO as the latest in a long series of institutional fixes proposed for the problem of emergent nationalism and what neoliberals see as the confusion between sovereignty -- ruling a country -- and ownership -- owning the property within it.
I build here on the work of other historians and show how the demands in the United Nations by African, Asian, and Latin American nations for things like the Permanent Sovereignty over Natural Resources, i.e. the right to nationalize foreign-owned companies, often dismissed as merely rhetorical, were actually existentially frightening to global businesspeople.
They drafted neoliberal intellectuals to do things like craft agreements that gave foreign corporations more rights than domestic actors and tried to figure out how to lock in what I call the "human right of capital flight" into binding international codes. I show how we can see the development of the WTO as largely a response to the fear of a planned -- and equal -- planet that many saw in the aspirations of the decolonizing world.
Perhaps the lasting image of globalization that the book leaves is that world capitalism has produced a doubled world -- a world of imperium (the world of states) and a world of dominium (the world of property). The best way to understand neoliberal globalism as a project is that it sees its task as the never-ending maintenance of this division. The neoliberal insight of the 1930s was that the market would not take care of itself: what Wilhelm Röpke called a market police was an ongoing need in a world where people, whether out of atavistic drives or admirable humanitarian motives, kept trying to make the earth a more equal and just place.
The culmination of these processes by the 1990s is a world economy that is less like a laissez-faire marketplace and more like a fortress, as ever more of the world's resources and ideas are regulated through transnational legal instruments. The book acts as a kind of field guide to these institutions and, in the process, hopefully recasts the 20th century that produced them.
Mark bennett 3.0 out of 5 stars One half of a decent book May 14, 2018 Format: Hardcover Verified Purchase
Jesper Doepping 5.0 out of 5 stars A concise definition of neoliberalism and its historical influence November 14, 2018This is a rather interesting look at the political and economic ideas of a circle of important economists, including Hayek and von Mises, over the course of the last century. He shows rather convincingly that conventional narratives concerning their idea are wrong. That they didn't believe in a weak state, didn't believe in the laissez-faire capitalism or believe in the power of the market. That they saw mass democracy as a threat to vested economic interests.
The core beliefs of these people was in a world where money, labor and products could flow across borders without any limit. Their vision was to remove these subjects (tariffs, immigration and controls on the movement of money) from the control of the democracy-based nation-state and instead vesting them in international organizations. International organizations which were by their nature undemocratic and beyond the influence of democracy. That rather than rejecting government power, what they rejected was national government power. They wanted weak national governments but at the same time strong undemocratic international organizations which would gain the powers taken from the state.
The other thing that characterized many of these people was a rather general rejection of economics. While some of them are (at least in theory) economists, they rejected the basic ideas of economic analysis and economic policy. The economy, to them, was a mystical thing beyond any human understanding or ability to influence in a positive way. Their only real belief was in "bigness". The larger the market for labor and goods, the more economically prosperous everyone would become. A unregulated "global" market with specialization across borders and free migration of labor being the ultimate system.
The author shows how, over a period extending from the 1920s to the 1990s, these ideas evolved from marginal academic ideas to being dominant ideas internationally. Ideas that are reflected today in the structure of the European Union, the WTO (World Trade Organization) and the policies of most national governments. These ideas, which the author calls "neoliberalism", have today become almost assumptions beyond challenge. And even more strangely, the dominating ideas of the political left in most of the west.
The author makes the point, though in a weak way, that the "fathers" of neoliberalism saw themselves as "restoring" a lost golden age. That golden age being (roughly) the age of the original industrial revolution (the second half of the 1800s). And to the extent that they have been successful they have done that. But at the same time, they have brought back all the political and economic questions of that era as well.
In reading it, I started to wonder about the differences between modern neoliberalism and the liberal political movement during the industrial revolution. I really began to wonder about the actual motives of "reform" liberals in that era. Were they genuinely interested in reforms during that era or were all the reforms just cynical politics designed to enhance business power at the expense of other vested interests. Was, in particular, the liberal interest in political reform and franchise expansion a genuine move toward political democracy or simply a temporary ploy to increase their political power. If one assumes that the true principles of classic liberalism were always free trade, free migration of labor and removing the power to governments to impact business, perhaps its collapse around the time of the first world war is easier to understand.
He also makes a good point about the EEC and the organizations that came before the EU. Those organizations were as much about protecting trade between Europe and former European colonial possessions as they were anything to do with trade within Europe.
To me at least, the analysis of the author was rather original. In particular, he did an excellent job of showing how the ideas of Hayek and von Mises have been distorted and misunderstood in the mainstream. He was able to show what their ideas were and how they relate to contemporary problems of government and democracy.
But there are some strong negatives in the book. The author offers up a complete virtue signaling chapter to prove how the neoliberals are racists. He brings up things, like the John Birch Society, that have nothing to do with the book. He unleashes a whole lot of venom directed at American conservatives and republicans mostly set against a 1960s backdrop. He does all this in a bad purpose: to claim that the Kennedy Administration was somehow a continuation of the new deal rather than a step toward neoliberalism. His blindness and modern political partisanship extended backward into history does substantial damage to his argument in the book. He also spends an inordinate amount of time on the political issues of South Africa which also adds nothing to the argument of the book. His whole chapter on racism is an elaborate strawman all held together by Ropke. He also spends a large amount of time grinding some sort of Ax with regard to the National Review and William F. Buckley.
He keeps resorting to the simple formula of finding something racist said or written by Ropke....and then inferring that anyone who quoted or had anything to do with Ropke shared his ideas and was also a racist. The whole point of the exercise seems to be to avoid any analysis of how the democratic party (and the political left) drifted over the decades from the politics of the New Deal to neoliberal Clintonism.
Then after that, he diverts further off the path by spending many pages on the greatness of the "global south", the G77 and the New International Economic Order (NIEO) promoted by the UN in the 1970s. And whatever many faults of neoliberalism, Quinn Slobodian ends up standing for a worse set of ideas: International Price controls, economic "reparations", nationalization, international trade subsidies and a five-year plan for the world (socialist style economic planning at a global level). In attaching himself to these particular ideas, he kills his own book. The premise of the book and his argument was very strong at first. But by around p. 220, its become a throwback political tract in favor of the garbage economic and political ideas of the so-called third world circa 1974 complete with 70's style extensive quotations from "Senegalese jurists"
Once the political agenda comes out, he just can't help himself. He opens the conclusion to the book taking another cheap shot for no clear reason at William F. Buckley. He spends alot of time on the Seattle anti-WTO protests from the 1990s. But he has NOTHING to say about BIll Clinton or Tony Blair or EU expansion or Obama or even the 2008 economic crisis for that matter. Inexplicably for a book written in 2018, the content of the book seems to end in the year 2000.
I'm giving it three stars for the first 150 pages which was decent work. The second half rates zero stars. Though it could have been far better if he had written his history of neoliberalism in the context of the counter-narrative of Keynesian economics and its decline. It would have been better yet if the author had the courage to talk about the transformation of the parties of the left and their complicity in the rise of neoliberalism. The author also tends to waste lots of pages repeating himself or worse telling you what he is going to say next. One would have expected a better standard of editing by the Harvard Press. Read less 69 people found this helpful Helpful Comment Report abuse
Anybody interested in global trade, business, human rights or democracy today should read this book.
The book follow the Austrians from the beginning in the Habsburgischer empire to the beginning rebellion against the WTO. However, most importantly it follows the thinking and the thoughts behind the building of a global empire of capitalism with free trade, capital and rights. All the way to the new "human right" to trade. It narrows down what neoliberal thought really consist of and indirectly make a differentiation to the neoclassical economic tradition.
What I found most interesting is the turn from economics to law - and the conceptual distinctions between the genes, tradition, reason, which are translated into a quest for a rational and reason based protection of dominium (the rule of property) against the overreach of imperium (the rule of states/people). This distinction speaks directly to the issues that EU is currently facing.
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May 26, 2021 | news.slashdot.org
(nytimes.com) 39 died on Saturday at his home in St. Paul, Minn. He was 80. From a report: His wife, Linda, said that he died after an episode of ventricular tachycardia, in which the heart beats faster than normal. Mr. Silver had a heart transplant 27 years ago.
Since their introduction in 1980, Post-it Notes have become a ubiquitous office product, first in the form of little canary-yellow pads -- billions of which are sold annually -- and later also in different hues and sizes, some with much stickier adhesives. There are currently more than 3,000 Post-it Brand products globally. Dr. Silver worked in 3M's central research laboratory developing adhesives. In 1968, he was trying to create one that was so strong it could be used in aircraft construction.
He failed in that goal. But during his experimentation, he invented something entirely different: an adhesive that stuck to surfaces, but that could be easily peeled off and was reusable. It was a solution to a problem that did not appear to exist, but Dr. Silver was certain it was a breakthrough. "I felt my adhesive was so obviously unique that I began to give seminars throughout 3M in the hope I would spark an idea among its product developers," he told Financial Times in 2010. Dr. Silver promoted his adhesive for several years within 3M, a company known for its innovative workplace, so assiduously that he became known as "Mr. Persistent."
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May 11, 2021 | www.zerohedge.com
19 play_arrowuno 3 hours ago remove link
his mother was on the board of IBM when he was given the OS work - he never earned anything
How Bill Gates' mom helped Microsoft get a deal with IBM in 1980 – and it propelled the company's huge success
https://www.cnbc.com/2020/08/05/how-bill-gates-mother-influenced-the-success-of-microsoft.html
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Feb 10, 2021 | www.nakedcapitalism.com
Michaelmas , February 6, 2021 at 10:42 pm
Slobodan's "The Globalists" is a great look at Von Mises and Hayek peddling NeoLiberalism to the last hereditary aristocracy standing in Europe in the interwar years.
It's Slobodian, Quinn.
To my mind, this set up a deracinated pseudo-nazism
So you're on to something.
Hayek is the Grandfather of neoliberalism and the primary influence on Hayek's thought was the Vienna of his youth: the go-go years after Franz Josef surrendered to the Hungarians, created the dual monarchy, and there was the great cultural efflorescence of Vienna that preceded the Austro-Hungarian empire's collapse.
Two ideologies emerged after WWI from Austria in reaction to the traumatic experience of that collapse -- ideologies formulated by Austrians that then deeply damaged the rest of the world.
Neoliberalism was one, of course. The other? Well, someone once asked Ernst Hanfstaengl aka Putzi, Hitler's confidant, what caused Hitler's antiSemitism.
Hanfstaengl replied: 'Anyone who did not know Vienna before 1914 cannot understand.' Hanfstaengl then explained that before WWI Vienna was full of beautiful people, the soldiers in their uniforms, the Hapsburg Empire's citizens in their local traditional clothes etc and 'then these strange people came from the East all dressed in black and speaking a strange kind of German'. These were the Orthodox Jews who came from Silesia, a part of the Austro-Hungarian Empire. Kaiser Franz Josef had done much to emancipate and help the Jews, so many crossed over to Vienna to start a new life.
Now, to further put Hitler and Nazism's policies in their historical context, it's necessary to understand the situation in Germany prior to their appearance.
In 1871, Bismarck had nationalized healthcare, making it available to all Germans, then provided old-age pensions as public social security. Child labor was abolished and public schools were provided for all children. The Kaiser implemented worker protection laws in 1890. After WW I, the Social Democrats' influence had remained strong. Germany had an active union membership. An official "Decree on Collective Agreements, Worker and Employees Committees and the Settlement of Labor disputes" enabled collective bargaining, legal enforcement of labor contracts as well as social security for disabled veterans, widows, and dependents. In 1918, unemployment benefits were given to all German workers.
In the 1932 elections, the Nazi Party didn't have an outright majority. According to the Nuremberg Trial transcripts, on January 4, 1933, German bankers and industrialists had a secret backroom deal with then-Chancellor Von Papen to make Hitler the Chancellor of Germany in a coalition.
https://www.loc.gov/rr/frd/Military_Law/pdf/NT_war-criminals_Vol-VIII.pdf
According to banker Kurt Baron von Schröder:
"In February 1933, as Chancellor, Hitler met with the leading German industrialists at the home of Hermann Goring. There were representatives from IG Farben, AG Siemens, BMW, coal mining magnates, Theissen Corp, AG Krupp, and others bankers, investors, and other Germans belonging to the top 1%. In this meeting, Hitler said, "Private enterprise cannot be maintained in the age of democracy.'"
In 1934 the Nazis outlined their plan to revitalize the German economy with the reprivatization of significant industries: railways, public works project, construction, steel, and banking. Hitler guaranteed profits for the private sector; many American industrialists and bankers flocked to Germany to invest.
The Nazis had a thorough plan for deregulation. The Nazi's chief economist stated," The first thing German business needs is peace and quiet. It must have a feeling of absolute legal security and must know that work and its return are guaranteed." Likewise, businesses weren't to be hampered by too much "regulation." On May 2, 1933, Hitler sent his Brown Shirts to all union headquarters. Union leaders were beaten, and sent to prison or concentration camps. The Nazi party expropriated union funds -- money workers paid for union membership -- for itself.
On January 20, 1934, the Nazis passed the Law Regulating National Labor, abrogating the power of the government to set minimum wages and working conditions. Employers lowered wages and benefits. Workers were banned from striking or engaging in other collective bargaining rights, and worked longer hours for lower wages. Their conditions so deteriorated that when the head of the AFL visited Nazi Germany in 1938, he compared an average worker's life to that of a slave. .
The Nazis also privatized medicine. One of Hitler's economists was the head of a private insurance company. These private for-profit health insurance companies immediately started to profit from Anti-Semitism. In 1934, they eliminated reimbursements for Jewish physicians, which allowed them to profit further.
And so on.
Philip K. Dick once wrote a novel whose particular ontological riff was that the Roman empire never really ended and in the 20th century people lived in an imposed illusion under the same elite, or their heirs, that had headed the Roman empire.
That sort of science-fictional novel could be written based on our own reality, riffing on the theme: The Nazis won.
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Jan 09, 2021 | www.moonofalabama.org
karlof1 , Jan 9 2021 0:37 utc | 124
Digital Spartacus @105--
I've been following her work for several months now and think her premises much sounder than Matthew Ehret's, who are actually on the same Canadian team. Generally, the three of us are working on exposing the rise and spread of what's now known as Neoliberalism. And of course, there's Dr. Hudson who's ahead of us all.
The line of investigation initiated by Upton Sinclair into the shared Board memberships at key elite universities within the USA that erased the traditional teaching of political-economy and replaced it with the mathematical economics which lie at the root of Neoliberalism's Junk Economics
I see as very promising as they're also prominent bankers and Old Money with social connections to England's Royalty and Nobility--the primary members of Europe's Rentier Class . When I look over the comments, many have forgotten just what Class owns the Duopoly and controls the federal government. Trump was never allowed into their circle but was used by some of its members in the pursuit of interests that are still shrouded in fog. My working hypothesis there is they were quite worried that too much industrial capacity had been foreclosed and moved such that it caused a real threat to national security; thus the need for MAGA.
With the rise of the Eurasian Bloc, the "threat" isn't military; it's economic. As I wrote earlier today, an economy based on consumerism will collapse when the consumers can no longer consume. Hudson's 100% correct that debt's that can't be repaid won't. The current degree of economic polarization is miniscule compared to what might ensue if the Bidenites don't forestall it--200 Million people bankrupt while 100 Million have good paying jobs and can afford their debts--the remaining 40-50 Million are mostly impoverished children. This time the part of the public that gets shafted as in 2009 under Obama isn't going to sit still, and what happened in DC will be repeated elsewhere with meaning this time. A genuine MAGA Fascist wanting control will need to disarm the Rentier Class and the Swamp thus ousting the current "Friendly Fascist" regime--and that would require a paramilitary since that's basically what composes the Swamp--Civil War between two Factions of Reaction that would also split the military. Wonder what barflies think of all that?
karlof1 , Jan 9 2021 1:11 utc | 135
Earlier in the week I linked to the latest Renegade Inc program which had Dr. Hudson as one of the guests. That show's transcript is now available. Here's an excerpt with Ross Ashcroft asking a question:
"Ross: What do you think are the megatrends that we should be looking at in 2021? What do you think is the direction of travel, if you like, for so-called developed economies?
"Michael Hudson: Well, the big trend in any economy is the growth of debt, because the debt grows exponentially. The economy has painted itself into a debt corner. We can see that in real estate. We can see that for small business. There's also almost no way to recover. The Federal Reserve has been printing quantitative easing to keep stock and bonds high. But for the real economy, the trend is polarization and lower employment.
"The trend also is that state and local finances are broke, especially in the biggest cities, New York City, San Francisco and Los Angeles. They're not getting income tax revenue from the unemployed or closed businesses. They're not getting the real estate tax with so many defaults and mortgage arrears. In New York City there's talk of cutting back the subways by 70 percent. People will be afraid to take the subways when they're overcrowded with people with the virus. So you're having a breakdown not only in state and local finances, but of public services that are state run – public transportation services, health services, education is being downsized. Everything that is funded out of state and local budgets is going to suffer.
"And living standards are going to be very sharply downward as people realize how many services they got are dependent on public infrastructure."
And this one I must also include:
"Ross: What is the one thing that has really surprised you in 2020? What have you laughed at? What has given you a chuckle?
"Michael Hudson: The surprise – that I really shouldn't have been surprised at – is how naive Bernie Sanders supporters were in thinking that they were going to get a fair deal and that the elections were going to be fair. The illusion is that people were actually going to have a fair election when the last thing the vested interests wanted was Bernie Sanders or Elizabeth Warren or any kind of reformer. So what happened to Sanders is what happened to Corbyn in Britain and the Labour Party's neoliberal leadership.
"So what's for laughs? I guess, Tulsi Gabbard's takedown of Kamala Harris was absolutely wonderful. Everybody just broke out laughing, cheering for her. And of course, that's why she was marginalized, and now we have Kamala Harris as the senior vice president."
Of course, none of the dire economic news is being reported with the focus instead on Wall Street's markets, with much of the public just as brainwashed about it as Trump. The last third focuses on politics, which is what most barflies want to read about. So, click the link and read what Dr. Hudson sees in the tea leaves.
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Oct 12, 2017 | www.amazon.com
protestantworkethic on August 14, 2013
An excellent cultural/intellectual historyShort review:
Mirowski's book is one of the best on the crisis: he mixes the eye of an anthropologist or journalist examining our daily lives and then leaps up to 20,000 feet with ease to provide a wider intellectual and historical context. His take is novel, certainly from the Left, but well informed of debates on the Right. Empirical, but with a theoretical lens as well. If you want to understand not just the economics or politics of what happened, but to situate those events within a wider history of the ideas that played in a role in the Recession, Mirowski has an incredibly erudite account.
Long review:
Mirowski is a member of the "Institute for New Economic Thinking", an non-profit aimed to correct the orthodoxies of economics, "neoliberal" ideas in particular. He opens this book with a report from one of the first meetings, which happened to feature "bold and original thinkers" like Ken "Excel for Dummies" Rogoff, Larry Summers and Niall Ferguson. The meeting ended with a timid call to add an extra chapter to standard Econ101 textbooks briefly describing the crisis. Mirowski further rightly groans at hand-wringing over "happiness measurements", morality in markets and peevish complaints of "greedy bankers" (as if avarice has only existed in the past ten years.)
How did this rigidity come to be? Mirowski answers by suggesting that we must understand neoliberalism as a Russian doll. The innermost doll of experts emerged from the Mont Pelerlin Society, an organization that was by design very hierarchical. He describes, for instance, correspondence between Popper and Hayek. Popper, following his philosophy of open debate suggested that MPS should have at least one respectable socialist. Hayek shut down this idea, insisting that agreement on first principles was a necessary condition for membership. This tightly networked group of intellectuals slowly incubated neoliberalism and developed a political strategy for propagating it.
Mirowski further points out that the Neoliberal Thought Collective were excellent sloganeers. Friedman's most famous academic text, for instance, argues that a lack of government intervention caused the Great Depression: a series of rural bank failures caused by an overly tight supply of money. However, when Friedman penned his Newsweek column he claimed with a straight face that the government *caused* the Recession, that is, by a lack of action in expanding the supply of money and reducing interest rates. This is how the Russian doll works: nuance for the insiders, ignorance for the outsiders.
There is a further layer to the doll though. Pivoting off of Foucault's final lectures at the College of France, Mirowski argues that there is an everyday neoliberalism that has emerged. Beyond political theory and public policy, neoliberalism is experienced on a quotidian level and it is on that potent terrain that it has survived the crisis. I, right now, am taking time out of my day to write a book review which I will be paid nothing for, which is in the service of the Bezo empire to sell even more books and probably destroy more local bookshops and which will be used to further quantify me into some bits of data in the sky so I can be marketed to even more heavily. But but but: I am individually expressing myself! How free am I! The neoliberal self is a creature coerced into being a "free" entrepreneur. It is the poor un/underemployed soul who thinks himself to be a failure or inadequate because he was not lucky enough to ride the right wave. The old liberal arts dictum to "know thy self" becomes "express thy self, and monetize it too!" This middle chapter here is the most engrossing part of the book. Mirowski delves into a sundry of sources on our culture and then leverages a novel and erudite analysis of Foucault to bring it all into sharp focus.
In closing, it is truly ironic that the other review of this book is so gravely concerned that Mirowski might be a socialist. We have a wonderful little anthropological artifact here of the NTC at work: "Whatever this book says, it's got 'Red' in a chapter title. I am a Very Reasonable Person and thus must be suspicious." Let me assure him/her: there are no calls for a violent revolution of the proletariat. On the contrary, Mirowski heads out to the outermost layer of the doll and analyzes why neoliberalism won. In particular, he argues that the NTC provided a powerful account of the market as a natural entity that *cannot* be messed with. Consequently, the Recession had nothing to do with the structure of capitalism itself, it was just a "once in a lifetime" moment akin to a natural disaster. An act of God.
Mirowski's careful history here shows that just the opposite is true. There was a concerted effort to propagate a particular ignorance and the Recession itself is by no means removed from that particular effort.
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Nov 08, 2019 | www.theguardian.com
After washing out at LSE, Hayek never held a permanent appointment that was not paid for by corporate sponsors. Even his conservative colleagues at the University of Chicago – the global epicentre of libertarian dissent in the 1950s – regarded Hayek as a reactionary mouthpiece, a "stock rightwing man" with a "stock rightwing sponsor", as one put it. As late as 1972, a friend could visit Hayek, now in Salzburg, only to find an elderly man prostrate with self-pity, believing his life's work was in vain. No one cared what he had written!
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Nov 01, 2019 | monthlyreview.org
The French poet Charles Baudelaire wrote in 1864 that "the cleverest ruse of the Devil is to persuade you he does not exist!" 1 I will argue here that this is directly applicable to today's neoliberals, whose devil's ruse is to pretend they do not exist. Although neoliberalism is widely recognized as the central political-ideological project of twenty-first-century capitalism, it is a term that is seldom uttered by those in power. In 2005, the New York Times went so far as to make neoliberalism's nonexistence official by running an article entitled "Neoliberalism? It Doesn't Exist." 2
Behind this particular devil's ruse lies a deeply disturbing, even hellish, reality. Neoliberalism can be defined as an integrated ruling-class political-ideological project, associated with the rise of monopoly-finance capital, the principal strategic aim of which is to embed the state in capitalist market relations. Hence, the state's traditional role in safeguarding social reproduction -- if largely on capitalist-class terms -- is now reduced solely to one of promoting capitalist reproduction. The goal is nothing less than the creation of an absolute capitalism. All of this serves to heighten the extreme human and ecological destructiveness that characterizes our time.
The Origins of NeoliberalismThe notion of neoliberalism is nearly a century old, although its main political influence is much more recent. It first arose as an ideology in the early 1920s in the face of the collapse of liberalism nearly everywhere in Europe, and in response to the rise of German and Austrian social democracy, particularly developments in Red Vienna. 3 It had its first notable appearance in Austrian economist and sociologist Ludwig von Mises's three works: Nation, State, and Economy (1919), Socialism (1922), and Liberalism (1927). 4 Mises's ideas were immediately recognized as representing a sharp departure from classical liberalism, leading the prominent Austro-Marxist Max Adler to coin the term neoliberalism in 1921. Mises's Socialism was subjected to a sharp critique by another gifted Austro-Marxist, Helene Bauer, in 1923 and to a more extended critique entitled "Neoliberalism" by the German Marxist Alfred Meusel, writing for Rudolf Hilferding's Die Gesellschaft in 1924. 5
For Meusel and Bauer, the neoliberal doctrine presented by Mises was far removed from classical liberalism and constituted a new doctrine devised for the era of "mobile capital" or finance capital, of which Mises was a "faithful servant." 6 It was expressly aimed at justifying the concentration of capital, the subordination of the state to the market, and an openly capitalist system of social control. Mises's neoliberalism, Meusel wrote, was characterized by the "merciless radicalism with which he attempts to derive the totality of social manifestations from a single principle" of competition. Everything opposed to the complete ascendance of the competitive principle was characterized by Mises as "destructionism," which he equated with socialism. For Mises, Charles Dickens, William Morris, George Bernard Shaw, H. G. Wells, Émile Zola, Anatole France, and Leo Tolstoy were all "without perhaps being aware of it recruiting agents for Socialism paving the way for destructionism," while actual Marxists were nothing more than destructionists, pure and simple. 7
In Liberalism , Mises explicitly distinguished between "the older liberalism and neoliberalism" on the basis of the former's commitment, at some level, to equality, as opposed to the complete rejection of equality (other than equality of opportunity) by the latter. 8 The question of democracy was resolved by Mises in favor of "a consumers' democracy." Where democracy is concerned, he wrote, "free competition does all that is needed. The lord of production is the consumer." 9
Mises was to exert an enormous influence on his younger follower Friedrich von Hayek, who was originally drawn to Mises's Socialism and who attended Mises's private seminars in Vienna. They shared a hatred of the Austro-Marxists' Red Vienna of the 1920s. In the early 1930s, Hayek left Vienna for the London School of Economics at the invitation of Lionel Robbins, an early British neoliberal economist. Mises took on the role of economic consultant to the Austrofascist Chancellor/dictator Engelbert Dollfuss prior to the Nazi takeover. In his work Liberalism , Mises declared: "It cannot be denied that Fascism and similar movements [on the right] aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history." 10 He later emigrated to Switzerland and then to the United States with the support of the Rockefeller Foundation, taking up a teaching post at New York University.
The Great Transformation ReversedThe most important critique of neoliberalism in the early post-Second World War years was to be Karl Polanyi's attack on the myth of the self-regulating market in The Great Transformation , published in 1944, at a time when the allied victory was already certain and the nature of the postwar order in the West was becoming clear. Polanyi's critique grew out of his earlier defense of Red Vienna in the 1920s, where he had identified to a considerable extent with Austro-Marxists like Adler and Otto Bauer, strongly opposing the views of Mises, Hayek, and others on the right. The neoliberal project, Polanyi explained in The Great Transformation , was to embed social relations in the economy, whereas prior to capitalism the economy had been "embedded in social relations." 11 Polanyi's book, however, appeared in a context in which it was assumed that the neoliberal perspective was all but doomed, with the "great transformation" standing for the triumph of state regulation of the economy, at a time when John Maynard Keynes was recognized as the dominant figure in state-economic policy, in what came to be known as the Age of Keynes.
Nevertheless, Polanyi's deeper concerns regarding attempts to rejuvenate market liberalism were, in part, justified. The Walter Lippmann Colloquium held in France in 1938, just prior to the outbreak of the Second World War, with Mises and Hayek both present, had constituted the first step at creating a capitalist international among major intellectual figures. At the time, the term neoliberalism was explicitly adopted by some participants, but was to be later abandoned, no doubt with the memory of the strong critiques that arose in the 1920s. 12 Still, the neoliberal project was taken up again after the war. In 1947, a mere three years after the publication of Polanyi's The Great Transformation , the Mont Pèlerin Society was established. It was to become the institutional basis, along with the University of Chicago Department of Economics, for the reemergence of neoliberal views. A key participant in the inaugural conference, in addition to Mises, Hayek, Robbins, Milton Friedman, and George Stigler, was Karl Polanyi's younger brother, Michael Polanyi, the noted chemist, philosopher of science, and virulent Cold Warrior. 13
Keynesianism dominated the entire period of what is now sometimes called the Golden Age of capitalism in the first quarter-century after the Second World War. But in the mid–1970s, with the appearance of a major economic crisis and the beginnings of economic stagnation first manifested as stagflation, Keynesianism disappeared within the economic orthodoxy. It was to be replaced by neoliberalism, first in the guise of monetarism and supply-side economics, and then in the form of a generalized restructuring of capitalism worldwide and the creation of a market-determined state and society. 14
The critical figure who best captured the essence of neoliberalism almost the moment that it rose to dominance, analyzing it extensively in his 1979 lectures at the Collège de France on The Birth of Biopolitics , was Michel Foucault. 15 As Foucault brilliantly explained, the role of the state is no longer to protect property, as in Adam Smith, or even to be an executive for the common interests of the capitalist class, as in Karl Marx. Rather, its role under neoliberalism became one of the active expansion of the market principle, or the logic of capitalist competition, to all aspects of life, engulfing the state itself. As Foucault wrote,
Instead of accepting a free market defined by the state and kept as it were under state supervision -- which was, in a way, the initial formula of liberalism, [neoliberals] turn the formula around and adopt the free market as [the] organizing and regulating principle of the state. In other words: a state under the supervision of the market rather than a market supervised by the state.
And what is important and decisive in current neo-liberalism can, I think, be situated here. For we should not be under any illusion that today's neo-liberalism is, as is too often said, the resurgence or recurrence of old forms of liberal economics which were formulated in the eighteenth and nineteenth centuries and are now being reactivated by capitalism for a variety of reasons to do with its impotence and crises as well as with some more or less local and determinate political objectives. In actual fact, something much more important is at stake in modern neo-liberalism. What is at issue is whether a market economy can in fact serve as the principle, form, and model for a state which, because of its defects, is mistrusted by everyone on both the right and the left, for one reason or another. 16
In a nutshell, Foucault declared: "The problem of neo-liberalism is how the overall exercise of political power can be modeled on the principles of the market economy." Its single-minded goal is "privatized social policy." 17
In the neoliberal era, the state was not to intervene to counter the effects of the system, but was simply to promote through its interventions the spread of the rule-based system of the market into all recesses of society. It was thus the guarantor of a self-regulating and expansive market, from which neither the society nor the state itself were immune. 18 Monopoly and oligopoly were no longer considered violations of the principle of competition, but mere manifestations of competition itself. 19 Perhaps most important in distinguishing classical liberalism and neoliberalism, according to Foucault, was the emphasis of the former on a fictional equal exchange or quid pro quo . For neoliberalism, in contrast, free competition, reinterpreted to embrace monopoly power and vast inequalities, was the governing principle, not exchange. 20
The overriding of the state's social-reproductive role in favor of neoliberal financialization was most apparent, Foucault argued, in the demise of social insurance, along with all forms of social welfare. In the neoliberal system, "it is up to the individual [to protect himself against risks] through all the reserves he has at his disposal," making the individual prey to big business without any protection from the state. The result of this shift was the further growth of privatized financial assets monopolized by a very few. 21
Neoliberalism, conceived in this way, is the systematic attempt to resolve the base-superstructure problem, perceived as an obstacle to capital, through the introduction of "a general regulation of society by the market" to be carried out by a state -- itself subordinated to the market principle. This new capitalist "singularity" is to be extended to all aspects of society, as an all-inclusive principle from which no exit is possible. 22 Even economic crises are to be taken as mere indicators of the need to extend the logic of the market further.
As Craig Allan Medlen, building on Paul A. Baran and Paul M. Sweezy's Monopoly Capital , explains in Free Cash, Capital Accumulation and Inequality , today's neoliberal order involves a systematic shift in the "boundary line" between state economic activities and the private sector. This boundary line has now shifted decisively against the state, leaving little room for the state's own consumption and investment, outside of the military sector, and with the state increasingly subsidizing the market and capital through its fiscal and monetary operations. 23
When neoliberalism reemerged in the late 1970s, it was thus as an opportunistic virus in a period of economic sickness. 24 The crisis of Keynesianism was related to deepening problems of surplus capital absorption or overaccumulation in the developing monopoly-capitalist economy. Neoliberal restructuring arose in these circumstances first in the forms of monetarism and supply-side economics, and then evolved into its current form with the financialization of the system, itself a response to economic stagnation. With the growth of excess capacity and stagnant investment, money capital increasingly flowed into the financial sector, which invented new financial instruments with which to absorb it. 25 Financial bubbles propelled the economy forward. None of this, however, removed the underlying stagnation tendency. In the decade since the Great Recession, as distinguished from all previous post-Second World War decades, the capacity-utilization rate in manufacturing in the United States has never surpassed 80 percent -- a level chronically insufficient to ignite net investment. 26
All of this reflects the transition from twentieth-century monopoly capital to twenty-first-century monopoly-finance capital. 27 This is evident in an explosion of credit and debt, institutionalized within the system despite periodic financial crises, leading to a whole new financial architecture for amassing wealth. The seizure of excess profits on a world scale through the new imperialism of the global labor arbitrage was made possible by digital systems of financial and technological control, and the opening of the world market after 1989. All of this has culminated in a globalized process of financialization and value capture, directed by the financial headquarters of multinational corporations at the apex of the capitalist world economy. 28
The diminishing role of the state both as an instrument of popular sovereignty and of social protection has led to a crisis of liberal democracy. The greatest inequality in history plus the undermining of the economic and social conditions of the vast majority of the population has given rise to massive, but still largely inarticulate, discontent. 29 Capital's response to this destabilizing situation has been to try to mobilize the largely reactionary lower-middle class against both the upper-middle class and the working class (especially through racist attacks on immigrants), while making the state outside the market the enemy -- a strategy that David Harvey has recently referred to as a developing "alliance" between neoliberalism and neofascism. 30
Absolute Capitalism and Social-System FailureIn Foucault's interpretation, neoliberalism is as remote from laissez-faire as it is from Keynesianism. As Hayek argued in The Constitution of Liberty , the neoliberal state is an interventionist, not laissez-faire, state precisely because it becomes the embodiment of a rule-governed, market-dictated economic order and is concerned with perpetuating and extending that order to the whole of society. If the neoliberal state is noninterventionist in relation to the economic sphere, it is all the more interventionist in its application of commodity principles to all other aspects of life, such as education, insurance, communications, health care, and the environment. 31
In this ideal, restructured neoliberal order, the state is the embodiment of the market and is supreme only insofar as it represents the law of value, which in Hayek's terms is virtually synonymous with the "rule of law." 32 The hegemonic class-property relations are encoded in the juridical structure and the state itself is reduced to these formal economic codes embodied in the legal system. 33 What Hayek means by "the rule of law," according to Foucault, is the imposition of "formal economic legislation" that "is quite simply the opposite of a plan. It is the opposite of planning." The object is to establish "rules of the game" that prevent any deviation from the logic of commodity exchange or capitalist competition, while extending these relations further into society, with the state as the ultimate guarantor of market supremacy. 34 Foucault contends that this principle was most explicitly enunciated by Michael Polanyi, who wrote in The Logic of Liberty : "The main function of the existing spontaneous order of jurisdiction is to govern the spontaneous order of economic life. [The] system of law develops and enforces the rules under which the competitive system of production and distribution operates." 35
Hence, the supremacy of the dominant social relations of production or hegemonic class-property forms is encoded in the rule of a commodified legal structure. The new Leviathan, which has discarded any precapitalist trappings, is no longer a force above or external to the realm of commodity exchange -- that is, a superstructure -- but is subordinated to the logic of the market, which it is its role to enforce. 36 This, Foucault suggests, is Max Weber's rational-legal order, which turns out to be simply the imposition of formal economic relations circumscribing the state. At the same time, the state is given the role of enforcing this new privatized order through its monopoly of the legitimate use of force. 37
Hence, Abraham Bosse's famous frontispiece for Thomas Hobbes's Leviathan , depicting the giant sovereign composed of individuals who have transferred their sovereignty to the monarch, would today take the form of a giant rational-legal individual in a two-piece suit composed internally of corporations, replacing the multitude. 38 The crownless sovereign power would now be portrayed as holding not a scepter in one hand and a sword in the other, but the fourteenth amendment of the U.S. Constitution (originally meant to ensure the rights of former slaves but transformed into the basis of corporate personhood) in one hand and a cruise missile in the other. The neoliberal Leviathan is a state that increasingly has a single function and follows a single market logic -- and in those terms alone it is absolute and represents an absolutist capitalism.
Naturally, absolute capitalism is not without contradictions, of which five stand out: economic, imperial, political, social-reproductive, and environmental. Together, they point to a general system failure. The economic-crisis tendencies are best viewed from the standpoint of Marx's wider critique of the laws of motion of capital. Economically, neoliberalism is a historical-structural product of an age of mobile monopoly-finance capital that now operates globally through commodity chains, controlled by the financial headquarters of the multinational corporations in the core of the world economy, which dominate international capital flows. 39 The inherent instability of the new absolute capitalism was marked by the Great Financial Crisis of 2007–9. 40 Overaccumulation and stagnation remain the central economic contradictions of the system, leading to corporate mergers and financialization (the shift toward the amassing of financial assets by speculative means) as the main countervailing factors. All of this, however, simply exacerbates the top-heavy character of twenty-first-century capitalism intensifying its already-existing long-term tendencies toward disequilibrium and crisis. 41
Neoliberal globalization refers specifically to the system of global labor arbitrage and commodity chains, coupled with the growth of worldwide monopolies. The fulcrum of this form of imperialism is the systematic exploitation of the fact that the difference in wages between the global North and South is greater than the difference in their productivities. This creates a situation whereby the low unit labor costs in emerging economies in the global South become the basis of today's supply chains and the new system of value capture. 42 These international economic conditions mark the advent of a new imperialism that is generating increasing global inequality, instability, and world struggle, made worse in our age by declining U.S. hegemony, which points to the prospect of widening and unlimited war.
As indicated above, the neoliberal regime represents a new synergy of state and market, with the increasing subordination of the social-reproduction activities of the state to capitalist reproduction. Whole sections of the state, such as central banking, and the main mechanisms of monetary policy, are outside effective governmental control and under the sway of financial capital. Under these circumstances, the state is increasingly viewed by the population today as an alien entity. This raises contradictions with respect to the three key social classes below the super-rich and the rich: the upper-middle class, the lower-middle class, and the working class.
In a broad sketch focusing on advanced capitalist society, the upper-middle class can be seen as consisting predominantly of a professional-technical stratum deeply suspicious of any attacks on government, since its position is dependent not simply on its economic class but also on the general system of political rights. It is therefore wedded to the liberal-democratic state. In contrast, when taken by itself, the lower-middle class, made up mainly of small business owners, middle management, and corporate-based white-collar salaried and sales workers (particularly the white, less-educated, rural, and fundamentalist-religious sectors), is generally antistate, procapital, and nationalist. It sees the state as chiefly benefitting its two main enemies: the upper-middle class and the working class -- the former perceived as benefitting directly from the state, the latter increasingly designated in racial terms. 43 The lower-middle class includes what C. Wright Mills called "the rearguarders" of the capitalist system, mobilized by the wealthy in times of crisis when a defense of capitalist interests is considered essential, but represents in itself an extremely volatile element of society. 44 The working class, essentially the bottom 60 percent of income earners in the United States, is the most oppressed and most diverse population (and thus the most divided), but nonetheless the enemy of capital. 45
The biggest threat to capital today, as in the past, is the working class. This is true both in the advanced capitalist countries themselves and even more so in the periphery, where the working class overlaps with the dispossessed peasantry. The working class is most powerful when able to combine with other subaltern classes as part of a hegemonic bloc led by workers (this is the real meaning of the Occupy Wall Street movement's "we are the 99%").
The 1 percent thus find themselves potentially without a political base, which remains necessary to continue the neoliberal, absolute-capitalist project. Thus, from Donald Trump to Jair Bolsonaro, we see the emergence of a tenuous working relationship between neoliberalism and neofascism, meant to bring the rear guard of the system into play. Here, the goal is to enlist the white, rural, religious, nationalistic lower-middle class as a political-ideological army on behalf of capital. But this is fraught with dangers associated with right-wing populism and ultimately threatens the demise of the liberal-democratic state. 46
The major gender, race, community, and class contradictions of capitalist society today reflect crises that extend beyond the narrow confines of workplace exploitation to the wider structures in which the lives of working people are embedded, including the major sites of social reproduction: family, community, education, health systems, communications, transportation, and the environment. The destruction of these sites of social reproduction, along with deteriorating working conditions, has brought back what Frederick Engels called "social murder," manifested in the declining life expectancy in recent years in the mature capitalist economies. 47 It is in these wider social domains that such issues as the feminization of poverty, racial capitalism, homelessness, urban-community decay, gentrification, financial expropriation, and ecological decline manifest themselves, creating the wider terrains of class, race, social-reproductive, and environmental struggle, which today are merging to a remarkable degree in response to neoliberal absolute capitalism. 48
The conflict between absolute capitalism and the environment is the most serious contradiction characterizing the system in this (or any)phase, raising the question of a "death spiral" in the human relation to the earth in the course of the present century. 49 The age of ecological reform, in the 1970s, was soon displaced by a new age of environmental excess. In absolute capitalism, absolute, abstract value dominates. In a system that focuses above all on financial wealth, exchange value is removed from any direct connection to use value. The inevitable result is a fundamental and rapidly growing rift between capitalist commodity society and the planet.
Exterminism or RevolutionAs we have seen, Mises employed the notion of destructionism to characterize the role of socialism. So important was this in his perspective that he devoted the entire fifty-page-long Part 5 of his book Socialism to this topic. "Socialism," he wrote, "does not build; it destroys. For destruction is the essence of it." It simply carries out the "consumption of capital" with no replacement or increase. Destructionism was best characterized, in his view, as a society that in the present consumed to the utmost extent, with no concern for the future of humanity -- a future which he saw as residing in the accumulation of capital. 50
Ironically, today's monopoly-finance capital is typified by the very kinds of absolute destructionism that Mises so deplored. Although technological change (particularly via the military) continues to advance, capital accumulation (investment) is stagnant at the center of the system, except where spurred on temporarily by tax cuts on corporations and privatization of state activities. Meanwhile, income and wealth inequality is rising to stratospheric levels; workers worldwide are experiencing a decline in material conditions (economic, social, and ecological); and the entire planet as a place of human habitation is in jeopardy. All this is the result of a system geared toward the most egregious forms of exploitation, expropriation, waste, and predation on a world scale. Science now tells us that the capitalist juggernaut, if present trends continue , will soon undermine industrial civilization and threaten human survival itself -- with many of the worst effects occurring during the lifetime of today's younger generations.
A useful reference point, with which to gain a historical and theoretical perspective on the present planetary emergency, is Marx and Engels's analysis of conditions in colonial Ireland from the 1850s to the 1870s. 51 Here, the operative term was extermination . As Marx wrote in 1859, English (and Anglo-Irish) capitalists after 1846 -- marking the Great Irish Famine and the Repeal of the Corn Laws -- were involved in "a fiendish war of extermination against the cotters," or the mass of Irish peasant subsistence farmers "ground to the dust" and dependent on the cultivation of potatoes as a subsistence crop. Irish soil nutrients were being exported with Irish grain, without return, to feed English industry. 52 The decades immediately following the Great Famine were thus referred to by Engels as the Period of Extermination . 53 The term extermination as used here by Marx and Engels, along with many of their contemporaries, had two related meanings at the time: expulsion and annihilation . 54 Extermination thus summed up the terrible conditions then facing the Irish.
At the root of the Irish problem in the mid–nineteenth century was a "more severe form of the metabolic rift" associated with the colonial system. 55 With the gradual expulsion and annihilation after 1846 of the poor peasant farmers, who had been responsible for fertilizing the soil, the entire fragile ecological balance underlying the production of crops and the replacement of nutrients in Ireland was destabilized. This encouraged further rounds of clearances, expulsion of the peasantry, consolidation of farms, and the replacement of tillage with pasture geared to English meat consumption. The Irish peasants were thus faced, as Marx put it in 1867, with a choice between "ruin or revolution." 56
Today, analogous conditions are arising on a planetary scale, with subsistence farmers everywhere finding their conditions undermined by the force of global imperialism. Moreover, ecological destruction is no longer mainly confined to the soil, but has been extended to the entire Earth System, including the climate, endangering the population of the earth in general and further devastating those already existing in the most fragile conditions. In the 1980s, Marxist historian E. P. Thompson famously penned "Notes on Exterminism, the Last Stage of Civilisation" examining planetary nuclear and environmental threats. 57 It is no secret that human lives in the hundreds of millions, perhaps billions, are threatened this century by material destruction -- ecological, economic, and military/imperial. Innumerable numbers of species are now on the brink of extinction. Industrial civilization itself faces collapse with a 4°C increase in global average temperature, which even the World Bank says is imminent with the continuation of today's business as usual. 58 Hence, the old socialist slogan famously associated with Rosa Luxemburg, Socialism or Barbarism! , is no longer adequate and must be replaced either by Socialism or Exterminism! , or with Marx's Ruin or Revolution!
The neoliberal drive to absolute capitalism is accelerating the world toward exterminism or destructionism on a planetary scale. In perpetrating this demolition, capital and the state are united as never before in the post-Second World War world. But humanity still has a choice: a long ecological revolution from below aimed at safeguarding the earth and creating a world of substantive equality, ecological sustainability, and satisfaction of communal needs -- an ecosocialism for the twenty-first century.
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Oct 31, 2019 | www.amazon.com
Chosen by Pankaj Mishra as one of the Best Books of the Summer
Neoliberals hate the state. Or do they? In the first intellectual history of neoliberal globalism, Quinn Slobodian follows a group of thinkers from the ashes of the Habsburg Empire to the creation of the World Trade Organization to show that neoliberalism emerged less to shrink government and abolish regulations than to redeploy them at a global level.
Slobodian begins in Austria in the 1920s. Empires were dissolving and nationalism, socialism, and democratic self-determination threatened the stability of the global capitalist system. In response, Austrian intellectuals called for a new way of organizing the world. But they and their successors in academia and government, from such famous economists as Friedrich Hayek and Ludwig von Mises to influential but lesser-known figures such as Wilhelm Röpke and Michael Heilperin, did not propose a regime of laissez-faire. Rather they used states and global institutions―the League of Nations, the European Court of Justice, the World Trade Organization, and international investment law―to insulate the markets against sovereign states, political change, and turbulent democratic demands for greater equality and social justice.
Far from discarding the regulatory state, neoliberals wanted to harness it to their grand project of protecting capitalism on a global scale. It was a project, Slobodian shows, that changed the world, but that was also undermined time and again by the inequality, relentless change, and social injustice that accompanied it. >
Mark bennett , May 14, 2018
One half of a decent bookJesper Doepping , November 14, 2018This is a rather interesting look at the political and economic ideas of a circle of important economists, including Hayek and von Mises, over the course of the last century. He shows rather convincingly that conventional narratives concerning their idea are wrong. That they didn't believe in a weak state, didn't believe in the laissez-faire capitalism or believe in the power of the market. That they saw mass democracy as a threat to vested economic interests.
The core beliefs of these people was in a world where money, labor and products could flow across borders without any limit. Their vision was to remove these subjects (tariffs, immigration and controls on the movement of money) from the control of the democracy-based nation-state and instead vesting them in international organizations. International organizations which were by their nature undemocratic and beyond the influence of democracy. That rather than rejecting government power, what they rejected was national government power. They wanted weak national governments but at the same time strong undemocratic international organizations which would gain the powers taken from the state.
The other thing that characterized many of these people was a rather general rejection of economics. While some of them are (at least in theory) economists, they rejected the basic ideas of economic analysis and economic policy. The economy, to them, was a mystical thing beyond any human understanding or ability to influence in a positive way. Their only real belief was in "bigness". The larger the market for labor and goods, the more economically prosperous everyone would become. A unregulated "global" market with specialization across borders and free migration of labor being the ultimate system.
The author shows how, over a period extending from the 1920s to the 1990s, these ideas evolved from marginal academic ideas to being dominant ideas internationally. Ideas that are reflected today in the structure of the European Union, the WTO (World Trade Organization) and the policies of most national governments. These ideas, which the author calls "neoliberalism", have today become almost assumptions beyond challenge. And even more strangely, the dominating ideas of the political left in most of the west.
The author makes the point, though in a weak way, that the "fathers" of neoliberalism saw themselves as "restoring" a lost golden age. That golden age being (roughly) the age of the original industrial revolution (the second half of the 1800s). And to the extent that they have been successful they have done that. But at the same time, they have brought back all the political and economic questions of that era as well.
In reading it, I started to wonder about the differences between modern neoliberalism and the liberal political movement during the industrial revolution. I really began to wonder about the actual motives of "reform" liberals in that era. Were they genuinely interested in reforms during that era or were all the reforms just cynical politics designed to enhance business power at the expense of other vested interests. Was, in particular, the liberal interest in political reform and franchise expansion a genuine move toward political democracy or simply a temporary ploy to increase their political power. If one assumes that the true principles of classic liberalism were always free trade, free migration of labor and removing the power to governments to impact business, perhaps its collapse around the time of the first world war is easier to understand.
He also makes a good point about the EEC and the organizations that came before the EU. Those organizations were as much about protecting trade between Europe and former European colonial possessions as they were anything to do with trade within Europe.
To me at least, the analysis of the author was rather original. In particular, he did an excellent job of showing how the ideas of Hayek and von Mises have been distorted and misunderstood in the mainstream. He was able to show what their ideas were and how they relate to contemporary problems of government and democracy.
But there are some strong negatives in the book. The author offers up a complete virtue signaling chapter to prove how the neoliberals are racists. He brings up things, like the John Birch Society, that have nothing to do with the book. He unleashes a whole lot of venom directed at American conservatives and republicans mostly set against a 1960s backdrop.
He does all this in a bad purpose: to claim that the Kennedy Administration was somehow a continuation of the new deal rather than a step toward neoliberalism.
His blindness and modern political partisanship extended backward into history does substantial damage to his argument in the book. He also spends an inordinate amount of time on the political issues of South Africa which also adds nothing to the argument of the book. His whole chapter on racism is an elaborate strawman all held together by Ropke. He also spends a large amount of time grinding some sort of Ax with regard to the National Review and William F. Buckley.
He keeps resorting to the simple formula of finding something racist said or written by Ropke....and then inferring that anyone who quoted or had anything to do with Ropke shared his ideas and was also a racist. The whole point of the exercise seems to be to avoid any analysis of how the democratic party (and the political left) drifted over the decades from the politics of the New Deal to neoliberal Clintonism.
Then after that, he diverts further off the path by spending many pages on the greatness of the "global south", the G77 and the New International Economic Order (NIEO) promoted by the UN in the 1970s.
And whatever many faults of neoliberalism, Quinn Slobodian ends up standing for a worse set of ideas: International Price controls, economic "reparations", nationalization, international trade subsidies and a five-year plan for the world (socialist style economic planning at a global level). In attaching himself to these particular ideas, he kills his own book. The premise of the book and his argument was very strong at first. But by around p. 220, its become a throwback political tract in favor of the garbage economic and political ideas of the so-called third world circa 1974 complete with 70's style extensive quotations from "Senegalese jurists"
Once the political agenda comes out, he just can't help himself. He opens the conclusion to the book taking another cheap shot for no clear reason at William F. Buckley. He spends alot of time on the Seattle anti-WTO protests from the 1990s. But he has NOTHING to say about BIll Clinton or Tony Blair or EU expansion or Obama or even the 2008 economic crisis for that matter. Inexplicably for a book written in 2018, the content of the book seems to end in the year 2000.
I'm giving it three stars for the first 150 pages which was decent work. The second half rates zero stars. Though it could have been far better if he had written his history of neoliberalism in the context of the counter-narrative of Keynesian economics and its decline.
It would have been better yet if the author had the courage to talk about the transformation of the parties of the left and their complicity in the rise of neoliberalism. The author also tends to waste lots of pages repeating himself or worse telling you what he is going to say next. One would have expected a better standard of editing by the Harvard Press.
A concise definition of neoliberalism and its historical influenceEdoardo Angeloni , January 1, 2019Anybody interested in global trade, business, human rights or democracy today should read this book.
The book follow the Austrians from the beginning in the Habsburgischer empire to the beginning rebellion against the WTO. However, most importantly it follows the thinking and the thoughts behind the building of a global empire of capitalism with free trade, capital and rights. All the way to the new "human right" to trade. It narrows down what neoliberal thought really consist of and indirectly make a differentiation to the neoclassical economic tradition.
What I found most interesting is the turn from economics to law - and the conceptual distinctions between the genes, tradition, reason, which are translated into a quest for a rational and reason based protection of dominium (the rule of property) against the overreach of imperium (the rule of states/people). This distinction speaks directly to the issues that EU is currently facing.
A very interesting book about the modern society.<img src="https://images-na.ssl-images-amazon.com/images/S/amazon-avatars-global/default._CR0,0,1024,1024_SX48_.png"/> PaulArt , November 30, 2018The author explicates how with Hayek and von Mises the economics of the central Europe has had a development, such that we can consider it a true entry in the modernity.
The structures which the neo-liberalism introduced were truly important for allowing the social progress. So some politicians have had the way for following particular models, which also today are considered with interest by many experts. The result is that the globalization has given to the several countries the same possibility . This competence has a strong value, because the author has a clear style and an efficient vision of the reality.
Neoliberalism - Present at CreationThis is a fantastic God send for those who are interested in the neoliberal disease that has caught this globe in the last 3 decades. It is different from other books like 'A Brief History of Neoliberalism' by David Harvey.
The difference is that Slobodan does a really masterful exposition of the roots of neoliberalism and neoliberals like Von Mises and Hayek by going all the way back to the 'Geneva School'. It is amazing to see the dedication and devotion of these water carriers for the owners of capital spend their entire life times devising subtle and sleight of hand schemes and methods to basically subvert society to serve the owners of capital. Fantastic work Slobodan. I await your next work.
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Sep 11, 2019 | www.globalresearch.ca
Chile, September 11, 1973: The Horrors of 'the First 9/11' Are Routinely Overlooked Each September large memorials are held for the 9/11 attacks on the US. Yet few recall the far more destructive 9/11 that occurred 28 years before. By Shane Quinn Global Research, September 11, 2019 The Duran and Global Research 8 September 2017 Region: Latin America & Caribbean , USA Theme: History , Media Disinformation , US NATO War Agenda
This article was originally published in September 2017.
On September 11, 1973, Salvador Allende 's democratic government in Chile was ousted by United States-backed forces in one of the Cold War's defining moments. Allende himself was killed during the coup while his presidential palace, La Moneda, was extensively bombed. Many thousands of Chileans were either murdered, "disappeared", imprisoned, and coerced to emigrate or enter exile. Allende's widow and family were forced to go into hiding in Mexico for many years.
In replacing Allende the Americans installed General Augusto Pinochet , one of the most notorious of the post-Second World War dictators. During the next 17 years of Pinochet's dictatorship around 40,000 Chileans were tortured – often under the most sadistic fashion and overseen by doctors in the Josef Mengele style (the Nazi doctor at Auschwitz). The doctors would ensure the victims would remain alive for as long as possible, administer medication to resuscitate them, so the torture could then recommence.
A Chilean who suffered such treatment in these chambers, but survived and later became an international lawyer, was asked where these doctors are today? He replied , "they're practicing in Santiago". There have been a number of Mengele-style doctors not only walking free in Chile, but resuming employment unhindered.
There have been no calls from the United States or Israel to bring these Nazi-style physicians to justice. Indeed, the Pinochet regime was already protecting Nazi war criminals such as SS Colonel Walter Rauff , creator of the gas chambers, and Mengele himself.
As the US's population is approximately 18 times bigger than Chile's, with an infinitely bigger landmass, the Chilean 9/11 was felt on a far greater scale. Indeed, it was also more destructive. In the US's 9/11, the White House was not bombed, the President ( George W. Bush ) was not killed, its people were not imprisoned and tortured en masse after the initial crimes were committed, a brutal dictator and his death squads were not imposed.
Before the Chilean coup in 1973, the country had been a lively, vibrant place where people were welcoming and cheerful. The Pinochet years afflicted upon the population persistent feelings of terror and suspicion.
A few days after the coup was implemented National Security Adviser Henry Kissinger described the situation in Chile as,
Forty Years Since the Chilean Coup of September 11, 1973"Nothing of very great consequence".
U.S. Secretary of State Henry Kissinger with Pinochet in 1976 (Source: Wikimedia Commons )
Except to the people of Chile that is. Following Allende's election three years before, Kissinger told CIA director Richard Helms over the phone,
"We will not let Chile go down the drain", to which Helms responded, "I am with you".
Kissinger, a future Nobel Peace Prize winner, had been implicated in other war crimes such as an open call for genocide in Cambodia in 1969, "Anything that flies on everything that moves".
Disturbed by Allende's election victory in early September 1970, US President Richard Nixon ordered the CIA to, "prevent Allende from coming to power or to unseat him". Allende was not due to take office until two months later. The US State Department suggested to, "let Allende come in and see what we can work out", – the words "work out" denoting a sinister undertone judging by the record books.
However, President Nixon rejected the State Department's proposal, protesting the possibility of,
"Like another Castro? Like in Czechoslovakia? The same people said the same thing. Don't let them do that".
President Nixon expressed caution saying that,
"We don't want a big story leaking out that we are trying to overthrow the government", before warning Kissinger "to be sure the paper record doesn't look bad".
Kissinger forwarded to Secretary of State William Rogers that,
"The President's view is to do the maximum possible to prevent an Allende takeover".
The aim of the Nixon administration in attempting to overthrow Allende's incoming government was to destroy independent nationalism, or what was called a "virus" that might "infect" others – the domino effect. After all Henry Stimson , the US Secretary of War during World War II, described Latin America as "our little region over here which has never bothered anybody".
Chile obviously came under the auspices of "our little region", despite the fact its capital Santiago is over 8,000 km from Washington. The rights of nations to manage their own affairs is an unacceptable prospect to US planners. We see examples of this to the present day.
In the meantime, "the maximum possible to prevent an Allende takeover" failed as the former physician successfully assumed office in November 1970. The CIA had been sent to work in building support for Allende's rival, former President Jorge Alessandri , but to no avail. Instead the CIA exerted covert pressure, including paying millions of dollars to opposition groups to speed up Allende's ousting.
The four-week tour of Chile by Cuban leader Fidel Castro in late 1971 further alarmed policymakers in the US. Allende himself had visited Cuba about a decade before, and had been impressed by the progress made by Castro's revolution, before again visiting the island nation in 1972.
Fidel Castro with Salvador Allende (Source: teleSUR / Twitter )
By the following year Allende was ousted and killed, with crucial CIA input, as Pinochet went about privatising the Chilean economy to suit American corporate requirements. The "Chicago boys", neoliberal Chilean economists trained at University of Chicago, were welcomed into the government – and were supported by the IMF and the World Bank.
The Chicago boys' policies had a disastrous effect on the population as unemployment more than doubled between 1974 and 1975, to over 18%. By 1983 unemployment further rocketed to 34.6%, far worse than the Great Depression in the US.
The population revolted at various stages but this is where Pinochet's brutal methods of repression came in useful, and was no doubt welcomed by the US government, IMF, and so on. Furthermore, Pinochet was a major drug trafficker who sold cocaine to the US and Europe in the 1980s, amassing a personal fortune in the process, along with his cronies. Pinochet, who also had links to Colombian drug dealers, said
"Not a leaf moves in Chile if I don't move it – let that be clear".
Meanwhile, the population continued to slide into poverty and desolation.
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Note to readers: please click the share buttons above. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.
Shane Quinn obtained an honors journalism degree. He is interested in writing primarily on foreign affairs, having been inspired by authors like Noam Chomsky. He is a frequent contributor to Global Research.
The original source of this article is The Duran and Global Research Copyright © Shane Quinn , The Duran and Global Research , 2019
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Sep 11, 2019 | www.globalresearch.ca
Chile, September 11, 1973: The Inauguration of Neoliberalism, "Shock Treatment" and the Instruments of Economic Repression: The Junta's Deadly "Economic Medicine" Salvador Allende was assassinated on the orders of Henry Kissinger By Prof Michel Chossudovsky Global Research, September 11, 2019 Region: Latin America & Caribbean , USA Theme: Global Economy , History , Poverty & Social Inequality
"Workers of my country, I have faith in Chile and its destiny.
Other men will overcome this dark and bitter moment when treason seeks to prevail.
Keep in mind that, much sooner than later, the great avenues will again be opened through which will pass free men to construct a better society.
Long live Chile!
Long live the people! Long live the workers!"
President Salvador Allende's farewell speech, 11 September 1973.
"It's hard to find someone with the fighting spirit, courage and the story of Allende. He was a man who actually had the branded name in history: democratically the left came to power, and by bombs he was removed from government." Senador Pedro Simon
Chile: "Shock Treatment" and the Mechanisms of Economic Repression
Immediately following Allende's election in September 1970 and prior to his inauguration in November 1970:
"Kissinger initiated discussion on the telephone with CIA director Richard Helm's about a preemptive coup in Chile. "We will not let Chile go down the drain," Kissinger declared. "I am with you," Helms responded. Their conversation took place three days before President Nixon, in a 15-minute meeting that included Kissinger, ordered the CIA to "make the economy scream," and named Kissinger as the supervisor of the covert efforts to keep Allende from being inaugurated. ( National Security Archive )
The CIA was the lead organization behind the imposition of a neoliberal economic agenda in Chile. In August 1972, a year prior to the coup, the CIA funded a 300-page economic blueprint to be implemented in the wake of the overthrow of the Allende government.
The ultimate objective of the September 11, 1973 military coup in Chile was the imposition of the neoliberal agenda (aka deadly "economic medicine") leading to the impoverishment of an entire nation.
Wall Street was behind the coup, working hand in glove with the CIA, the US State Department and Chile's economic elites. Henry Kissinger was the Go-Between.
After Allende's election in November Wall Street's major commercial banks (including Chase Manhattan, Chemical, First National City, Manufacturers Hanover, and Morgan Guaranty), cancelled credits to Chile. In turn, in 1972, Kennecott Corporation "tied up Chilean copper exports with lawsuits in France, Sweden, Italy, and Germany". (See John M. Swomley, Jr. "The Political Power of Multinational Corporations," Christian Century, 91 (25 September 1974), p. 881.
"Regime change" was enforced through a covert CIA military intelligence operation, which laid the groundwork for the military takeover, the assassination of president Allende as well as the macro-economic reforms to be adopted in the wake of the military coup.
At the time of the September 11, 1973 military coup, I was Visiting Professor of Economics at the Catholic University of Chile. In the hours following the bombing of the Presidential Palace of La Moneda, the new military rulers imposed a 72-hour curfew.
Salvador Allende in the defense of the Palacio de la Moneda, September 11, 1973 (left)
When the university reopened several days later, I started patching together the history of the coup from written notes. I had lived through the September 11, 1973 coup as well as the failed June 29th coup. Several of my students at the Universidad Catolica had been arrested by the military Junta.
Chicago Economics, Chilean Style
Sweeping macro-economic reforms (including privatization, price liberalization and the freeze of wages) were implemented in early October 1973.Barely a few weeks after the military takeover, the military Junta headed by General Augusto Pinochet ordered a hike in the price of bread from 11 to 40 escudos, a hefty overnight increase of 264%. This "economic shock treatment" had been designed by a group of economists called the "Chicago Boys," many of whom were my colleagues at the Institute of Economics of the Catholic University.
These deadly macro-economic reforms were largely dictated by Wall Street in liaison with the CIA, with "Chicago Economics" providing an ideological "free market" paradigm and justification. Professors Milton Friedman and Arnold Harberger of Chicago University were by no means the driving force behind these reforms.
While food prices had skyrocketed, wages had been frozen to ensure "economic stability and stave off inflationary pressures." From one day to the next, an entire country had been precipitated into abysmal poverty; in less than a year the price of bread in Chile increased thirty-six fold (3700%). Eighty-five percent of the Chilean population had been driven below the poverty line.
In November 1973, following the dramatic hikes in the price of food, I drafted in Spanish an initial "technical" assessment of the Junta's deadly macro-economic reforms.
Together with a medical doctor, colleague and lifelong friend who was teaching at the Faculty of Medicine of the University of Chile, I estimated the impacts of the economic reforms on the levels of undernourishment, which had resulted from the collapse of the standard of living.
In the wake of the military coup and following the engineered hike in food prices, I estimated that approximately 85% of the Chilean population did not meet minimum calorie and protein requirements as defined by the World Health Organization (WHO).
In October 1973, the "official" food price index had increased by 82.3 percent (in relation to September), according to the Instituto Nacional de Estadistica, which had been taken over by the Junta.
The INE figures on the price of food commodities, however, had been falsified. In November, I proceeded to collect and tabulate the actual rate of increase in food prices from directly observed prices in the Santiago Metropolitan area. I discovered a substantial discrepancy in relation to the official statistics.
Food prices had increased by 211.1 percent in October and November 1973 in relation to September, according to my estimates of 31 food categories. (The official November figures pointed to an increase of 88.6 percent in relation to September). And thereafter, it was on the basis of these official (fake) statistics that the movement in real purchasing power was estimated and official wage adjustments were implemented.
Fearing censorship by the Junta led by General Augusto Pinochet, I limited my analysis to the collapse of living standards in the wake of the Junta's reforms, resulting from the price hikes of food and fuel, focussing on statistical estimates, without making any kind of political analysis.
The Economics Institute of the Catholic University was initially reluctant to publish the report. They sent it to the Military Junta prior to its release.
The opinions expressed in this report are those of the author. Therefore, they are of the author's responsibility and do not compromise the Institute of Economics
(This was first time that the Institute chose to publish a disclaimer)
I left Chile for Peru in December 1973. The report was released as a working paper (200 copies) by the Catholic University a few days before my departure. In Peru, where I joined the Economics Department of the Catholic University of Peru, I was able to write up a more detailed study of the Junta's neoliberal reforms and their ideological underpinnings. This study was published in 1974-75 in English and Spanish.
Economic Repression
By March 1974, food prices in Chile (according to my estimates) had increased by 505.5 percent (since September 1973). Real wages had collapsed.
Chile: The movement of real wages (1970-77) based on official statistics
Source: Rudiger Dornbusch, Sebastian Edwards. Macroeconomic Populism in Latin America http://www.nber.org/papers/w2986 (p20)
The above graph (based on official statistics) shows that real wages collapsed by close to 70 percent in relation to the base period (1970), which also corresponds to the beginning of the Unidad Popular (UP) government of Salvador Allende. The collapse in real wages was greater than that indicated by the official statistics.
It is worth noting that in 1971, the Allende government increased real wages by 20%. The collapse from its 1971 level to early 1974 was of the order of 75% based on official statistics of the cost of living. A wage increase was implemented by the Junta in early March of 1974 (see graph above).
The Destruction of Economic Life
The events of September 11 1973 marked me profoundly in my work as an economist. Through the tampering of prices, wages and interest rates, people's lives had been destroyed; an entire national economy had been destabilized. Macro-economic reform was neither "neutral" –as claimed by the academic mainstream– nor separate from the broader process of social and political transformation.
I also started to understand the role of military-intelligence operations in support of what is usually described as a process of "economic restructuring". In my earlier writings on the Chilean military Junta, I looked upon so-called "free market" reforms as well-organized instruments of "economic repression."
Macro-Economics and Geopolitics are intertwined. The economic dimensions of US led wars must be understood. The destruction of economic life in Afghanistan, Iraq, Syria and Libya constitutes a crime against humanity, i.e. an "Economic Genocide" which consists in destabilizing and deliberately sabotaging a national economy.
- Today, wars are being fought in the Middle East. Several Latin American countries are the object of US dirty tricks with a view to implementing regime change.
- Poverty is engineered by the IMF's debt conditionalities.
- The prices of food and energy are deliberately manipulated through speculative trade, e.g. on the Chicago and New York mercantile exchanges.
- Currency devaluations are engineered through speculative operations on the foreign exchange markets.
While the contemporary mechanisms of intervention ("color revolutions", "war on terrorism", economic destabilization, sanctions, etc) are different to those of the 1970s, the ultimate objective is the derogation of national sovereignty and the imposition of neoliberalism:
- corporate control, privatization,
- the "free market" pillage of natural resources,
- deadly economic medicine, austerity measures,
- the repeal of social programs,
- the deregulation of trade
- the collapse of wages,
- the instatement of a cheap labor economy,
- the transformation of countries into territories.
I recall that in the months leading up to the September 1973 coup in Chile, the distribution of basic consumer goods and food had been deliberately disrupted through market manipulation. No bread, no milk, no sugar were available at government regulated prices. Chile's escudo was worthless. The black market prevailed.
A similar situation is now unfolding in Venezuela where the national currency has collapsed. Black market prices for food and essential commodities have spiralled. Reminiscent of Chile in 1973, foreign exchange (Forex) market manipulation in Venezuela coupled with sabotage triggers food shortages, poverty and political instability. Concurrent with the engineered collapse of the Bolivar, real purchasing power has plummeted. (see below)
Source: Los Angeles Times, May 31, 2016
Michel Chossudovsky, September 17, 2016 Forty Years Since the Chilean Coup of September 11, 1973
sources:
Michel Chossudovsky, La medicion del ingreso minimo de subsistencia y la politica de ingresos para 1974 , Documentos de Trabajo no. 18, Noviembre de 1973.
Michel Chossudovsky, The Neo-liberal Model and the Mechanisms of Economic Repression, The Chilean Case, Research Paper No. 7411, Department of Economics, University of Ottawa, 1974, published in Co-Existence, Vol 12, 1975
Michel Chossudovsky, Hacia el nuevo modelo economico chileno : inflación y redistribución del ingreso, El trimestre económico . Mexico, Vol. 42. 1975, 2, p. 311-347.* * *
The videos below describe the preparation of the September 11, 1973 military coup and its aftermath.
Video: CIA, Chile and Allendehttps://www.youtube.com/embed/8R7MNnoYktM Chile: The First Start. The Inauguration of Neoliberalism
https://www.youtube.com/embed/dRRUpO5kPhw?feature=oembed
The original source of this article is Global Research Copyright © Prof Michel Chossudovsky , Global Research, 2019
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Aug 12, 2019 | www.moonofalabama.org
karlof1 , Aug 11 2019 21:27 utc | 18
Responding to several questions in the last open thread, I mentioned the fact that Epstein's case reflects the great amount of corruption prevalent within the Outlaw US Empire, and it's that aspect of the case that might be used as a campaign issue, particularly since Sanders is going to great lengths to point to the utterly corrupt and immoral nature of "health" insurance and Big Pharma. That was exactly the line he presented on today's Face The Nation program, despite the primary fccus being gun control:"'The American people are sick and tired of powerful corporate interest determining what goes on in Washington,' Sanders said. 'You know that's whether it's the healthcare industry, whether it is the fossil fuel industry, whether it is the NRA.'"
The other important point Sanders made was the divisive nature of Trump's rhetoric--that becoming more divided now isn't in the nation's best interest:
"He is creating the kind of divisiveness in this nation that is the last thing we should be doing."
Ah, but that's exactly what the Current Oligarchy wants done--create an ever more divisive nation such that solidarity--and thus Movement Building--becomes ever harder to attain and realize.
karlof1 , Aug 11 2019 21:54 utc | 22
financial matters , Aug 12 2019 3:30 utc | 5518 Cont'd--
IMO, it matters not whether Epstein's alive or dead. What matters is that a person like Epstein was able to become what Epstein became, which was enabled through the great, vast cesspool of corruption that the global elite inhabit. Epstein ought to become the Poster Boy for ridding the nation of government and elite corruption that affects every aspect of life here and everywhere. As many have said, Billionaires ought not to exist--no one individual should have that much wealth and power. The thesis embodied within Andrew Carnegie's Gospel of Wealth (PDF) ought to be made into law such that it's ensured that those fortunate enough to become well-off thanks to the public--directly or indirectly via government--return a great proportion of that wealth to their benefactors. IMO, had such a law been in force, the corruption that enabled Epstein would have had a more difficult time doing what it did.
Yes, there are other factors/actors involved that aided Epstein's racket. We have an excellent idea of who and what--China has the proper solution for such corruption. Ridding the world of those factors/actors ought to be equivalent to the Quest for The Grail.
At least comfort can come from knowing that the evil within Syria is currently being eradicated, and that additional evil plans are being thwarted thanks to the Forces of Resistance.
psychohistorian , Aug 12 2019 3:59 utc | 58Ellen Brown has a good blog post up on China, https://ellenbrown.com/2019/08/09/neoliberalism-has-met-its-match-in-china/
Basically stating that China is too powerful for the US to overcome with its typical attempts to destroy anything that isn't completely controlled by private finance.
""What is mainly devalued when a currency is devalued, says Hudson, is the price of the country's labor and the working conditions of its laborers. The reason American workers cannot compete with foreign workers is not that the dollar is overvalued. It is due to their higher costs of housing, education, medical services and transportation. In most competitor countries, these costs are subsidized by the government.""
""China today is a peer competitor that is more formidable economically, more sophisticated diplomatically, and more flexible ideologically than the Soviet Union ever was. And unlike the Soviet Union, China is deeply integrated into the world and intertwined with the U.S. economy.""
"" The Chinese have proven the effectiveness of their public banking system in supporting their industries and their workers. Rather than seeing it as an existential threat, we could thank them for test-driving the model and take a spin in it ourselves.""
Grieved , Aug 12 2019 3:59 utc | 59@ financial matters with the Ellen Brown link...thanks
Let me repeat one of the quotes that I want to expand upon
"" The Chinese have proven the effectiveness of their public banking system in supporting their industries and their workers. Rather than seeing it as an existential threat, we could thank them for test-driving the model and take a spin in it ourselves.""
While I agree overwhelmingly with the concept, I have come to think that Trump was (s)elected by the global elite to speed up the demise of he current Western way before enough "knowledge" of the China/Ellen Brown concept is widely held. I read an article at Strategic Culture (no link) about how the EU has ensconced the financial independence of the banking system in treaties that are much harder to change than by the politicians in Brussels.
The point I am trying to make is that the sooner the world crisis is brought to a head, the better chance global private finance has to survive the resulting reset. If the elite were to let the Western crazy go on longer there would be more of a chance of ALL the Western countries agreeing to try the China way....which is almost a prerequisite for success. The elite of global private finance need to survive in some form to stay relevant in the world and if China had more success under their belt (and road...grin) the glaring difference between the financial perfidy of the West would be more glaringly obvious that it is to many at this juncture.
I have been pondering what the heck is going on since Trump "won" and this now makes the most sense to me.
As example of the ignorance of the public I submit the limited support I get for my one note Samba here at what is purported to be an enlightened gathering of humanity....
The elite need to make their move while they still have control of the media/propaganda machine that continues to be very effective....but slipping
Hoarsewhisperer , Aug 12 2019 5:54 utc | 73@55 financial matters
Wonderful link, thank you for the Ellen Brown piece. That Hudson interview at Guns and Butter is the gift that keeps on giving. Hudson is like a beef-stock cube: you have to give it time and add things to it but it's the highly condensed basis of a powerful stew. And what Brown adds is formidable.
It almost seems as if everyone is fine with how money is created. What's more important is how it circulates, and what it achieves. I love her remarks that China can add or subtract interest, carry or write off a loan, and in effect do everything with the money that it deems necessary to produce socially useful results.
The mistake of the old communist model was to "own" the means of production. The success of the new socialist systems that have learned from this lies in not caring who actually "owns" anything, but in making sure that the money of the economy works to produce the social good. If "ownership" is good for the people, let them own. But the money? That belongs to state control.
I enjoyed all the quotes from Ellen Brown's article you supplied - as I enjoy everything you infrequently post, by the way - and how about one more quote, addressing the threat of the Asian Tigers to the Chicago model, and how it was dealt with:
Just as the US had engaged in a Cold War to destroy the Soviet communist model, so Western financial interests set out to destroy this emerging Asian threat. It was defused when Western neoliberal economists persuaded Japan and the Asian Tigers to adopt the free-market system and open their economies and their companies to foreign investors. Western speculators then took down the vulnerable countries one by one in the "Asian crisis" of 1997-98. China alone was left as an economic threat to the Western neoliberal model, and it is this existential threat that is the target of the trade and currency wars today.And what the west saw as the main threat was the state involvement in the economy. It was proving its value, as it did in creating the American Dream of the nineteen-fifties in the USA itself, and as it continues to do in all the modern socialist revolutionary states with their amazingly healthy economies - all tested in the trial-by-fire of US sanctions.
Many thanks again for the link. I would have missed that one, and it's a gem!
"The thesis embodied within Andrew Carnegie's Gospel of Wealth (PDF) ought to be made into law such that it's ensured that those fortunate enough to become well-off thanks to the public--directly or indirectly via government--return a great proportion of that wealth to their benefactors. IMO, had such a law been in force, the corruption that enabled Epstein would have had a more difficult time doing what it did."karlof1 , Aug 12 2019 6:06 utc | 75
...
Posted by: karlof1 | Aug 11 2019 21:54 utc | 22That's precisely how Western economies operated until the 1960s. The UK was an outstanding example. Lord Nuffield (British Motor Corporation) paid 19 shillings and 6 pence on every Pound of income beyond the top threshold. The Beatles switched their affairs beyond the reach of the UK Taxman because their success yielded Nuffield-ish levels of income.
And Income Tax was just the tip of the iceberg. Estate Tax resulted in many Tr-raditional Old English estates being sold off to pay the Death Duties.I have a hazy recollection that you're a fan of Michael Hudson's economic philosophy. If two-way communication is an option on Hudson's website, ask him to publish a chart hilighting the difference between Tax Scales of the 1950s and Tax Scales post-2010 in any Western country of his choice. It'll make your hair stand on end but it will also make it crystal clear WHY the Rich are getting richer and the Poor poorer in the (Thoroughly Modernised) 21st Century.
Buying politicians is the most lucrative investment of all...Formerly T-Bear , Aug 12 2019 8:58 utc | 82Hoarsewhisperer @73--
Thanks for your reply! Yes, I'm a Hudson fan. And I'm aware of what the tax levels were once-upon-a-time. The "Libertarian Swindle" that in part gave us Neoliberalism and Junk Economics was the active power behind the massive sea-change that has ruined so many good public works.
Milton Freidman, Margaret Thatcher, and several others on both sides of the pond deserve to have their bodies exhumed, drawn and quartered, then burned and the ashes thrown into the ocean for the evil they worked.
c1ue , Aug 12 2019 17:06 utc | 108@ karlof1 | Aug 12 2019 6:06 utc | 75
Thanks for mentioning '"Libertarian Swindle"' as door opener for the neoliberal economic agenda but it actually predates that. One must go back to post WWII politics with the early rebound of conservative efforts to regain political dominance; e.g. communists in state department (ca 1946-7); communists in military (McCarthyism 1947-9); Who lost China (1950-3); John Birch Society (1953-); a tome deaf Eisenhower administration (Dulles Bros. et al); Loss of Cuba (1958-present); 1968 Nixon "Law and Order" opening DoJ removing enforcement of regulatory law resulting regulatory capture by 'business'; 1980 smarmy election of Reagan using "Moral Majority" to open capture of government itself. Yes "Libertarian Swindle" was present in all this history and much more but that history is being clouded, subverted, destroyed and being made useless as more ignorant opinion is being used to replace knowledge of where we once were and where we had been. Once that takes complete effect, it shall be a house of mirrors henceforth; see how well any can navigate under those circumstances. Should predict that nothing will end well at that point.
@karlof1 #105karlof1 , Aug 12 2019 17:19 utc | 111
Hudson has never concealed that he does consulting work for many governments, as well as individuals.
Super Imperialism was translated into Chinese almost immediately.
As for tariffs: I'm sorry, but focusing on product prices is exactly what neo-liberal economists do. While tariffs *might* increase the prices of products from China (China's lowered exchange rate offsets the tariffs to a significant extent), it is the lack of jobs which really hurt Americans. As Dr. Michael Hudson has said repeatedly: when America was industrializing, it put heavy tariffs on classes of products in which the U.S. government wanted to grow its own manufacturing capacity for - and from these, American jobs.
Farmers in the US and EU, doctors, lawyers, pharm companies and many more verticals are heavily protected by walls of patents, accreditations and other import restrictions - it is the blue collar working class which is fully (and hypocritically) exposed to foreign competition.
And while I agree that most of the audience in Trump rallies can't articulate the above, they do know they've been fucked. And they want someone, anyone, and anyhow, to change that. Agreed that Trump may not be that president, but he's at least paying lip service to their pain - as opposed to the liberals who keep talking about training and competitiveness and other meritocratic bullshit.Another Hudson audio only program that is a must listen. What's discussed you won't read/hear/see in most media. Just the insider info about what Morgan Stanley told its Sovereign Wealth Fund holders is worth the listen as it's 100% related to the direction global finance is heading as de-dollarization accelerates. The background context to the verbal spat between Germany and the Outlaw US Empire's ambassador that occurred late last week I linked to and what that means is also discussed. For the 11 or so minutes Hudson gets to talk in answer to the questions posed, the information is outstanding. Again, the program was recorded on July 30th. Sorry for the delay in commenting about it, but finding time to listen/watch is too often at a premium for me, and today I was able to do some catching-up.JW @107--
Yes, just as Westerners remarked about the "foreignness" of the East, we now hear similar things said by Chinese about the West. Curious isn't it.
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August 02, 2019
BarakalypseNowNeoliberalism is an economic ideology that exists within the framework of capitalism. Over four decades ago, neoliberalism become the dominant economic paradigm of global society.
These BarakalypseNow video series, are tracing the history of neoliberalism, starting with a survey of neoliberal philosophy and research, a historical reconstruction of the movement pushing for neoliberal policy solutions, witnessing the damage that neoliberalism did to its first victims in the developing world, and then charting neoliberalism's infiltration of the political systems of the United States and the United Kingdom.
Learn how neoliberalism is generating crises for humanity at an unprecedented rate.
Neoliberalism was a reaction. It was an effort to disassemble a previous vision of society that once held sway over most of the world. In order to understand neoliberalism, it's important to first understand the world before neoliberalism; the world which neoliberalism considered unacceptable, and in need of urgent reconfiguration.
Learn about the world of embedded liberalism.
The story of neoliberalism is a story about the power of ideas. Embedded liberalism was in power, but it was not without resistance. Academics and businessmen who opposed the New Deal and British social democracy were only begrudgingly accepting of the situation at best, or on the warpath against government intervention in the economy at worst. These two factions allied with one another to create an idea so powerful that it would covertly undo their losses to embedded liberalism by supplanting it entirely. This is where the story of neoliberalism begins.
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Mar 06, 2012 | discussion.theguardian.com
NotWithoutMyMonkey , 6 Mar 2012 04:22
The likes of BruceMajors here don't get it.'Big-gubment' exists to enforce property-rights. Libertarians bleat on about how freedom is founded in the right own to property and yet fail to realise that these so-called 'rights', which are a negation of natural rights (the world and it's resources belongs to all equally, and that lands to land, water and seed are in essence premised on theft) requires a large, powerful and authoritarian apparatus capable of effectively projecting violence to enforce property rights. claims to property are premised on violence.
Your so-called philosophy fails on first premises.
And in case you don't get it, the threat of a worker revolution saw the welfare state arise as a carrot to complement the stick. With the stick becoming increasingly ineffective in the earlier part of the 20th century, the disquiet needed to be quelled through other means. That method was the social democratic welfare state. The collapse of Communism as an existential threat, followed by the emergence of economic globalisation (shopping around for the cheapest labour), consumerism and automation have all effectively eroded class solidarity amongst those most disenfranchised by a state enforced inequality and eroded the value of labour. The beneficiaries of the state as a mechanism for enforcing their claims to property no longer need the working classes.
Hence we find that around the world, western democracies are withdrawing the carrot and reasserting the stick.
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Feb 11, 2019 | theecologist.org
An excitable Keith Joseph met with Ralph Harris of the Institute of Economic Affairs and his deputy Arthur Seldon at one of his favourite Westminster restaurants, Lockets, in February 1974.Heath's intention must have been to give Joseph a chemistry set with which he would hopefully blow himself up.
Joseph was at the time a member of the Shadow Cabinet and the third most influential politician in the Conservative party. He had invited his close friends from the IEA to lunch so he could get their clearance to set up a rival free market think tank.
His new Centre for Policy Studies would be overtly political and use the methods of the Socialist Fabians to win the battle of ideas in favour of radical liberalism within Britain's natural party of government.
This was cloak and dagger politics. An audacious, secret, plan to challenge seize the party leadership, win the forthcoming election and install a new Cabinet dedicated to making Hayek's economic prescriptions official policy for the first time. "My aim was to convert the Tory party," Joseph would later explain.
Joseph would become known even among his closest friends as the "Mad Monk" in part because of the purity and forcefulness of his political thought. He would concede that he was "a convenient madman".
Offer Encouragement
He had relied on Harris's instruction and help in economics and social policy, devouring the stack of books, reports and articles that the IEA recommended over the previous months.
"Harris assured Joseph that he was not troubled by the fact that there would be two organisations promoting roughly the same message. In fact Harris and Seldon could not have been more helpful," records Antony Fisher biographer Gerald Frost.
The CPS was in fact "the logical next step" in the battle against the State. Antony Fisher was just as welcoming of Joseph's bold move and paid a visit "to assure him of his personal support and to offer encouragement".
Joseph was the Marcus Brutus of his time, convinced that disloyally disposing of his leader, Edward Heath, would be good for his party, his city, his empire. He was the leader of this conspiracy.
Strangely considering his part in the internal leadership coup, Lawson would describe his friend Joseph as being: "Tormented by self-doubt, devoid of guile, and with a passion to educate, he laboured under the delusion that everyone else, friend or foe, was as intellectually honest and fundamentally decent, as lacking in malice and personal ambition, as he was."
Provoking Wrath
Heath was deeply suspicious that his colleagues were secretly plotting a leadership bid but gave his approval to the new think tank only half convinced it would study Polish economic policy. "Heath's intention must have been to give Joseph a chemistry set with which he would hopefully blow himself up," said one contemporary.
Joseph recruited Margaret Thatcher as vice chairman of the CPS in May 1974. "His was a risky, exposed position, and the fear of provoking the wrath of Ted and the derision of the left-wing commentators was a powerful disincentive - but I jumped at the chance," Thatcher recalled years later.
"From Keith and Alfred I learned a great deal. I renewed my reading of the seminal works of liberal economics and conservative thought.
"I also regularly attended lunches at the Institute of Economic affairs where Ralph Harris, Arthur Seldon, Alan Walters and others - in other words all those who had been right when we in government had gone wrong - were busy marking out a new non-socialist economic and social path for Britain."
Joseph prescribed Friedrich von Hayek's The Road to Serfdom as required reading. Gerald Frost, was a member of the CPSboard and would hand books and reports to Richard Ryder, Thatcher's political secretary, for her to read over the weekend including the latest output from the IEA.
"Joseph was also responsible for ensuring that Mrs Thatcher struck up relations with the IEA directors, and through them, Hayek and Friedman," recalls Frost.
The new Conservative think tank operated on an annual budget of £150,000 from private donors - which included the largess of the tobacco companies.
Hung Parliament
The official founding meeting of the CPS was held in Room G of the House of Commons on 12 June 1974. Joseph was joined by Thatcher and Sherman and also an industrialist named Nigel Vinson.
Vinson had written an article for the IEA and shortly after was called by Fisher and taken to lunch. Vinson was invited by Fisher to join the board of trustees of the IEA.
Vinson agreed because he "admired him hugely". Thirty years later he told me: "That's the link between the IEA and the Centre for Policy Studies: that's me. I, Maggie Thatcher and Keith Joseph, we were the first three directors of the Centre for Policy Studies."
The IEA, he explained, wanted to form opinions over decades and also protect the charitable status as educational rather than party political. The CPS, on the other hand, wanted to transform British politics in the next months and years.
Joseph went on a speaking tour while Britain was in tumult. Edward Heath had taken on the mining unions and lost.
The election in February had delivered a hung parliament and when negotiations between the Conservatives and Liberals collapsed, Labour formed a minority government. Harold Wilson and his Labour party won the second general election of the year, on 10 October 1974, but only by three votes.
"The result was much less of a disaster for the Tories than it might have been," according to Geoffrey Howe, who would later become chancellor under Thatcher. "We had lost, certainly. But disaster had been averted".
It was well understood that Heath would not last long as Tory leader. After the election he put Thatcher in charge of housing, and she in turn asked Nigel Lawson to join her clique.
Weathy Stockbroker
Lawson was born in Hampstead, now one of the most desirable parts of the capital, in March 1932. His father was a successful City of London tea merchant and his mother's father was a wealthy stockbroker.
His childhood home was "complete with nanny, cook and parlourmaid". Lawson during his formative years immediately after the war developed the distinctive distrust that would make him amenable to the free market philosophy.
"It seemed to me that in every respect the socialism the Labour Government was seeking to put into practice went against the grain of human nature - not least its Utopian disregard of original sin or of what Anthony Quinton has called 'man's moral and intellectual imperfection'."
Lawson won a maths scholarship and went up to Oxford University to study philosophy, politics and economics under the tutelage of professor Roy Harrod, an ardent Keynesian.
He specialised in philosophy and was influenced by the Linguistic Analysis school which would prove a useful foundation for his elegant rhetoric during his political career.
He joined Chatham, the "somewhat decadent high Tory dining club" and played poker. After university he joined the navy and in 1955 married Vanessa Salmon, a wealthy tobacco heiress. He then joined the Financial Times as an oil correspondent.
His son Dominic, currently a climate skeptic columnist, and his celebrity daughter Nigella, were both born during this period. Lawson then moved from the newsroom to the political backroom.
Oliver Poole, chairman of the FT and of the Conservative party, recognised his shrewdness and way with words hired him as a speechwriter to Harold MacMillan, the prime minister. Lawson would edit the right-wing Spectator and then the city pages of the newly launched Sunday Telegraph when in 1970 he stood unsuccessfully as an MP for Slough.
He was finally elected to Parliament on the eve of his 42nd birthday in 1974 and in the same year had a hand in drafting the Conservative party manifesto, committed the Tories to creating an ministry for energy and then found himself in Thatcher's policy group.
"This was my first experience of working with Margaret," Lawson would note. The proximity to Thatcher meant proximity to Joseph who at that time was the free market cabal's great hope for leadership.
Lawson recalled: "Keith was the founder member of the group of Tory radicals which, under Margaret's leadership, were the government's driving force during the first two Thatcher parliaments. The only other full members of that group were Geoffrey Howe, Norman Tebbit and myself."
Delinquents and Denizens
Howe made it clear that he wanted Joseph to join the leadership. "I [told] Joseph that he would have our support if he chose to stand, and no doubt others were doing the same. Keith seemed willing to accept the challenge."
But then disaster. Joseph would during the course of one speech wreck his leadership ambitions on the rocks of public good will and tolerance. "The balance of our population, our human stock is threatened", Joseph warned at Edgbaston in October 1974.
"A high and rising proportion of children are being born to mothers least fitted to bring children into the world and bring them up."
He continued: "Many of these girls are unmarried, many are deserted or divorced or soon will be. Some are of low intelligence, most of low educational attainment. They are producing problem children, the future unmarried mothers, delinquents, denizens of our borstals, sub-normal educational establishments, prisons, hostels for drifters!"
The blame for this apparent malaise was clear. "The Socialist method would take away from the family and its members the responsibilities which give it cohesion".
Almost before he had sat down after the address there was a storm of protest across the country. Many working class families were deeply offended and Joseph was "accused of being a racist and an advocate of eugenics".
The speech would in fact do for Joseph just as the "rivers of blood" had killed the political career of his close friend and fellow IEA advocate Enoch Powell years earlier. He was no longer a serious contender for the Conservative leadership and future prime minister.
"Keith, naive rather than deliberately provocative, was genuinely surprised by the fuss," according to Howe. "Sadly, I concluded that Keith's judgment was too erratic for him to be entrusted with leadership of the party." [Howe, 1994: 89].
Hostility to Women
Shortly after the speech a humbled Joseph called at Thatcher's offices at the Houses of Parliament. "I am sorry," he told his unofficial campaign leader. "I just can't run. Ever since I made that speech, the press has been outside the house. They have been merciless. My wife can't take it and I have decided I just can't stand."
The free market advocates had to decide what to do. They were deeply unhappy at the prospect that Heath and his national consensus would grind on for ever. Thatcher's ambitions were limited to that of chancellor, especially because of the hostility to women that dominated the Conservatives at that time. Her husband, Denis, had sold the family oil business to Castrol in the 1950s for what would today be many millions.
She was therefore comfortably off enough to risk everything. "Look, Keith, if you're not going to stand," she said finally. "I will." Thatcher's victory in the election for the Tory leadership was decisive. Two days later she met with the 1922 Committee of Conservative back bench MPs. "The room was packed," Howe recalls. "Tears came to my eyes. The Conservative Party had elected its first woman leader. By her almost reckless courage she had won their support, if not yet their hearts. A new bond of loyalty had been forged."
Thatcher quickly assembled her team. She surprised almost everyone by making Geoffrey Howe, the IEA supporter and member of the Mont Pelerin Society, her chancellor and therefore putting him in charge of the country's economy.
In doing so, she looked over Keith Joseph, although he remained at her side as a policy advisor. Howe concluded: "Keith Joseph was widely, and rightly, seen as the man who had blazed the trail for Margaret's victory."
She then recruited a team of young, privately-educated free market thinkers to help her meet the terrifying prospect of confronting Harold Wilson - still a "cunning and attractive parliamentary performer" - in the House of Commons.
The Gang of Four was led by Nigel Lawson.
Adam Curtis, the BBC filmmaker, captured the significance of this moment in the transformation of British political life. "She turned to the Institute of Economic Affairs to create the policies for a future government. What Fisher and Smedley had dreamt of twenty years before had finally happened.
"Once upon a time their Think Tank had been marginalised and despised - now it was at the centre of a counter-revolution that was about to triumph."
Brendan Montague is editor of The Ecologist, founder of Request Initiative and co-author of Impact of Market Forces on Addictive Substances and Behaviours: The web of influence of addictive industries (Oxford University Press) . He tweets at @EcoMontague. This article first appeared at Desmog.uk .
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Feb 11, 2019 | jacobinmag.com
- An interview with
- Stephanie L. Mudge
ince the late 1970s political parties all over the world have embraced a politics of free markets, privatization, and financialization. While promising freedom, this political project -- typically referred to as neoliberalism -- has brought record levels of economic inequality and significant democratic retrenchment, particularly in the advanced capitalist world.
Scholars often explain this shift by pointing to the victory of the New Right -- personified by figures like Ronald Reagan and Margaret Thatcher. But a new book by sociologist Stephanie Mudge tells a different story.
In Leftism Reinvented: Western Parties from Socialism to Neoliberalism , Mudge looks at left parties in advanced capitalist countries over the last century and shows how the experts aligned with those parties pushed them in the direction of spin doctors and markets. In the process, left parties' ability to represent the interests of their own working-class constituencies was eroded -- and ordinary people were shut out of the halls of power.
Political organizer and socialist activist Chase Burghgrave recently spoke with Mudge about her new book, the role of experts in democratic societies, and whether a more vibrant, egalitarian politics is possible.
CB You state at the beginning of your book that leftism actually went through two reinventions in the last century, first from socialist to Keynesian , and then from Keynesian to neoliberal . Why did you think it was important to analyze both of these reinventions within leftism? SM The short answer is that the second reinvention couldn't have happened without the first.The longer answer is that socialism, Keynesianism (or what I call "economistic leftism"), and neoliberalism are not just political ideologies floating in the ether; they emerged out of certain institutional arrangements.
Economistic leftism was grounded in a strong, and historically novel, relationship between academic economics professions and left parties. This relationship was what made the Democratic Party "left," in a Keynesian sense, in the 1930s and 1940s. And this relationship was also key to the move from Keynesianism to neoliberalism -- after all, both systems of thought were primarily formulated inside economics professions.
Now, I hasten to add that neither economistic nor neoliberal leftism should be understood as left parties or politicians simply parroting the things economists say. But once left parties came to depend on economics, it did matter in a whole new way how economists saw things. CB You compared four political parties of the Left in your book: the British Labour Party, the German Social Democratic Party (SPD), the Swedish Social Democratic Party (SAP), and the US Democratic Party. Why did you think it was important to study leftism's trajectory through these four parties? And given that the Democratic Party was never a socialist party, why do you think the Democratic Party should be studied in an analysis of socialism's eventual transformation into neoliberalism? SM
I had pretty specific historical reasons for the parties I included in the book. For starters, I only wanted to deal with parties that were more or less continuous organizations for the whole twentieth century (this is a little complicated for the German SPD, which was banned in Nazi Germany, but in fact it did survive in exile during that time).
I also wanted to make sure that I included parties that have been especially influential internationally -- which varies across time periods. The German SPD was the first, and hands down the most powerful, mass party of the socialist left at its founding in 1875, so it had to be included if you wanted to understand the socialist period. The Swedish SAP then became the most successful social-democratic party in the West in the wartime and post–World War II periods and was very influential internationally for that reason. The British Labour Party, meanwhile, became very important when it came to power after World War II, and was a driver of the internationalization of "third way" politics in the 1990s.
The Democratic Party is trickier, because of its very different history. It has always been a mass party in a certain sense, but not a socialist or ideological one. I include it because, when the leading liberal or New Deal faction of the Democratic Party embraced Keynesianism around the time of the 1937 recession, it became somewhat comparable to social-democratic and labor parties. And, last but not least, in the 1990s the Democratic Party was a major exporter of "third way" politics to Europe and elsewhere. So that is why it needed to be part of the story. CB At the center of your analysis of leftism's reinventions are political parties and people you call "party experts." Why are party experts important for explaining the trajectory of Western leftism over the last century? SM First, a definition is in order: I conceive of party experts very broadly, as the people in and around parties who make themselves valuable as strategists, speechwriters, and analysts -- that is, people who spend their time producing arguments about how things are and what parties and governments should do about it. The focus is on what people do, or the role they play, inside parties, regardless of their formal training, credentials, positions, or titles. So a party expert could be a consultant, journalist, economist, or politician, or anything else.
The reason party experts are important is that they shape what's on offer in democratic politics -- that is, what is political, or what it is possible to vote for . So, it matters a lot how party experts see things.
In the book I make the argument that party experts matter in a special way in left politics. Historically speaking, left parties play a very special role because they claim to be the best representatives of poor, disempowered, and disenfranchised groups -- that is, groups that lack time, money, connections, and other resources that facilitate full political participation. So left party experts articulate the interests of the least powerful in democratic politics. This is a very, very important responsibility. CB I was surprised reading your book to find that many of the party experts of early left parties came out of socialist associations, clubs, left newspapers, and journals. How was this background important for early party experts? SM Yes, this is sort of surprising, especially from a present-day perspective. Politics today is absolutely saturated with professionals -- consultants, strategists, think tank policy specialists, media talking heads. But it was not always thus. It's very clear that in the late 1800s and early 1900s, journalists and newspapermen were the most important party experts, especially on the Left. In the book I call these figures "party theoreticians," because they often wrote and edited for journals and newspapers that were party-supported, and so they depended on political parties to make a living.
Party theoreticians were important for a few reasons. First, if we go back far enough to recognize the tremendous importance of journalists in the production of socialist theory -- which describes many of the most important early socialist and Marxian intellectuals -- we have a very useful analytical starting point. We can trace their origins (how they became party experts) and what happened to them: why did they decline, such that we're now surprised to find such a figure at all? And, of course, we can ask whether the fact that party theoreticians were party-dependent journalists mattered for how they saw things.
They were also important because journalists changed the course of political history. It's not clear that Marxism specifically, or socialist theory more generally, could have become the basis of an enduring international discussion without them. Marx himself was academically trained, but much of his writing was done as a journalist . Some argue that the camaraderie, collaboration, cross-criticism, and political engagement that characterized life as a journalist in the mid to late 1800s directly informed the socialist and Marxian imaginary. So if we agree that socialist theory has been one of the most important lines of thinking in modern history, then we should also agree that party-dependent and party-affiliated journalists are among history's most important intellectual figures.
There is one more reason the party theoretician is important, which bears on politics today. The fact that journalists' past influence is surprising to us now shows that perceptions of "experts" or "expertise" are both historically variable and politically determined. There is a lesson in this: contemporary political parties have a special capacity to consecrate (in a sense, to make ) experts, regardless of what kind of credentials, schooling, skills, or professional positions people have. They can valorize certain types of skills, forms of knowledge, and modes of communicating; they can also, of course, exclude or marginalize.
Left parties should take this capacity more seriously. There are too many wonks, strategists, and talking heads, and too few people who don't have fancy credentials but do have firsthand knowledge of suffering in their communities, featured in today's political debates. Maybe if left parties took their capacity to make experts more seriously, they could cultivate a more inclusive and representative politics. CB How did this relationship between left political parties and the economics discipline form, and what were its effects? SM In the book I argue that a new "interdependence" between mainstream economics professions and left parties formed during the Great Depression and the wartime period. There were a few reasons this happened.
One is that everyone agreed that there were big economic problems, but economic facts were matters of dispute (remember that this period predates widely available, standardized economic statistics). So there was a great deal of political demand for people who could pinpoint, for instance, the scale and causes of unemployment.
Another cause was located in economics: economics professions (which were then much smaller, and still in the making) attracted lots of new students who were interested in problems of poverty, labor relations, income distribution, and unemployment, but those students often found that economics professors wouldn't (or couldn't) speak to those concerns. This kicked off a sort of generational rebellion, and new kinds of economists were born (there are similar things happening now, by the way).
Third, in Western Europe, left parties were becoming established enough to invest in recruiting a younger, college-educated generation of leadership. In the Democratic Party, this kind of recruitment began via FDR's campaign (in the making of the famed " Brain Trust ").
So, in sum, in the 1920s and 1930s, a new generation of technically adept economists who spoke to left political concerns were in the making, even as left parties formed closer ties with universities and economics professions.
The effects, I think, were tremendous. In a sense, interdependence made "Keynesianism" mainstream -- that is, it helped Keynesian economics become orthodoxy. Interdependence also underpinned left parties' ability to form coalitions, win elections, and govern postwar economies. Last but not least, interdependence created a sort of backdoor into influencing left politics -- through economics professions, rather than through parties. CB The party experts that came to replace socialist party theoreticians had what you refer to as a "Keynesian ethics." What are "Keynesian ethics," and where did they come from? SM "Keynesian ethics" refer to the way left parties' dominant economic experts in the 1960s -- people I call "economist theoreticians" -- saw economists, politics, and the relationship between the two. The hallmark of the Keynesian ethic was an assumption that the economist's job was to provide strategically useful analysis and advice -- that is, advice that helped left parties hold together coalitions, deal with the demands of organized labor, facilitate negotiation, support redistributive and welfarist policies, and appeal to broader publics. In other words, "good" economic advice was also politically useful .
The sociological argument here is that the Keynesian ethic was linked to economist theoreticians' situation: they had one foot in left parties and the other in the economics profession. In other words, Keynesian ethics expressed economists' very real experience of being prominent economists and also political strategists, advisers, or government appointees. For people who had this experience, Keynesian ethics were common sense. CB Keynesian economist theoreticians were displaced within the left political parties when Keynesian economics as a discipline went into crisis in the 1970s. Why did this happen, and what kind of party expert replaced them? SM The standard answer is that "stagflation" -- increasing rates of both unemployment and inflation in the 1960s and 1970s -- killed Keynesianism, because it confirmed monetarist arguments (in particular, Milton Friedman's). So stagflation was proof that Keynesianism was a faulty science, and Keynesian economists were faulty scientists.
But the actual history is much more complicated. Economic events are real -- if gas prices are suddenly really high, that's pretty clear to everyone -- but interpreting what those events mean is a whole different thing. People do the interpretation, and people always have investments. In the book I point out that the stagflation-killed-Keynesianism narrative was produced by people with investments -- sometimes political, sometimes professional, and sometimes both.
The stagflation critique was political, not just scientific. And, among economists, those who declared Keynesian economics dead in the 1970s were academics, financial economists, international economists, and sometimes conservative or center-right-party-affiliated economists -- they were, in other words, not left-party-affiliated economist theoreticians. So the stagflation-killed-Keynesianism narrative also had a professional aspect to it -- that is, it was partly an "ivory tower" critique of economists who were too politically involved, and therefore not scientific enough. And that critique clearly won, which fundamentally changed the economics profession by killing Keynesian ethics.
So, what comes next -- to whom did left parties turn? They turned to new kinds of economists, who saw the world, and their role in politics, in a very different way. In the book I call these new kinds of economists "TFEs" (which stands for Transnational, Finance-oriented Economists). I argue that TFEs were not "neoliberals," but they had what we might call "neoliberal ethics": they saw their responsibilities in terms of expanding and sustaining markets (a term that is sometimes code for specifically financial markets), even if this worked directly against the interests of left constituencies -- and, by extension, left parties. CB Do you think the growth of neoliberalism is better explained by left parties' acceptance of neoliberalism than the political victory of the Right? SM
Yes. Right parties have never pretended to be representatives of the disempowered or advocates of policies that insulate people from market forces. The Right's embrace of free markets in the 1980s was important, but it was not surprising. And I think it's disputable that this was really a popular move, electorally speaking -- this was a period of growing political alienation and declining turnout across the board. In this context, left parties were the only political force that was capable of critically engaging with market logic. But they did the opposite of this in the 1990s.
I think this had electoral and cultural consequences. Electorally, the "losers" of "globalization" -- that is, a whole lot of people, including whole communities -- ended up with no party that spoke for them. Culturally, criticism of the neoliberal order was marginalized and hived off as a province of the "radical" left, rather than being the stuff of mainstream political discourse -- where it should have been all along. CB You write that the growth of transnationalized, finance-oriented economists (TFEs) and left party political strategists and policy wonks are actually related. Why is that? SM
TFEs were left party advisers who took it for granted that markets were forces "out there." They specialized in how to keep markets happy and reasoned that market-driven growth was good for everyone. But all of this was built on half-truths. First: markets, especially of the financial sort, become forces "out there" if humans construct them, insulate them from public or government oversight, and prop them up when they fail. Left parties in government in the late 1990s and early 2000s, with the input of TFEs, did exactly this. Second: what's good for markets is not necessarily good for families, communities, young people, older people, wage-earners, or victims of discrimination -- among others. This is especially true if by "markets" we really mean financial markets. Recent history is proof enough on both of these points.
So what do left parties do if they no longer have a way of responding to their constituencies' economic concerns, but they still want to win elections? They turn to spin: that is, they try to build appeal by marketing rather than substance. This is a sort of functional argument in the book: TFEs represented markets instead of constituents, and created a new need for strategic expertise. But it wasn't enough, and left political coalitions disintegrated. CB What have been the electoral consequences of TFEs and strategists, of this new generation of party experts in left parties? SM
In short: disastrous. Left politics has to speak for actual people, not a fictional ideal-type "mainstream" or "median" voter. Left parties' turn to markets, spin, and strategy is a symptom of a failure of meaningful representation. Voters know the difference between marketing and substance: sooner or later people see the game for what it is, and they lose faith. I think recent history is proof enough on this, too. CB You seem to indicate in your book's conclusion that what Western left parties need are a new generation of party experts capable of giving voice to the voiceless and acting as intermediaries between parties of the Left and those they are supposed to represent. What kind of party expert do you hope replaces TFEs, political strategists, and policy wonks? SM
This is the big question, isn't it? The short answer is that left politics needs experts who make spin unnecessary. Left politics should have intuitive appeal because it speaks to people's real needs and concerns.
That said, I don't think new experts will magically cure the ills of left politics. Nor is it my place to say who the next left party experts should be. I think that party experts can be anyone -- and maybe, in the current moment, left parties should be dedicating their resources to playing the long game by radically broadening the profiles of the people we consider "experts."
But I will say this: it is absolutely essential that left parties cultivate people's ability to understand, and critically engage with, the structure and logic of contemporary financial capitalism. I think Alexis de Tocqueville once said that you have to "educate democracy." I would give this a Marxian twist: you have to educate capitalist democracy. There can be no left politics without a shared understanding of today's specific economic circumstances, which are not like the circumstances of the 1930s or the 1970s. We live in a complicated world that is dominated by finance and holders of financial wealth, and this world needs to be unmasked.
And, to be honest, I'm skeptical that the contemporary economics professions can lead the way here, because they operate "on high" -- they speak a highly specialized language that is designed to be exclusive, not inclusive; they are constrained in the kinds of questions they can ask and the techniques they can use to answer them. So, maybe I should modify my previous statement: left parties should be dedicating their resources to cultivating critical economic analysis and radically broadening the profiles of the people we consider "economists." About the Author
Stephanie L. Mudge is an associate professor of sociology at the University of California, Davis and the author of Leftism Reinvented: Western Parties from Socialism to Neoliberalism .
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Dec 23, 2018 | failedevolution.blogspot.com
From David Harvey's A Brief History of NeoliberalismPart 10 – How Margaret Thatcher systematically destroyed the British industry along with the trade unions
While there were many elements out of which consent for a neoliberal turn could be constructed, the Thatcher phenomenon would surely not have arisen, let alone succeeded, if it had not been for the serious crisis of capital accumulation during the 1970s. Stagflation was hurting everyone. In 1975 inflation surged to 26 per cent and unemployment topped one million. The nationalized industries were draining resources from the Treasury.
This set up a confrontation between the state and the unions. In 1972, and then again in 1974, the British miners (a nationalized industry) went on strike for the first time since 1926.
The miners had always been in the forefront of British labour struggles. Their wages were not keeping pace with accelerating inflation, and the public sympathized. The Conservative government, in the midst of power blackouts, declared a state of emergency, mandated a three-day working week, and sought public backing against the miners. In 1974 it called an election seeking public support for its stand. It lost, and the Labour government that returned to power settled the strike on terms favourable to the miners.
The victory was, however, pyrrhic. The Labour government could not afford the terms of the settlement and its fiscal difficulties mounted. A balance of payments crisis paralleled huge budget deficits. Turning for credits to the IMF in 1975–6, it faced the choice of either submitting to IMF-mandated budgetary restraint and austerity or declaring bankruptcy and sacrificing the integrity of sterling, thus mortally wounding financial interests in the City of London. It chose the former path, and draconian budgetary cutbacks in welfare state expenditures were implemented . The Labour government went against the material interests of its traditional supporters. But it still had no solution to the crises of accumulation and stagflation. It sought, unsuccessfully, to mask the difficulties by appealing to corporatist ideals, in which everyone was supposed to sacrifice something for the benefit of the polity.
Its supporters were in open revolt, and public sector workers initiated a series of crippling strikes in the ' winter of discontent ' of 1978. ' Hospital workers went out, and medical care had to be severely rationed. Striking gravediggers refused to bury the dead. The truck drivers were on strike too. Only shop stewards had the right to let trucks bearing "essential supplies" cross picket lines. British Rail put out a terse notice "There are no trains today" . . . striking unions seemed about to bring the whole nation to a halt. '
The mainstream press was in full cry against greedy and disruptive unions, and public support fell away. The Labour government fell, and in the election that followed Margaret Thatcher won a significant majority with a clear mandate from her middle-class supporters to tame public sector trade union power .
The commonality between the US and the UK cases most obviously lies in the fields of labour relations and the fight against inflation. With respect to the latter, Thatcher made monetarism and strict budgetary control the order of the day. High interest rates meant high unemployment (averaging more than 10 per cent in 1979–84, and the Trades Union Congress lost 17 per cent of its membership in five years ). The bargaining power of labour was weakened.
Alan Budd, an economic adviser to Thatcher, later suggested that ' the 1980s policies of attacking inflation by squeezing the economy and public spending were a cover to bash the workers ' . Britain created what Marx called ' an industrial reserve army ', he went on to observe, the effect of which was to undermine the power of labour and permit capitalists to make easy profits thereafter. And in an action that paralleled Reagan's provocation of PATCO in 1981, Thatcher provoked a miners' strike in 1984 by announcing a wave of redundancies and pit closures (imported coal was cheaper).
The strike lasted for almost a year, and, in spite of a great deal of public sympathy and support, the miners lost. The back of a core element of the British labour movement had been broken. Thatcher further reduced union power by opening up the UK to foreign competition and foreign investment. Foreign competition demolished much of traditional British industry in the 1980s –– the steel industry (Sheffield) and shipbuilding (Glasgow) more or less totally disappeared within a few years, and with them a good deal of trade union power.
Thatcher effectively destroyed the indigenous nationalized UK automobile industry, with its strong unions and militant labour traditions, instead offering the UK as an offshore platform for Japanese automobile companies seeking access to Europe. These built on greenfield sites and recruited non-union workers who would submit to Japanese-style labour relations.
The overall effect was to transform the UK into a country of relatively low wages and a largely compliant labour force (relative to the rest of Europe) within ten years. By the time Thatcher left office, strike activity had fallen to one-tenth of its former levels. She had eradicated inflation, curbed union power, tamed the labour force, and built middle-class consent for her policies in the process .
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Dec 30, 2018 | www.europeanfinancialreview.com
Neoliberalism, the Free Market, and the Decline of Managerial Capitalism
April 23, 2014 • EUROPE , WORLD , Economic Thoughts , Commentary , Business & Economy , Politics & Policy , Eurozone Crisis & Debate
Twitter Facebook LinkedIn Google+ Pinterest Line Viber WhatsAppNeoliberalism is a most troubled term, one that denotes a variety of ideologies, beliefs, policies and practices. This article outlines some of the changes concerning corporate governance, managerial control, and employee relations and points at the interrelations between the scholarly debates and theoretical contributions, macroeconomic conditions, and political agenda all being part of the century-long history of neoliberalism.
The roots of neoliberalism runs deep in Western thinking and the history of the term is more complex than is generally recognized, especially among those who associate the term with laissez-faire policies and what at times has been rejected as "market fundamentalism." Liberalism as a political and economic term is of British origin, but the neoliberal tradition of thinking derives from the continent, and from Austria and Germany in particular. 1 The Austrian School of Economics, represented by Friedrich von Hayek and Joseph Schumpeter and the so-called Ordo-liberals at Freiburg University in Germany represent two distinct branches of economic liberalism. While Hayek early on warned against an expanded role of the state as the central planner of economic activities, the German group of liberal economists was more ready to recognize the role of the state as the legitimate regulator of the economy.
Hayek was a peripheral figure in the economic profession in the interwar period, but the anti-Keynesian sentiments at London School of Economics, best represented by the economist Lionel Robbins, served to advance Hayek as an alternative to the widely endorsed Keynesian economic theory and its application in policy. In 1950, Hayek was offered a position at LSE on the basis of a private donation. A few years earlier, in 1947, Hayek had founded the Mont Pèlerin Society (MPS), a community of intellectuals including economists such as Frank Knight, Milton Friedman, and Lionel Robbins and the philosopher Karl Popper. This group was committed to advancing a liberal economic agenda and to counteracting collectivist solutions to economic problems. For more than two decades, MPS was operating out of the limelight as Keynesianism effectively enabled economic growth and handled the issue of the distribution of economic resources through the use of progressive taxation in the emerging welfare states. In both economics departments and in policy-making quarters, Keynesianism became highly influential, at times hegemonic. However, by the mid-1960s, the profit rates started to decline in American industry and during the first oil crisis in the 1970s, caused by political conflicts, industry's profit rates sharply declined as energy costs soared.
Liberalism as a political and economic term is of British origin, but the neoliberal tradition of thinking derives from the continent, and from Austria and Germany in particular
The remainder of the 1970s were characterized by the new phenomenon of stagflation , high inflation in combination with rising unemployment, and the new monetarist economic theory advocated by Milton Freidman proposed a high interest-rate policy to curb inflation and to promote economic growth. Paul Volcker, the new chairman of the Federal Reserve named by President Carter, announced a high interest rate policy that would last well into the 1980s. By the mid-1970s, the predominant Keynesianist economic policy came under attack and neoliberal intellectuals could advance their positions.
The triumph of neoliberalism in the 1980s was caused by both macroeconomic and political changes in American society. First, the combination of high overseas savings, primarily in Japan reporting significant trade surplus, an overrated dollar, and the high-interests policy of the Fed led to an inflow of capital into the American economy, creating an oversupply of capital in the 1980s. 2 In addition, Ronald Reagan was elected president in 1980 on the basis of a pro-business agenda, and the Reagan Administration recruited economic advisors and co-workers from neoliberal and neoconservative think tanks that were either formed. or significantly increased their budgets, in the 1970s, as private capital owners donated money to advance free market policies. The new administration wanted to promote economic growth by implementing new regulatory policies based on the idea of the virtues of "small governments" as prescribed by Hayek's work published during the war years and thereafter. One of the key targets in this neoliberal framework were the trade unions, which were widely regarded as representing a collectivist solution that poorly fitted with the free-market policy advocated by neoliberal intellectuals. In addition, substantial tax reforms in the 1980s were justified on the basis of what was branded "trickle-down economics" by its critics, the idea that reduced taxes would create their own economic momentum as the supply of capital would "trickle down" the economic system and generate economic growth through increased demand.
By the mid-1980s, a wave of hostile takeovers strongly contributed to the decline in managerial capitalism, the economic regime characterized by large, public corporations run by professional managers representing various functional domains of expertise, and promoted a shift to "investor capitalism.
The tax-reforms reduced the federal income but the inflow of foreign capital into the American economy enabled the Reagan Administration to eat the cake and have it too: while Reagan was fond of speaking of "rolling back the state," he had larger budget deficits than any other post-World War II president, and government bonds served to finance the sharp increase in military spending in the 1980s. In fact, the issuing of government bonds closely followed the budget deficits in the Reagan era. 3
Investor capitalismThe new economic advisors, equipped with the new finance theory, advocated a liberalization of regulatory frameworks enabling new financial operations. By the mid-1980s, a wave of so-called hostile takeovers strongly contributed to the decline in managerial capitalism, the economic regime characterized by large, public corporations run by professional managers representing various functional domains of expertise, and promoted a shift to "investor capitalism," an economic regime closely bound up with the emergence of an increasingly dominant finance industry. As the American economy overflowed with capital, there were opportunities for a new class of professional finance professionals to raise capital, to buy large conglomerate firms being underrated after 1970s bear markets, and to divest them. Permissive regulators endorsed economic theories that regarded hostile takeovers as a legitimate mechanism serving to eliminate poorly managed firms with low-growth opportunities and therefore playing a key role in renewing and invigorating the economy. Such theoretically logical arguments were, however, not supported by empirical evidence as it was primarily sound and well-functioning companies that were subject to hostile takeover bids. 4
Regardless of the legitimacy of the new forms of financial engineering, strongly dependent on the ability to issue junk bonds popular among the new generation of finance industry actors such as Michael Milken, the new threat to corporate survival made CEOs and directors aware of the need to pay close attention to the market valuation of the stock. The popularity of agency theory and its insistence on the creation of shareholder value as the sole legitimate objective of the corporation further underlined the firm's orientation towards the finance market. In the new political and regulatory environment of the 1980s, the focus shifted from long-term survival and economic stability, i.e., virtues of managerial capitalism, to short-term capital accumulation and the ability to live with the turmoil of the ups and downs of the economy. Managers had traditionally been paid to secure long-term and stable growth and to cater to a variety of constituencies, while in the new economic regime, that of investor capitalism, high returns on investment and the one-sided focus of shareholder enrichment were rewarded. Managers started to "think like shareholders."
The popularity of agency theory and its insistence on the creation of shareholder value as the sole legitimate objective of the corporation further underlined the firm's orientation towards the finance market.
The inflow of capital into the U.S. economy had also created a new form of finance industry actor, the fund manager. While fund managers controlled 20% of shares of a stock-listed company in 1970, in 2005, the comparable figure was 60%. 5 In the ideal case of market-based transactions, an investor being unsatisfied with the financial performance of the firm acts through exit rather than voice (in Albert Hirschman's terms), i.e., he or she sells the stock. In the case where one single actor holds large shares of the stock, the selling of the shares would affect the market price, and therefore fund managers started to influence how CEOs and directors were recruited to the firms in which they held stocks, that is, they increasingly turned to voice rather than exit . As a consequence, CEOs and the directors with a background in finance that shared a belief in finance market efficiency and the virtue of shareholder value creation were increasingly recruited. As both fund managers and CEOs were now compensated on the basis of their ability to report a growth in the value of the stock, the interests of CEOs, directors, and owners converged as they were now all serving the same finance market. In an agency theory view, this led to a reduction of the so-called agency costs. Unfortunately, there was evidence of new forms of behavior that were not anticipated by free-market protagonists.
If markets were efficient, why would firms invest their so-called "free cash flow" to manipulate the price of their stock rather than investing the money in productive capital, or transfer the capital to the owners as dividends?
For instance, in the period of 1987-2007, the amount of annual repurchases of stocks by individual firms increased eighteen-fold. 6 Agency theory makes the assumption that finance markets are effectively pricing assets, that is, all publically available information is reflected in a financial asset's market price. Yet, the de-regulation of the finance markets from the 1980s to promote market efficiency coincides with a strong preference of firms to repurchase their own stock. If markets were efficient, why would then firms invest their so-called "free cash flow" to manipulate the price of their stock rather than investing the money in productive capital, or transfer the capital to the owners as dividends? The literature on stock repurchases offers a number of explanations but fails to provide a unified and comprehensive view. 7 Under all conditions, stock repurchases remain a puzzling phenomenon for free-marketeers.
In the new regime of investor capitalism, dominated by neoclassic economic theory favouring market transactions and skeptical of the role of organizations altogether (as they to some extent represent a market failure in terms of offering lower transaction costs vis-à-vis comparable market transactions), managerial authority has been moved to the outside of the corporation. First of all, to repeat, the shareholder value creation policy locates the shareholders who know better than executives inside the firm where to invest the free-cash flow; if there are promising potentials within the focal firm, capital owners will buy more shares, but if there are higher expected returns elsewhere, the capital will be invested accordingly. Second, as a consequence of the suspicion that executives are at risk to act opportunistically, various forms of auditing, accreditations, and credit ratings are widely used in an attempt to move the corporate control outside of the firm. The extensive literature on auditing and the issuing of accreditations and credit ratings unfortunately reveal that it is complicated to maintain the arm's-length distance needed between the auditor and the auditee, 8 and in the case of credit-rating, the so-called "issuer pays" policy leads to a series of governance problems. 9
Third, the orientation towards finance markets and its emphasis on high returns over long–term stability -- there is ample evidence of a sharp growth of recurrent financial crises after 1980 10 -- has led to new human resources and employment practices, wherein a larger proportion of the workforce is hired on short-term contracts and receive lower pay and fewer benefits. In addition, in the U.S., and the U.K., the two epicentra of neoliberal reforms, the level of unionization has been in decline, further reducing the collective bargaining power of workers. 11 The perhaps largest explanatory factor regarding the decline in long-term stability in employment is the loss in manufacturing jobs in the U.S., and the succession of service-industry jobs offering both lower pay and lower demands for technical expertise. In addition, in the attempt to boost shareholder value, downsizing and off-shoring have been popular among finance market-oriented executives. By and large, the shift from the managerial capitalism of the Keynesian, post-World War II period to the neoliberal investor capitalism brought a new theory of the firm, novel corporate governance practices, an accentuated short-term perspective on economic value creation, and not least, a new vocabulary of how to address and speak about managerial practices and firm performance.
The triumph of free-market thinking and neoliberal policy is perhaps not so much to be treated as the ultimate evidence of the superior rationality of the market, as it is indicative of the decline of the U.S. and U.K. economies and the West more broadly speaking on the global scale.
Concluding RemarksIn hindsight, after five decades of consolidation and organization, free-market protagonists managed to move from the periphery of economic policy-making and into its very centres by the end of the 1970s. Those who were initially regarded as outsiders and eccentrics started to claim the Nobel Memorial Prizes in Economic Sciences by the mid-1970s, but this is, skeptics may say, not so much about "being right" (in terms of making adequate predictions or providing policies that regulate the economy effectively) as much as it is indicative of the ability to capitalize on strong political and economic interests being mobilized when, for example, trade unions' influence and demands for economic equality were regarded to be too far advanced by certain groups. In addition to the ability to align capital owners and intellectuals in financing academic departments and think tanks in the post-World War II period and in the crisis-ridden 1970s in particular, 12 macroeconomic conditions were beneficial for the free-market cause. At the same time, it is complicated to predict the outcome from policy-making, and there are significant influences from unforeseen events and unanticipated consequences of purposeful action in the history of neoliberalism and free market reforms. Therefore, the triumph of free-market thinking and neoliberal policy is perhaps not so much to be treated as the ultimate evidence of the superior rationality of the market as economists like Friedrich von Hayek and Milton Friedman would assume, as it is indicative of the decline of the U.S. and U.K. economies and the West more broadly speaking on the global scale as suggested by economic statistics. 13
While finance theory professors are fond of speaking of finance markets as being "the brain of capitalist system," the events of 2008 rendered such statements subject to doubt, to say the least.
The enormous growth of financial markets and the finance industry is also a topic subject to much scholarly and media attention, and while finance theory professors are fond of speaking of finance markets as being "the brain of capitalist system," the events of 2008 rendered such statements subject to doubt, to say the least. In addition, the free-market capitalism being dreamed about by neoliberal intellectuals since the 1930s does by no means imply a diminished state but rather the government and state agencies becoming an ally of capital owners, serving to rearticulate the welfare state into a "neoliberal ownership society state." Whether that is a sustainable role of the state, or if it rewards certain groups at an intolerable level is subject to ongoing discussions.
This article draw on A. Styhre (2014) Management and Neoliberalism: Connecting Policies and Practices (New York & London: Routledge)
Go to topAbout the Author
Alexander Styhre , Ph.D (Lund University) is Chair of Organization Theory and Management, School of Business, Economics and Law, University of Gothenburg, Sweden. Styhre has published widely in the field of organization studies and is the author of several research monographs and textbooks. Alexander is the Editor-in-Chief of Scandinavian Journal of Management.
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Dec 29, 2018 | failedevolution.blogspot.com
From David Harvey's A Brief History of Neoliberalism
Part 11 – The Reagan/Thatcher neoliberal legacy: a bizarre form of a sinister political doctrine from which it would be difficult one to escape
But Thatcher had to fight the battle on other fronts. A noble rearguard action against neoliberal policies was mounted in many a municipality –– Sheffield, the Greater London Council (which Thatcher had to abolish in order to achieve her broader goals in the 1980s), and Liverpool (where half the local councillors had to be gaoled) formed active centres of resistance in which the ideals of a new municipal socialism (incorporating many of the new social movements in the London case) were both pursued and acted upon until they were finally crushed in the mid-1980s.
She began by savagely cutting back central government funding to the municipalities, but several of them responded simply by raising property taxes, forcing her to legislate against their right to do so. Denigrating the progressive labour councils as 'loony lefties' (a phrase the Conservative-dominated press picked up with relish), she then sought to impose neoliberal principles through a reform of municipal finance. She proposed a 'poll tax' –– a regressive head tax rather than a property tax –– which would rein in municipal expenditures by making every resident pay. This provoked a huge political fight that played a role in Thatcher's political demise .
Thatcher also set out to privatize all those sectors of the economy that were in public ownership. The sales would boost the public treasury and rid the government of burdensome future obligations towards losing enterprises. These state-run enterprises had to be adequately prepared for privatization, and this meant paring down their debt and improving their efficiency and cost structures, often through shedding labour.
Their valuation was also structured to offer considerable incentives to private capital –– a process that was likened by opponents to 'giving away the family silver'. In several cases subsidies were hidden in the mode of valuation –– water companies, railways, and even state-run enterprises in the automobile and steel industries held high-value land in prime locations that was excluded from the valuation of the enterprise as an ongoing concern.
Privatization and speculative gains on the property released went hand in hand. But the aim here was also to change the political culture by extending the field of personal and corporate responsibility and encouraging greater efficiency, individual/corporate initiative, and innovation. British Aerospace, British Telecom, British Airways, steel, electricity and gas, oil, coal, water, bus services, railways, and a host of smaller state enterprises were sold off in a massive wave of privatizations.
Britain pioneered the way in showing how to do this in a reasonably orderly and, for capital, profitable way. Thatcher was convinced that once these changes had been made they would become irreversible: hence the haste. The legitimacy of this whole movement was successfully underpinned, however, by the extensive selling off of public housing to tenants. This vastly increased the number of homeowners within a decade. It satisfied traditional ideals of individual property ownership as a working-class dream and introduced a new, and often speculative, dynamism into the housing market that was much appreciated by the middle classes, who saw their asset values rise –– at least until the property crash of the early 1990s .
Dismantling the welfare state was, however, quite another thing. Taking on areas such as education, health care, social services, the universities, the state bureaucracy, and the judiciary proved difficult. Here she had to do battle with the entrenched and sometimes traditional upper-middle-class attitudes of her core supporters .
Thatcher desperately sought to extend the ideal of personal responsibility (for example through the privatization of health care) across the board and cut back on state obligations. She failed to make rapid headway. There were, in the view of the British public, limits to the neoliberalization of everything. Not until 2003, for example, did a Labour government, against widespread opposition, succeed in introducing a fee-paying structure into British higher education .
In all these areas it proved difficult to forge an alliance of consent for radical change. On this her Cabinet (and her supporters) were notoriously divided (between 'wets' and 'drys') and it took several years of bruising confrontations within her own party and in the media to win modest neoliberal reforms. The best she could do was to try to force a culture of entrepreneurialism and impose strict rules of surveillance, financial accountability, and productivity on to institutions, such as universities, that were ill suited to them.
Thatcher forged consent through the cultivation of a middle class that relished the joys of home ownership, private property, individualism, and the liberation of entrepreneurial opportunities. With working-class solidarities waning under pressure and job structures radically changing through deindustrialization, middle-class values spread more widely to encompass many of those who had once had a firm working-class identity .
The opening of Britain to freer trade allowed a consumer culture to flourish, and the proliferation of financial institutions brought more and more of a debt culture into the centre of a formerly staid British life. Neoliberalism entailed the transformation of the older British class structure, at both ends of the spectrum.
Moreover, by keeping the City of London as a central player in global finance it increasingly turned the heartland of Britain's economy, London and the south-east, into a dynamic centre of ever-increasing wealth and power. Class power had not so much been restored to any traditional sector but rather had gathered expansively around one of the key global centres of financial operations. Recruits from Oxbridge flooded into London as bond and currency traders, rapidly amassing wealth and power and turning London into one of the most expensive cities in the world.
While the Thatcher revolution was prepared by the organization of consent within the traditional middle classes who bore her to three electoral victories, the whole programme, particularly in her first administration, was far more ideologically driven (thanks largely to Keith Joseph) by neoliberal theory than was ever the case in the US. While from a solid middle-class background herself, she plainly relished the traditionally close contacts between the prime minister's office and the 'captains' of industry and finance. She frequently turned to them for advice and in some instances clearly delivered them favours by undervaluing state assets set for privatization . The project to restore class power –– as opposed to dismantling working-class power –– probably played a more subconscious role in her political evolution.
The success of Reagan and Thatcher can be measured in various ways. But I think it most useful to stress the way in which they took what had hitherto been minority political, ideological, and intellectual positions and made them mainstream. The alliance of forces they helped consolidate and the majorities they led became a legacy that a subsequent generation of political leaders found hard to dislodge.
Perhaps the greatest testimony to their success lies in the fact that both Clinton and Blair found themselves in a situation where their room for manoeuvre was so limited that they could not help but sustain the process of restoration of class power even against their own better instincts. And once neoliberalism became that deeply entrenched in the English-speaking world it was hard to gainsay its considerable relevance to how capitalism in general was working internationally.
This is not to say, as we shall see, that neoliberalism was merely imposed elsewhere by Anglo-American influence and power. For as these two case studies amply demonstrate, the internal circumstances and subsequent nature of the neoliberal turn were quite different in Britain and the US, and by extension we should expect that internal forces as well as external influences and impositions have played a distinctive role elsewhere.
Reagan and Thatcher seized on the clues they had (from Chile and New York City) and placed themselves at the head of a class movement that was determined to restore its power. Their genius was to create a legacy and a tradition that tangled subsequent politicians in a web of constraints from which they could not easily escape . Those who followed, like Clinton and Blair, could do little more than continue the good work of neoliberalization, whether they liked it or not.
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Dec 09, 2018 | www.ineteconomics.org
- mikem2 31 Oct 2018 00:22 7 8 Meet the Economist Behind the One Percent's Stealth Takeover of America
Ask people to name the key minds that have shaped America's burst of radical right-wing attacks on working conditions, consumer rights and public services, and they will typically mention figures like free market-champion Milton Friedman, libertarian guru Ayn Rand, and laissez-faire economists Friedrich Hayek and Ludwig von Mises.
James McGill Buchanan is a name you will rarely hear unless you've taken several classes in economics. And if the Tennessee-born Nobel laureate were alive today, it would suit him just fine that most well-informed journalists, liberal politicians, and even many economics students have little understanding of his work.
The reason? Duke historian Nancy MacLean contends that his philosophy is so stark that even young libertarian acolytes are only introduced to it after they have accepted the relatively sunny perspective of Ayn Rand. (Yes, you read that correctly). If Americans really knew what Buchanan thought and promoted, and how destructively his vision is manifesting under their noses, it would dawn on them how close the country is to a transformation most would not even want to imagine, much less accept.
That is a dangerous blind spot, MacLean argues in a meticulously researched book, Democracy in Chains , a finalist for the National Book Award in Nonfiction. While Americans grapple with Donald Trump's chaotic presidency, we may be missing the key to changes that are taking place far beyond the level of mere politics. Once these changes are locked into place, there may be no going back.
The greedy right wing want it all for themselves.
- Stephen Hancock 31 Oct 2018 00:04 3 4 Neo-liberalism will never die, it might mutate in to another parasitic ideology and the Liberals might re-brand their party, but as long as there's human greed to want more power and financial gain over others, people like Abbott and Joyce will continue to surface and thrive.
- ocratato 31 Oct 2018 00:03 5 6 I think declaring neoliberalism dead is way too premature.
The rich and powerful have their greedy hands on the levers of government in many countries. They are not going to give that up without a fight.Basically neoliberalism will eventually go down kicking and screaming. Sadly it will take a lot of us with it. It is going to get nasty.
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Dec 05, 2018 | www.bradford-delong.com
Margaret Thatcher Against Friedrich von Hayek's Pleas for a Lykourgan Dictatorship : "My dear Professor Hayek, Thank you for your letter of 5 February. I was very glad that you were able to attend the dinner so thoughtfully organised by Walter Salomon. It was not only a great pleasure for me, it was, as always, instructive and rewarding to hear your views on the great issues of our time...
December 03, 2018 at 05:19 PM in History , Moral Responsibility , Politics , Streams: (Tuesday) Hoisted from Archives , Streams: Cycle | Permalink | Comments (1)
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Dec 05, 2018 | www.bradford-delong.com
Von Hayek, to put it bluntly, loved Pincohet's shooting people in soccer stadiums: the "Lykourgan Moment" in which unconstitutional and illiberal actions create the space for future stable libertarian capitalism was a recurrent fantasy of his.
Friedman saw his trips to Chile to be an opportunity to preach to the gentiles -- to primarily preach free markets and small government, but also respect for individuals, for their liberty, and for democracy. And he had no tolerance for those who said it was evil to try to make the Chilean people more prosperous because that might reinforce the dictatorship.
Buchanan... where was Buchanan on this spectrum, anyway? It's complicated:
Andrew Farrant and Vlad Tarko : James M. Buchanan's 1981 Visit to Chile: Knightian Democrat or Defender of the 'Devil's Fix'? :
"Buchanan has repeatedly argued that the 'political economist should not act as if he or she were providing advice to a benevolent despot' (Boettke Constitutional Political Economy, 25, 110–124, 2014: 112), but an increasingly influential body of scholarship argues that Buchanan provided a wealth of early 1980s policy advice to Augusto Pinochet's military dictatorship in Chile (e.g., Fischer 2009; Maclean 2017). In particular, Buchanan reportedly provided an analytical defense of military rule to a predominantly Chilean audience when he visited the country in late 1981...
...This paper draws upon largely ignored archival evidence from the Buchanan House Archives and Chilean primary source material to assess whether Buchanan provided a defense of Pinochet's "capitalist fascism" (Samuelson 1983) or whether he defended democracy when he visited Chile in 1981.
Aside from the importance of this for assessing Buchanan's own legacy, his constitutional political economy arguments presented in Chile also provide an interesting and distinct perspective on the connection between democracy and growth, which remains highly relevant to current debates. Despite a general agreement about the desirability of democracy, the view that authoritarian regimes can spur "growth miracles", or might even be a necessary stage in political-economic development, still has prominent supporters (e.g. Sachs 2012)...
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Nov 27, 2018 | thenewkremlinstooge.wordpress.com
Northern Star November 26, 2018 at 4:23 pm
As the New deal unravels:"The original "New Deal," which included massive public works infrastructure projects, was introduced by Democratic President Franklin Roosevelt in the 1930s amid the Great Depression. Its purpose was to stave off a socialist revolution in America. It was a response to a militant upsurge of strikes and violent class battles, led by socialists who were inspired by the 1917 Russian Revolution that had occurred less than two decades before.
American capitalism could afford to make such concessions because of its economic dominance. The past forty years have been characterized by the continued decline of American capitalism on a world stage relative to its major rivals. The ruling class has responded to this crisis with a social counterrevolution to claw back all gains won by workers. This has been carried out under both Democratic and Republican administrations and with the assistance of the trade unions.
Since the 2008 crash, first under Bush and Obama, and now Trump, the ruling elites have pursued a single-minded policy of enriching the wealthy, through free credit, corporate bailouts and tax cuts, while slashing spending on social services.
To claim as does Ocasio-Cortez that American capitalism can provide a new "New Deal," of a green or any other variety, is to pfile:///F:/Private_html/Skeptics/Political_skeptic/Neoliberalism/Historyromote an obvious political fiction."
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Dec 11, 2017 | www.huffingtonpost.com
In his ground-breaking 1995 book Jihad vs. McWorld , political scientist Benjamin Barber posits that the global conflicts of the early 21st century would be driven by two opposing but equally undemocratic forces: neoliberal corporate globalization (which he dubbed "McWorld") and reactionary tribal nationalisms (which he dubbed "Jihad"). Although distinct in many ways, both of these forces, Barber persuasively argues, succeed by denying the possibilities for democratic consensus and action, and so both must be opposed by civic engagement and activism on a broad scale.
In the two decades since Barber's book, this conflict has seemed to play out along overtly cultural lines: with Islamic extremism representing jihad, in opposition to Western neoliberalism representing McWorld. Case in pitch-perfect point: the Al Qaeda terrorist attacks on the World Trade Center. Yet despite his use of the Arabic word Jihad, Barber is clear that reactionary tribalism is a worldwide phenomenon -- and in 2016 we're seeing particularly striking examples of that tribalism in Western nations such as Great Britain and the United States.
Britain's vote this week in favor of leaving the European Union was driven entirely by such reactionary tribal nationalism. The far-right United Kingdom Independence Party (UKIP) and its leader Nigel Farage led the charge in favor of Leave , as exemplified by a recent UKIP poster featuring a photo of Syrian refugees with the caption " Breaking point: the EU has failed us ." Farage and his allies like to point to demographic statistics about how much the UK has changed in the last few decades , and more exactly how the nation's white majority has been somewhat shifted over that time by the arrival of sizeable African and Asian immigrant communities.
It's impossible not to link the UKIP's emphases on such issues of immigration and demography to the presidential campaign of the one prominent U.S. politician who is cheering for the Brexit vote : presumptive GOP nominee Donald Trump. From his campaign-launching speech about Mexican immigrant "criminals and rapists" to his proposal to ban Muslim immigration and his "Make American Great Again" slogan, Trump has relied on reactionary tribal nationalism at every stage of his campaign, and has received the enthusiastic endorsement of white supremacist and far-right organizations as a result. For such American tribal nationalists, the 1965 Immigration Act is the chief bogeyman, the origin point of continuing demographic shifts that have placed white America in a precarious position.
The only problem with that narrative is that it's entirely inaccurate. What the 1965 Act did was reverse a recent, exclusionary trend in American immigration law and policy, returning the nation to the more inclusive and welcoming stance it had taken throughout the rest of its history. Moreover, while the numbers of Americans from Latin American, Asian, and Muslim cultures have increased in recent decades, all of those communities have been part of o ur national community from its origin points . Which is to say, this right-wing tribal nationalism isn't just opposed to fundamental realities of 21st century American identity -- it also depends on historical and national narratives that are as mythic as they are exclusionary.
Linking Brexit and Trump to global right-wing tribal nationalisms doesn't mean conflating them all, of course. Although Trump rallies have featured troubling instances of violence, and although the murderer of British politican Jo Cox was an avowed white supremacist and Leave supporter, the right-wing Islamic extremism of groups such as Al Qaeda, ISIS, and Boko Haram rely far more consistently and centrally on violence and terrorism in support of their worldview and goals. Such specific contexts and nuances are important and shouldn't be elided.
Yet at the same time, we can't understand our 21st century world without a recognition of this widespread phenomenon of global, tribal nationalism. From ISIS to UKIP, Trump to France's Jean-Marie Le Pen, such reactionary forces have become and remain dominant players across the world, influencing local and international politics, economics, and culture. Benjamin Barber called this trend two decades ago, and we would do well to read and remember his analyses -- as well as his call for civic engagement and activism to resist these forces and fight for democracy.
Ben Railton Professor & public scholar of American Studies, Follow Ben Railton on Twitter: www.twitter.com/AmericanStudier
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Dec 13, 2017 | www.unz.com
Introduction
The American welfare state was created in 1935 and continued to develop through 1973. Since then, over a prolonged period, the capitalist class has been steadily dismantling the entire welfare state.
Between the mid 1970's to the present (2017) labor laws, welfare rights and benefits and the construction of and subsidies for affordable housing have been gutted. ' Workfare' (under President 'Bill' Clinton) ended welfare for the poor and displaced workers. Meanwhile the shift to regressive taxation and the steadily declining real wages have increased corporate profits to an astronomical degree.
What started as incremental reversals during the 1990's under Clinton has snowballed over the last two decades decimating welfare legislation and institutions.
The earlier welfare 'reforms' and the current anti-welfare legislation and austerity practices have been accompanied by a series of endless imperial wars, especially in the Middle East.
In the 1940's through the 1960's, world and regional wars (Korea and Indo-China) were combined with significant welfare program – a form of ' social imperialism' , which 'buy off' the working class while expanding the empire. However, recent decades are characterized by multiple regional wars and the reduction or elimination of welfare programs – and a massive growth in poverty, domestic insecurity and poor health.
New Deals and Big Wars
The 1930's witnessed the advent of social legislation and action, which laid the foundations of what is called the ' modern welfare state' .
Labor unions were organized as working class strikes and progressive legislation facilitated trade union organization, elections, collective bargaining rights and a steady increase in union membership. Improved work conditions, rising wages, pension plans and benefits, employer or union-provided health care and protective legislation improved the standard of living for the working class and provided for 2 generations of upward mobility.
Social Security legislation was approved along with workers' compensation and the forty-hour workweek. Jobs were created through federal programs (WPA, CCC, etc.). Protectionist legislation facilitated the growth of domestic markets for US manufacturers. Workplace shop steward councils organized 'on the spot' job action to protect safe working conditions.
World War II led to full employment and increases in union membership, as well as legislation restricting workers' collective bargaining rights and enforcing wage freezes. Hundreds of thousands of Americans found jobs in the war economy but a huge number were also killed or wounded in the war.
The post-war period witnessed a contradictory process: wages and salaries increased while legislation curtailed union rights via the Taft Hartley Act and the McCarthyist purge of leftwing trade union activists. So-called ' right to work' laws effectively outlawed unionization mostly in southern states, which drove industries to relocate to the anti-union states.
Welfare reforms, in the form of the GI bill, provided educational opportunities for working class and rural veterans, while federal-subsidized low interest mortgages encourage home-ownership, especially for veterans.
The New Deal created concrete improvements but did not consolidate labor influence at any level. Capitalists and management still retained control over capital, the workplace and plant location of production.
Trade union officials signed pacts with capital: higher pay for the workers and greater control of the workplace for the bosses. Trade union officials joined management in repressing rank and file movements seeking to control technological changes by reducing hours (" thirty hours work for forty hours pay "). Dissident local unions were seized and gutted by the trade union bosses – sometimes through violence.
Trade union activists, community organizers for rent control and other grassroots movements lost both the capacity and the will to advance toward large-scale structural changes of US capitalism. Living standards improved for a few decades but the capitalist class consolidated strategic control over labor relations. While unionized workers' incomes, increased, inequalities, especially in the non-union sectors began to grow. With the end of the GI bill, veterans' access to high-quality subsidized education declined.
While a new wave of social welfare legislation and programs began in the 1960's and early 1970's it was no longer a result of a mass trade union or workers' "class struggle". Moreover, trade union collaboration with the capitalist regional war policies led to the killing and maiming of hundreds of thousands of workers in two wars – the Korean and Vietnamese wars.
Much of social legislation resulted from the civil and welfare rights movements. While specific programs were helpful, none of them addressed structural racism and poverty.
The Last Wave of Social Welfarism
The 1960'a witnessed the greatest racial war in modern US history: Mass movements in the South and North rocked state and federal governments, while advancing the cause of civil, social and political rights. Millions of black citizens, joined by white activists and, in many cases, led by African American Viet Nam War veterans, confronted the state. At the same time, millions of students and young workers, threatened by military conscription, challenged the military and social order.
Energized by mass movements, a new wave of social welfare legislation was launched by the federal government to pacify mass opposition among blacks, students, community organizers and middle class Americans. Despite this mass popular movement, the union bosses at the AFL-CIO openly supported the war, police repression and the military, or at best, were passive impotent spectators of the drama unfolding in the nation's streets. Dissident union members and activists were the exception, as many had multiple identities to represent: African American, Hispanic, draft resisters, etc.
Under Presidents Lyndon Johnson and Richard Nixon, Medicare, Medicaid, OSHA, the EPA and multiple poverty programs were implemented. A national health program, expanding Medicare for all Americans, was introduced by President Nixon and sabotaged by the Kennedy Democrats and the AFL-CIO. Overall, social and economic inequalities diminished during this period.
The Vietnam War ended in defeat for the American militarist empire. This coincided with the beginning of the end of social welfare as we knew it – as the bill for militarism placed even greater demands on the public treasury.
With the election of President Carter, social welfare in the US began its long decline. The next series of regional wars were accompanied by even greater attacks on welfare via the " Volker Plan " – freezing workers' wages as a means to combat inflation.
Guns without butter' became the legislative policy of the Carter and Reagan Administrations. The welfare programs were based on politically fragile foundations.
The Debacle of Welfarism
Private sector trade union membership declined from a post-world war peak of 30% falling to 12% in the 1990's. Today it has sunk to 7%. Capitalists embarked on a massive program of closing thousands of factories in the unionized North which were then relocated to the non-unionized low wage southern states and then overseas to Mexico and Asia. Millions of stable jobs disappeared.
Following the election of 'Jimmy Carter', neither Democratic nor Republican Presidents felt any need to support labor organizations. On the contrary, they facilitated contracts dictated by management, which reduced wages, job security, benefits and social welfare.
The anti-labor offensive from the ' Oval Office' intensified under President Reagan with his direct intervention firing tens of thousands of striking air controllers and arresting union leaders. Under Presidents Carter, Reagan, George H.W. Bush and William Clinton cost of living adjustments failed to keep up with prices of vital goods and services. Health care inflation was astronomical. Financial deregulation led to the subordination of American industry to finance and the Wall Street banks. De-industrialization, capital flight and massive tax evasion reduced labor's share of national income.
The capitalist class followed a trajectory of decline, recovery and ascendance. Moreover, during the earlier world depression, at the height of labor mobilization and organization, the capitalist class never faced any significant political threat over its control of the commanding heights of the economy.
The ' New Deal' was, at best, a de facto ' historical compromise' between the capitalist class and the labor unions, mediated by the Democratic Party elite. It was a temporary pact in which the unions secured legal recognition while the capitalists retained their executive prerogatives.
The Second World War secured the economic recovery for capital and subordinated labor through a federally mandated no strike production agreement. There were a few notable exceptions: The coal miners' union organized strikes in strategic sectors and some leftist leaders and organizers encouraged slow-downs, work to rule and other in-plant actions when employers ran roughshod with special brutality over the workers. The recovery of capital was the prelude to a post-war offensive against independent labor-based political organizations. The quality of labor organization declined even as the quantity of trade union membership increased.
Labor union officials consolidated internal control in collaboration with the capitalist elite. Capitalist class-labor official collaboration was extended overseas with strategic consequences.
The post-war corporate alliance between the state and capital led to a global offensive – the replacement of European-Japanese colonial control and exploitation by US business and bankers. Imperialism was later 're-branded' as ' globalization' . It pried open markets, secured cheap docile labor and pillaged resources for US manufacturers and importers.
US labor unions played a major role by sabotaging militant unions abroad in cooperation with the US security apparatus: They worked to coopt and bribe nationalist and leftist labor leaders and supported police-state regime repression and assassination of recalcitrant militants.
' Hand in bloody glove' with the US Empire, the American trade unions planted the seeds of their own destruction at home. The local capitalists in newly emerging independent nations established industries and supply chains in cooperation with US manufacturers. Attracted to these sources of low-wage, violently repressed workers, US capitalists subsequently relocated their factories overseas and turned their backs on labor at home.
Labor union officials had laid the groundwork for the demise of stable jobs and social benefits for American workers. Their collaboration increased the rate of capitalist profit and overall power in the political system. Their complicity in the brutal purges of militants, activists and leftist union members and leaders at home and abroad put an end to labor's capacity to sustain and expand the welfare state.
Trade unions in the US did not use their collaboration with empire in its bloody regional wars to win social benefits for the rank and file workers. The time of social-imperialism, where workers within the empire benefited from imperialism's pillage, was over. Gains in social welfare henceforth could result only from mass struggles led by the urban poor, especially Afro-Americans, community-based working poor and militant youth organizers.
The last significant social welfare reforms were implemented in the early 1970's – coinciding with the end of the Vietnam War (and victory for the Vietnamese people) and ended with the absorption of the urban and anti-war movements into the Democratic Party.
Henceforward the US corporate state advanced through the overseas expansion of the multi-national corporations and via large-scale, non-unionized production at home.
The technological changes of this period did not benefit labor. The belief, common in the 1950's, that science and technology would increase leisure, decrease work and improve living standards for the working class, was shattered. Instead technological changes displaced well-paid industrial labor while increasing the number of mind-numbing, poorly paid, and politically impotent jobs in the so-called 'service sector' – a rapidly growing section of unorganized and vulnerable workers – especially including women and minorities.
Labor union membership declined precipitously. The demise of the USSR and China's turn to capitalism had a dual effect: It eliminated collectivist (socialist) pressure for social welfare and opened their labor markets with cheap, disciplined workers for foreign manufacturers. Labor as a political force disappeared on every count. The US Federal Reserve and President 'Bill' Clinton deregulated financial capital leading to a frenzy of speculation. Congress wrote laws, which permitted overseas tax evasion – especially in Caribbean tax havens. Regional free-trade agreements, like NAFTA, spurred the relocation of jobs abroad. De-industrialization accompanied the decline of wages, living standards and social benefits for millions of American workers.
The New Abolitionists: Trillionaires
The New Deal, the Great Society, trade unions, and the anti-war and urban movements were in retreat and primed for abolition.
Wars without welfare (or guns without butter) replaced earlier 'social imperialism' with a huge growth of poverty and homelessness. Domestic labor was now exploited to finance overseas wars not vice versa. The fruits of imperial plunder were not shared.
As the working and middle classes drifted downward, they were used up, abandoned and deceived on all sides – especially by the Democratic Party. They elected militarists and demagogues as their new presidents.
President 'Bill' Clinton ravaged Russia, Yugoslavia, Iraq and Somalia and liberated Wall Street. His regime gave birth to the prototype billionaire swindlers: Michael Milken and Bernard 'Bernie' Madoff.
Clinton converted welfare into cheap labor 'workfare', exploiting the poorest and most vulnerable and condemning the next generations to grinding poverty. Under Clinton the prison population of mostly African Americans expanded and the breakup of families ravaged the urban communities.
Provoked by an act of terrorism (9/11) President G.W. Bush Jr. launched the 'endless' wars in Afghanistan and Iraq and deepened the police state (Patriot Act). Wages for American workers and profits for American capitalist moved in opposite directions.
The Great Financial Crash of 2008-2011 shook the paper economy to its roots and led to the greatest shakedown of any national treasury in history directed by the First Black American President. Trillions of public wealth were funneled into the criminal banks on Wall Street – which were ' just too big to fail .' Millions of American workers and homeowners, however, were ' just too small to matter' .
The Age of Demagogues
President Obama transferred 2 trillion dollars to the ten biggest bankers and swindlers on Wall Street, and another trillion to the Pentagon to pursue the Democrats version of foreign policy: from Bush's two overseas wars to Obama's seven.
Obama's electoral 'donor-owners' stashed away two trillion dollars in overseas tax havens and looked forward to global free trade pacts – pushed by the eloquent African American President.
Obama was elected to two terms. His liberal Democratic Party supporters swooned over his peace and justice rhetoric while swallowing his militarist escalation into seven overseas wars as well as the foreclosure of two million American householders. Obama completely failed to honor his campaign promise to reduce wage inequality between black and white wage earners while he continued to moralize to black families about ' values' .
Obama's war against Libya led to the killing and displacement of millions of black Libyans and workers from Sub-Saharan Africa. The smiling Nobel Peace Prize President created more desperate refugees than any previous US head of state – including millions of Africans flooding Europe.
'Obamacare' , his imitation of an earlier Republican governor's health plan, was formulated by the private corporate health industry (private insurance, Big Pharma and the for-profit hospitals), to mandate enrollment and ensure triple digit profits with double digit increases in premiums. By the 2016 Presidential elections, ' Obama-care' was opposed by a 45%-43% margin of the American people. Obama's propagandists could not show any improvement of life expectancy or decrease in infant and maternal mortality as a result of his 'health care reform'. Indeed the opposite occurred among the marginalized working class in the old 'rust belt' and in the rural areas. This failure to show any significant health improvement for the masses of Americans is in stark contrast to LBJ's Medicare program of the 1960's, which continues to receive massive popular support.
Forty-years of anti welfare legislation and pro-business regimes paved the golden road for the election of Donald Trump
Trump and the Republicans are focusing on the tattered remnants of the social welfare system: Medicare, Medicaid, Social Security. The remains of FDR's New Deal and LBJ's Great Society -- are on the chopping block.
The moribund (but well-paid) labor leadership has been notable by its absence in the ensuing collapse of the social welfare state. The liberal left Democrats embraced the platitudinous Obama/Clinton team as the 'Great Society's' gravediggers, while wailing at Trump's allies for shoving the corpse of welfare state into its grave.
Conclusion
Over the past forty years the working class and the rump of what was once referred to as the ' labor movement' has contributed to the dismantling of the social welfare state, voting for ' strike-breaker' Reagan, ' workfare' Clinton, ' Wall Street crash' Bush, ' Wall Street savior' Obama and ' Trickle-down' Trump.
Gone are the days when social welfare and profitable wars raised US living standards and transformed American trade unions into an appendage of the Democratic Party and a handmaiden of Empire. The Democratic Party rescued capitalism from its collapse in the Great Depression, incorporated labor into the war economy and the post- colonial global empire, and resurrected Wall Street from the 'Great Financial Meltdown' of the 21 st century.
The war economy no longer fuels social welfare. The military-industrial complex has found new partners on Wall Street and among the globalized multi-national corporations. Profits rise while wages fall. Low paying compulsive labor (workfare) lopped off state transfers to the poor. Technology – IT, robotics, artificial intelligence and electronic gadgets – has created the most class polarized social system in history. The first trillionaire and multi-billionaire tax evaders rose on the backs of a miserable standing army of tens of millions of low-wage workers, stripped of rights and representation. State subsidies eliminate virtually all risk to capital. The end of social welfare coerced labor (including young mother with children) to seek insecure low-income employment while slashing education and health – cementing the feet of generations into poverty. Regional wars abroad have depleted the Treasury and robbed the country of productive investment. Economic imperialism exports profits, reversing the historic relation of the past.
Labor is left without compass or direction; it flails in all directions and falls deeper in the web of deception and demagogy. To escape from Reagan and the strike breakers, labor embraced the cheap-labor predator Clinton; black and white workers united to elect Obama who expelled millions of immigrant workers, pursued 7 wars, abandoned black workers and enriched the already filthy rich. Deception and demagogy of the labor-
Issac , December 11, 2017 at 11:01 pm GMT
"The military-industrial complex has found new partners on Wall Street and among the globalized multi-national corporations."whyamihere , December 12, 2017 at 4:24 am GMT"The collaboration of liberals and unions in promoting endless wars opened the door to Trump's mirage of a stateless, tax-less, ruling class."
A mirage so real, it even has you convinced.
If the welfare state in America was abolished, major American cities would burn to the ground. Anarchy would ensue, it would be magnitudes bigger than anything that happened in Ferguson or Baltimore. It would likely be simultaneous.Disordered , December 13, 2017 at 8:41 am GMTI think that's one of the only situations where preppers would actually live out what they've been prepping for (except for a natural disaster).
I've been thinking about this a little over the past few years after seeing the race riots. What exactly is the line between our society being civilized and breaking out into chaos. It's probably a lot thinner than most people think.
I don't know who said it but someone long ago said something along the lines of, "Democracy can only work until the people figure out they can vote for themselves generous benefits from the public treasury." We are definitely in this situation today. I wonder how long it can last.
While I agree with Petras's intent (notwithstanding several exaggerations and unnecessary conflations with, for example, racism), I don't agree so much with the method he proposes. I don't mind welfare and unions to a certain extent, but they are not going to save us unless there is full employment and large corporations that can afford to pay an all-union workforce. That happened during WW2, as only wartime demand and those pesky wage freezes solved the Depression, regardless of all the public works programs; while the postwar era benefited from the US becoming the world's creditor, meaning that capital could expand while labor participation did as well.Wally , Website December 13, 2017 at 8:57 am GMTFrom then on, it is quite hard to achieve the same success after outsourcing and mechanization have happened all over the world. Both of these phenomena not only create displaced workers, but also displaced industries, meaning that it makes more sense to develop individual workfare (and even then, do it well, not the shoddy way it is done now) rather than giving away checks that probably will not be cashed for entrepreneurial purposes, and rather than giving away money to corrupt unions who depend on trusts to be able to pay for their benefits, while raising the cost of hiring that only encourages more outsourcing.
The amount of welfare given is not necessarily the main problem, the problem is doing it right for the people who truly need it, and efficiently – that is, with the least amount of waste lost between the chain of distribution, which should reach intended targets and not moochers.
Which inevitably means a sound tax system that targets unearned wealth and (to a lesser degree) foreign competition instead of national production, coupled with strict, yet devolved and simple government processes that benefit both business and individuals tired of bureaucracy, while keeping budgets balanced. Best of both worlds, and no military-industrial complex needed to drive up demand.
"President Obama transferred 2 trillion dollars to the ten biggest bankers and swindlers on Wall Street " That's twice the amount that Bush gave them.jacques sheete , December 13, 2017 at 10:52 am GMTDen Lille Abe , December 13, 2017 at 11:09 am GMTThe American welfare state was created in 1935 and continued to develop through 1973. Since then, over a prolonged period, the capitalist class has been steadily dismantling the entire welfare state.
Wrong wrong wrong.
Corporations [now] are welfare recipients and the bigger they are, the more handouts they suck up, and welfare for them started before 1935. In fact, it started in America before there was a USA. I do not have time to elaborate, but what were the various companies such as the British East India Company and the Dutch West India Companies but state pampered, welfare based entities? ~200 years ago, Herbert Spencer, if memory serves, pointed out that the British East India Company couldn't make a profit even with all the special, government granted favors showered upon it.
Corporations not only continuously seek monopolies (with the aid and sanction of the state) but they steadily fine tune the welfare state for their benefit. In fact, in reality, welfare for prols and peasants wouldn't exist if it didn't act as a money conduit and ultimate profit center for the big money grubbers.
Well, the author kind of nails it. I remember from my childhood in the 50-60 ties in Scandinavia that the US was the ultimate goal in welfare. The country where you could make a good living with your two hands, get you kids to UNI, have a house, a telly ECT. It was not consumerism, it was the American dream, a chicken in every pot; we chewed imported American gum and dreamed.wayfarer , December 13, 2017 at 1:01 pm GMTIn the 70-80 ties Scandinavia had a tremendous social and economic growth, EQUALLY distributed, an immense leap forward. In the middle of the 80 ties we were equal to the US in standards of living.
Since we have not looked at the US, unless in pity, as we have seen the decline of the general income, social wealth fall way behind our own.
The average US workers income has not increased since 90 figures adjusted for inflation. The Scandinavian workers income in the same period has almost quadrupled. And so has our societies.The article is dismal reading, and evidence of the failings of the "unregulated" society, where the anything goes as long as you are wealthy.
Anonymous , Disclaimer December 13, 2017 at 1:40 pm GMTBetween the mid 1970's to the present (2017) labor laws, welfare rights and benefits and the construction of and subsidies for affordable housing have been gutted. 'Workfare' (under President 'Bill' Clinton) ended welfare for the poor and displaced workers. Meanwhile the shift to regressive taxation and the steadily declining real wages have increased corporate profits to an astronomical degree.
source: http://www.unz.com/jpetras/rise-and-decline-of-the-welfare-state/
What does Hollywood "elite" JAP and wannabe hack-stand-up-comic Sarah Silverman think about the class struggle and problems facing destitute Americans? "Qu'ils mangent de la bagels!", source: https://en.wikipedia.org/wiki/Let_them_eat_cake
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@Greg FraserAnonymous , Disclaimer December 13, 2017 at 2:43 pm GMTLike the Pentagon. Americans still don't readily call this welfare, but they will eventually. Defense profiteers are unions in a sense, you're either in their club Or you're in the service industry that surrounds it.
As other commenters have pointed out, it's Petras curious choice of words that sometimes don't make too much sense. We can probably blame the maleable English language for that, but here it's too obvious. If you don't define a union, people might assume you're only talking about a bunch of meat cutters at Safeway.animalogic , December 13, 2017 at 2:57 pm GMTThe welfare state is alive and well for corporate America. Unions are still here – but they are defined by access and secrecy, you're either in the club or not.
The war on unions was successful first by co-option but mostly by the media. But what kind of analysis leaves out the role of the media in the American transformation? The success is mind blowing.
America has barely literate (white) middle aged males trained to spout incoherent Calvinistic weirdness: unabased hatred for the poor (or whoever they're told to hate) and a glorification of hedge fund managers as they get laid off, fired and foreclosed on, with a side of opiates.
There is hardly anything more tragic then seeing a web filled with progressives (management consultants) dedicated to disempowering, disabling and deligitimizing victims by claiming they are victims of biology, disease or a lack of an education rather than a system that issues violence while portending (with the best media money can buy) that they claim the higher ground.
@WallyReg Cæsar , December 13, 2017 at 3:08 pm GMT""Democracy can only work until the people figure out they can vote for themselves generous benefits from the public treasury." We are definitely in this situation today."
Quite right: the 0.01% have worked it out & US democracy is a Theatre for the masses.
Reg Cæsar , December 13, 2017 at 3:20 pm GMTThey elected militarists and demagogues as their new presidents.
Wilson and FDR were much more militarist and demagogic than those that followed.
@whyamiherephil , December 13, 2017 at 4:48 pm GMTI don't know who said it but someone long ago said something along the lines of, "Democracy can only work until the people figure out they can vote for themselves generous benefits from the public treasury."
Some French aristocrat put it as, once the gates to the treasury have been breached, they can only be closed again with gunpowder. Anyone recognize the author?
The author doesn't get it. What we have now IS the welfare state in an intensely diverse society. We have more transfer spending than ever before and Obamacare represents another huge entitlement.HallParvey , December 13, 2017 at 4:57 pm GMTIntellectuals continue to fantasize about the US becoming a Big Sweden, but Sweden has only been successful insofar as it has been a modest nation-state populated by ethnic Swedes. Intense diversity in a huge country with only the remnants of federalism results in massive non-consensual decision-making, fragmentation, increased inequality, and corruption.
@AnonymousAnonymous , Disclaimer December 13, 2017 at 4:57 pm GMTThe welfare state is alive and well for corporate America. Unions are still here – but they are defined by access and secrecy, you're either in the club or not.
They are largely defined as Doctors, Lawyers, and University Professors who teach the first two. Of course they are not called unions. Access is via credentialing and licensing. Good Day
@Linda GreenAnonymous , Disclaimer December 13, 2017 at 5:54 pm GMTBernie Sanders, speaking on behalf of the MIC's welfare bird: "It is the airplane of the United States Air Force, Navy, and of NATO."
Elizabeth Warren, referring to Mossad's Estes Rockets: "The Israeli military has the right to attack Palestinian hospitals and schools in self defense"
Barack Obama, yukking it up with pop stars: "Two words for you: predator drones. You will never see it coming."
It's not the agitprop that confuses the sheep, it's whose blowhole it's coming out of (labled D or R for convenience) that gets them to bare their teeth and speak of poo.
@HallParveyLogan , December 13, 2017 at 9:10 pm GMTWhat came first, the credentialing or the idea that it is a necessary part of education? It certainly isn't an accurate indication of what people know or their general intelligence – although that myth has flourished. Good afternoon.
@RealistLogan , December 13, 2017 at 9:19 pm GMTFor an interesting projection of what might happen in total civilizational collapse, I recommend the Dies the Fire series of novels by SM Stirling.
It has a science-fictiony setup in that all high-energy system (gunpowder, electricity, explosives, internal combustion, even high-energy steam engines) suddenly stop working. But I think it does a good job of extrapolating what would happen if suddenly the cities did not have food, water, power, etc.
Spoiler alert: It ain't pretty. Those who dream of a world without guns have not really thought it through.
@philIt has been pointed out repeatedly that Sweden does very well relative to the USA. It has also been noted that people of Swedish ancestry in the USA do pretty well also. In fact considerably better than Swedes in Sweden
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BigAl , December 13, 2017 at 1:17 pm GMT
The 1970's was in many ways the watershed decade for the radical transformation of the American economy and society, even more than the 1960's (I lived through both as a young man). I have yet to read the definitive social-critical analysis of these years to explain the changes that, looking back, seem to have taken the country of my childhood right out from under me, gone forever, increasingly difficult to remember through the fog of nostalgia that tends to distort as much as to reveal.Some of the things I do remember about this time include the PATCO (air traffic controllers) strike, very well. What is often not mentioned is that PATCO was attempting to do something that had not been permitted under federal civil service law, that is, bargain for wages as well as working conditions. Wage bargaining, PATCO correctly assessed, was the issue that made or broke unions and had enabled state and local public employees to finally begin to earn a decent, living wage beginning in the 1960's (think the iconic Mike Quill and the NYC TWU).
Reagan correctly (from his point of view) saw that to fail to break PATCO on this issue was to open the floodgates and turn the U.S. civil services into something akin to its European counterpart, with the possibility of general strikes and the rest. And of course to encourage private sector unions in their drive to organize and to change federal and state labor laws to strengthen the right to picket strike and organize.
What I also remember well however, is how little support PATCO was able to garnish from other unionized workers (and in many cases from union leadership as well). It seemed to me at the time that some of the strongest hostility came from rank and file of trade and utilities unions. Of course Reagan, following the Nixon playbook, shrewdly played the patriot-nationalist card, painting PATCO as a threat to national security as well as composed of a bunch of ingrates who should have been happy to have jobs. But by then the segmentation of the American workforce, a tactic that played right into the hands of the corporate-capitalist class was in full swing. The American worker lucky enough to possess a decent paying skilled or semi-skilled union job was being taught to see their situation as morally "deserved" and to see newer aspirants to similar positions, whether recently arrived immigrants or members of racial-ethnic groups previously suppressed by law, custom and prejudice as threats/dangers/enemies of their own recently won status.
I recall too that it was in the 1970's that the threat of "relocation", at that time mainly from the more heavily unionized north and northeastern states to the union-hostile south began to play a major role in the destruction of the power of labor. This was the beginning of the "globalization" factor and of the off-shoring of manufacturing jobs that has been commented on extensively and that took off a decade or so later. What is often not recalled is that unions and other pro-labor groups attempted to lobby Congress to amend the NLRA (National Labor Relations Act) and to appoint labor-friendly members to the NLRB to ensure that plant relocation would be a mandatory subject of bargaining and thus prevent unilateral (by capital ownership) relocation or the threat of relocation as a means to destroy the power of labor. They were, of course, not successful, and factories and business continued to move away from traditional centers of labor power and worker-protections, first to so-called "right-to-work" states and eventually to Asia.
And I remember the beginning of the financialization of the American corporation that I experienced on a "micro" scale, a kid lucky enough to have a summer job while in university at a large resource-extraction corporation's HQ in NYC. I recall white-collar conversations about compensation and about how salaries had steadily risen over the past decade (the company was said to be doing "really well"). And I remember how towards the end of my summer stints more and more conversation was about stock prices and Wall Street favor and about the new executive managerial style brought in by "those young MBA"s", and about (for the first time) worries of a "take-over" by "outsiders" (the company, although public, had had family leadership for many years).
And most of all I remember how gradually the material-economic components to the identity of the blue-collar and middle class worker were written out of existence. The great narrative, the myth that explains to us what it means to be "an American," no longer included any hint of class solidarity, of the kind of work we did, the pay we earned, the common living conditions in the small towns and urban neighborhoods and "cookie-cutter" suburbs of America.
Formerly the struggle of economic and material improvement was seen by most ordinary Americas as a struggle for certain necessary conditions to maintain, strengthen, and perpetuate a way-of-life in which the common core assumptions about the "good life" remained basically stable and unchallenged: family, stable job, residential security, public schools, public places -- neighborhood bars, coffee shops, civic clubs, parks and playgrounds -- where people could meet and interact as social equals.
The financialization of the economy, indeed of social life itself to a great extent, meant the drive for the maximization of private profit and the pursuit of interests and 'efficiencies" conceived entirely apart from any impact of the common good of society as a whole, and should have been seen as a grave threat to the very conditions of material and economic security, only recently achieved, that were the foundation of these other civic and social institutions.
Instead, through a grand and diabolical deceit cynically promulgated by a mostly Republican capitalist class of privilege, but also aided and abetted by a "new Left" that increasingly postured itself as the enemy of this older and more traditional way of life, the enemy was reconceived as the new "elites", the young, urban, hipster "Leftist" who despised the old ways and represented a singular assault on everything good about America.
Meanwhile, steadily, relentlessly, the material conditions and hard-won economic improvements that had gradually made small town, urban-neighborhood, and inner-suburban life decent and livable were being destroyed by a class that paid lip-service to Capra's Bedford Falls while at the same time endlessly working to transform it into Pottersville.
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Nov 16, 2017 | www.theguardian.com
The events that led to Donald Trump's election started in England in 1975. At a meeting a few months after Margaret Thatcher became leader of the Conservative party, one of her colleagues, or so the story goes, was explaining what he saw as the core beliefs of conservatism. She snapped open her handbag, pulled out a dog-eared book, and slammed it on the table . "This is what we believe," she said. A political revolution that would sweep the world had begun.
The book was The Constitution of Liberty by Frederick Hayek . Its publication, in 1960, marked the transition from an honest, if extreme, philosophy to an outright racket. The philosophy was called neoliberalism . It saw competition as the defining characteristic of human relations. The market would discover a natural hierarchy of winners and losers, creating a more efficient system than could ever be devised through planning or by design. Anything that impeded this process, such as significant tax, regulation, trade union activity or state provision, was counter-productive. Unrestricted entrepreneurs would create the wealth that would trickle down to everyone.
This, at any rate, is how it was originally conceived. But by the time Hayek came to write The Constitution of Liberty, the network of lobbyists and thinkers he had founded was being lavishly funded by multimillionaires who saw the doctrine as a means of defending themselves against democracy. Not every aspect of the neoliberal programme advanced their interests. Hayek, it seems, set out to close the gap.
He begins the book by advancing the narrowest possible conception of liberty: an absence of coercion. He rejects such notions as political freedom, universal rights, human equality and the distribution of wealth, all of which, by restricting the behaviour of the wealthy and powerful, intrude on the absolute freedom from coercion he demands.
Democracy, by contrast, "is not an ultimate or absolute value". In fact, liberty depends on preventing the majority from exercising choice over the direction that politics and society might take.
He justifies this position by creating a heroic narrative of extreme wealth. He conflates the economic elite, spending their money in new ways, with philosophical and scientific pioneers. Just as the political philosopher should be free to think the unthinkable, so the very rich should be free to do the undoable, without constraint by public interest or public opinion.
The ultra rich are "scouts", "experimenting with new styles of living", who blaze the trails that the rest of society will follow. The progress of society depends on the liberty of these "independents" to gain as much money as they want and spend it how they wish. All that is good and useful, therefore, arises from inequality. There should be no connection between merit and reward, no distinction made between earned and unearned income, and no limit to the rents they can charge.
Inherited wealth is more socially useful than earned wealth: "the idle rich", who don't have to work for their money, can devote themselves to influencing "fields of thought and opinion, of tastes and beliefs". Even when they seem to be spending money on nothing but "aimless display", they are in fact acting as society's vanguard.
Hayek softened his opposition to monopolies and hardened his opposition to trade unions. He lambasted progressive taxation and attempts by the state to raise the general welfare of citizens. He insisted that there is "an overwhelming case against a free health service for all" and dismissed the conservation of natural resources. It should come as no surprise to those who follow such matters that he was awarded the Nobel prize for economics .
By the time Thatcher slammed his book on the table, a lively network of thinktanks, lobbyists and academics promoting Hayek's doctrines had been established on both sides of the Atlantic, abundantly financed by some of the world's richest people and businesses , including DuPont, General Electric, the Coors brewing company, Charles Koch, Richard Mellon Scaife, Lawrence Fertig, the William Volker Fund and the Earhart Foundation. Using psychology and linguistics to brilliant effect, the thinkers these people sponsored found the words and arguments required to turn Hayek's anthem to the elite into a plausible political programme.
Thatcherism and Reaganism were not ideologies in their own right: they were just two faces of neoliberalism. Their massive tax cuts for the rich, crushing of trade unions, reduction in public housing, deregulation, privatisation, outsourcing and competition in public services were all proposed by Hayek and his disciples. But the real triumph of this network was not its capture of the right, but its colonisation of parties that once stood for everything Hayek detested.
Bill Clinton and Tony Blair did not possess a narrative of their own. Rather than develop a new political story, they thought it was sufficient to triangulate . In other words, they extracted a few elements of what their parties had once believed, mixed them with elements of what their opponents believed, and developed from this unlikely combination a "third way".
It was inevitable that the blazing, insurrectionary confidence of neoliberalism would exert a stronger gravitational pull than the dying star of social democracy. Hayek's triumph could be witnessed everywhere from Blair's expansion of the private finance initiative to Clinton's repeal of the Glass-Steagal Act , which had regulated the financial sector. For all his grace and touch, Barack Obama, who didn't possess a narrative either (except "hope"), was slowly reeled in by those who owned the means of persuasion.
As I warned in April, the result is first disempowerment then disenfranchisement. If the dominant ideology stops governments from changing social outcomes, they can no longer respond to the needs of the electorate. Politics becomes irrelevant to people's lives; debate is reduced to the jabber of a remote elite. The disenfranchised turn instead to a virulent anti-politics in which facts and arguments are replaced by slogans, symbols and sensation. The man who sank Hillary Clinton's bid for the presidency was not Donald Trump. It was her husband.
The paradoxical result is that the backlash against neoliberalism's crushing of political choice has elevated just the kind of man that Hayek worshipped. Trump, who has no coherent politics, is not a classic neoliberal. But he is the perfect representation of Hayek's "independent"; the beneficiary of inherited wealth, unconstrained by common morality, whose gross predilections strike a new path that others may follow. The neoliberal thinktankers are now swarming round this hollow man, this empty vessel waiting to be filled by those who know what they want. The likely result is the demolition of our remaining decencies, beginning with the agreement to limit global warming .
Those who tell the stories run the world. Politics has failed through a lack of competing narratives. The key task now is to tell a new story of what it is to be a human in the 21st century. It must be as appealing to some who have voted for Trump and Ukip as it is to the supporters of Clinton, Bernie Sanders or Jeremy Corbyn.
A few of us have been working on this, and can discern what may be the beginning of a story. It's too early to say much yet, but at its core is the recognition that – as modern psychology and neuroscience make abundantly clear – human beings, by comparison with any other animals, are both remarkably social and remarkably unselfish . The atomisation and self-interested behaviour neoliberalism promotes run counter to much of what comprises human nature.
Hayek told us who we are, and he was wrong. Our first step is to reclaim our humanity.
justamug -> Skytree 16 Nov 2016 18:17
Thanks for the chuckle. On a more serious note - defining neoliberalism is not that easy since it is not a laid out philosophy like liberalism, or socialism, or communism or facism. Since 2008 the use of the word neoliberalism has increased in frequency and has come to mean different things to different people.
A common theme appears to be the negative effects of the market on the human condition.
Having read David Harvey's book, and Phillip Mirowski's book (both had a go at defining neoliberalism and tracing its history) it is clear that neoliberalism is not really coherent set of ideas.
ianfraser3 16 Nov 2016 17:54
EF Schumacher quoted "seek first the kingdom of God" in his epilogue of "Small Is Beautiful: a study of economics as if people mattered". This was written in the early 1970s before the neoliberal project bit in the USA and the UK. The book is laced with warnings about the effects of the imposition of neoliberalism on society, people and the planet. The predictions have largely come true. New politics and economics needed, by leaders who place at the heart of their approach the premise, and fact, that humans are "by comparison with any other animals, are both remarkably social and remarkably unselfish". It is about reclaiming our humanity from a project that treats people as just another commodity.
Filipio -> YouDidntBuildThat 16 Nov 2016 17:42Whoa there, slow down.
Your last post was questioning the reality of neoliberalism as a general policy direction that had become hegemonic across many governments (and most in the west) over recent decades. Now you seem to be agreeing that the notion does have salience, but that neoliberalism delivered positive rather than negative consequences.
Well, its an ill wind that blows nobody any good, huh?
Doubtless there were some positive outcomes for particular groups. But recall that the context for this thread is not whether, on balance, more people benefited from neoliberal policies than were harmed -- an argument that would be most powerful only in very utilitarian style frameworks of thought (most good for the many, or most harm for only the few). The thread is about the significance of the impacts of neoliberalism in the rise of Trump. And in specific relation to privatisation (just one dimension of neoliberalism) one key impact was downsizing (or 'rightsizing'; restructuring). There is a plethora of material, including sociological and psychological, on the harm caused by shrinking and restructured work-forces as a consequence of privatisation. Books have been written, even in the business management sector, about how poorly such 'change' was handled and the multiple deleterious outcomes experienced by employees.
And we're still only talking about one dimension of neoliberalism! Havn't even touched on deregulation yet (notably, labour market and financial sector).
The general thrust is about the gradual hollowing out of the middle class (or more affluent working class, depending on the analytical terms being used), about insecurity, stress, casualisation, rising wage inequality.
You want evidence? I'm not doing your research for you. The internet can be a great resource, or merely an echo chamber. The problem with so many of the alt-right (and this applies on the extreme left as well) is that they only look to confirm their views, not read widely. Open your eyes, and use your search engine of choice. There is plenty out there. Be open to having your preconceptions challenged.
RichardErskine -> LECKJ3000 16 Nov 2016 15:38
LECKJ3000 - I am not an economist, but surely the theoretical idealised mechanisms of the market are never realised in practice. US subsidizing their farmers, in EU too, etc. And for problems that are not only externalities but transnational ones, the idea that some Hayek mechanism will protect thr ozone layer or limit carbon emissions, without some regulation or tax.
Lord Stern called global warming the greatest market failure in history, but no market, however sophisticated, can deal with it without some price put on the effluent of product (the excessive CO2 we put into the atmosphere).
As with Montreal and subsequent agreements, there is a way to maintain a level playing field; to promote different substances for use as refrigerants; and to address the hole in ozone layer; without abandoning the market altogether. Simple is good, because it avoids over-engineering the interventions (and the unintended consequences you mention).
The same could/ should be true of global warming, but we have left it so late we cannot wait for the (inevitable) fall of fossil fuels and supremacy of renewables. We need a price on carbon, which is a graduated and fast rising tax essentially on its production and/or consumption, which has already started to happen ( http://www.worldbank.org/content/dam/Worldbank/document/SDN/background-note_carbon-tax.pdf ), albeit not deep / fast / extensive enough, or international in character, but that will come, if not before the impacts really bite then soon after.
So Hayek, I feel, is like many theoreticians, in that he seems to want a pure world that will function according to a simple and universal law. The world never was, and never will be that simple, and current economics simply continues to have a blindspot for externalities that overwhelm the logic of an unfettered so-called free market.
LionelKent -> greven 16 Nov 2016 14:59
And persistent. J.K. Galbraith viewed the rightwing mind as predominantly concerned with figuring out a way to justify the shift of wealth from the immense majority to an elite at the top. I for one regret acutely that he did not (as far as I know) write a volume on his belief in progressive taxation.
RandomLibertarian -> JVRTRL 16 Nov 2016 09:19
Not bad points.
When it comes to social safety net programs, e.g. in health care and education -- those programs almost always tend to be more expensive and more complicated when privatized. If the goal was to actually save taxpayer money, in the U.S. at least, it would have made a lot more sense to have a universal Medicare system, rather than a massive patch-work like the ACA and our hybrid market.
Do not forget that the USG, in WW2, took the deliberate step of allowing employers to provide health insurance as a tax-free benefit - which it still is, being free even from SS and Medicare taxes. In the post-war boom years this resulted in the development of a system with private rooms, almost on-demand access to specialists, and competitive pay for all involved (while the NHS, by contrast, increasingly drew on immigrant populations for nurses and below). Next, the large sums of money in the system and a generous court system empowered a vast malpractice industry. So to call our system in any way a consequence of a free market is a misnomer.
Entirely state controlled health care systems tend to be even more cost-effective.
Read Megan McArdle's work in this area. The US has had similar cost growth since the 1970s to the rest of the world. The problem was that it started from a higher base.
Part of the issue is that privatization tends to create feedback mechanism that increase the size of spending in programs. Even Eisenhower's noted "military industrial complex" is an illustration of what happens when privatization really takes hold.
When government becomes involved in business, business gets involved in government!
Todd Smekens 16 Nov 2016 08:40
Albert Einstein said, "capitalism is evil" in his famous dictum called, "Why Socialism" in 1949. He also called communism, "evil", so don't jump to conclusions, comrades. ;)
His reasoning was it distorts a human beings longing for the social aspect. I believe George references this in his statement about people being "unselfish". This is noted by both science and philosophy.
Einstein noted that historically, the conqueror would establish the new order, and since 1949, Western Imperialism has continued on with the predatory phase of acquiring and implementing democracy/capitalism. This needs to end. As we've learned rapidly, capitalism isn't sustainable. We are literally overheating the earth which sustains us. Very unwise.
Einstein wrote, "Man is, at one and the same time, a solitary being and a social being. As a solitary being, he attempts to protect his own existence and that of those who are closest to him, to satisfy his personal desires, and to develop his innate abilities. As a social being, he seeks to gain the recognition and affection of his fellow human beings, to share in their pleasures, to comfort them in their sorrows, and to improve their conditions of life. Only the existence of these varied, frequently conflicting, strivings accounts for the special character of a man, and their specific combination determines the extent to which an individual can achieve an inner equilibrium and can contribute to the well-being of society."
Personally, I'm glad George and others are working on a new economic and social construct for us "human beings". It's time we leave the predatory phase of "us versus them", and construct a new society which works for the good of our now, global society.
zavaell -> LECKJ3000 16 Nov 2016 06:28
The problem is that both you and Monbiot fail to mention that your "the spontaneous order of the market" does not recognize externalities and climate change is outside Hayek's thinking - he never wrote about sustainability or the limits on resources, let alone the consequences of burning fossil fuels. There is no beauty in what he wrote - it was a cold, mechanical model that assumed certain human behaviour but not others. Look at today's money-makers - they are nearly all climate change deniers and we have to have government to reign them in.
aLERNO 16 Nov 2016 04:52
Good, short and concise article. But the FIRST NEOLIBERAL MILESTONE WAS THE 1973 COUP D'ETAT IN CHILE, which not surprisingly also deposed the first democratically-elected socialist government.
accipiter15 16 Nov 2016 02:34
A great article and explanation of the influence of Hayek on Thatcher. Unfortunately this country is still suffering the consequences of her tenure and Osborne was also a proponent of her policies and look where we are as a consequence. The referendum gave the people the opportunity to vent their anger and if we had PR I suspect we would have a greater turn-out and nearly always have some sort of coalition where nothing gets done that is too hurtful to the population. As for Trump, again his election is an expression of anger and desperation. However, the American voting system is as unfair as our own - again this has probably been the cause of the low turn-out. Why should people vote when they do not get fair representation - it is a waste of time and not democratic. I doubt that Trump is Keynsian I suspect he doesn't have an economic theory at all. I just hope that the current economic thinking prevailing currently in this country, which is still overshadowed by Thatcher and the free market, with no controls over the city casino soon collapses and we can start from a fairer and more inclusive base!
JVRTRL -> Keypointist 16 Nov 2016 02:15
The system that Clinton developed was an inheritance from George H.W. Bush, Reagan (to a large degree), Carter, with another large assist from Nixon and the Powell Memo.
Bill Clinton didn't do it by himself. The GOP did it with him hand-in-hand, with the only resistance coming from a minority within the Democratic party.
Trump's victory was due to many factors. A large part of it was Hillary Clinton's campaign and the candidate. Part of it was the effectiveness of the GOP massive resistance strategy during the Obama years, wherein they pursued a course of obstruction in an effort to slow the rate of the economic recovery (e.g. as evidence of the bad faith, they are resurrecting a $1 trillion infrastructure bill that Obama originally proposed in 2012, and now that they have full control, all the talk about "deficits" goes out the window).
Obama and the Democratic party also bear responsibility for not recognizing the full scope of the financial collapse in 2008-2009, passing a stimulus package that was about $1 trillion short of spending needed to accelerate the recovery by the 2010 mid-terms, combined with a weak financial regulation law (which the GOP is going to destroy), an overly complicated health care law -- classic technocratic, neoliberal incremental policy -- and the failure of the Obama administration to hold Wall Street accountable for criminal misconduct relating to the financial crisis. Obama's decision to push unpopular trade agreements didn't help either. As part of the post-mortem, the decision to continuing pushing the TPP may have cost Clinton in the rust belt states that went for Trump. The agreement was unpopular, and her shift on the policy didn't come across as credible. People noticed as well that Obama was trying to pass the measure through the lame-duck session of Congress post-election. With Trump's election, the TPP is done too.
JVRTRL daltonknox67 16 Nov 2016 02:00
There is no iron law that says a country has to run large trade deficits. The existence of large trade deficits is usually a result of policy choices.
Growth also hasn't gone into the tank. What's changed is the distribution of the gains in GDP growth -- that is in no small part a direct consequence of changes in policy since the 1970s. It isn't some "market place magic". We have made major changes to tax laws since that time. We have weakened collective bargaining, which obviously has a negative impact on wages. We have shifted the economy towards financial services, which has the tendency of increasing inequality.
The idea too that people will be "poorer" than in the 1920s and 1930s is just plain ignorant. It has no basis in any of the data. Wages in the bottom quartile have actually decreased slightly since the 1970s in real terms, but those wages in the 1970s were still exponentially higher than wages in the 1920s in real terms.
Wages aren't stagnating because people are working less. Wages have stagnated because of dumb policy choices that have tended to incentives looting by those at the top of the income distribution from workers in the lower parts of the economy. The 2008 bailouts were a clear illustration of this reality. People in industries rigged rules to benefit themselves. They misallocated resources. Then they went to representatives and taxpayers and asked for a large no-strings attached handout that was effectively worth trillions of dollars (e.g. hundreds of billions through TARP, trillions more through other programs). As these players become wealthier, they have an easier time buying politicians to rig rules further to their advantage.
JVRTRL -> RandomLibertarian 16 Nov 2016 01:44
"The tyranny of the 51 per cent is the oldest and most solid argument against a pure democracy."
"Tyranny of the majority" is always a little bizarre, given that the dynamics of majority rule are unlike the governmental structures of an actual tyranny. Even in the context of the U.S. we had minority rule due to voting restrictions for well over a century that was effectively a tyranny for anyone who was denied the ability to participation in the elections process. Pure majorities can go out of control, especially in a country with massive wealth disparities and with weak civic institutions.
On the other hand, this is part of the reason to construct a system of checks and balances. It's also part of the argument for representative democracy.
"Neoliberalism" is entirely compatible with "growth of the state". Reagan greatly enlarged the state. He privatized several functions and it actually had the effect of increasing spending.
When it comes to social safety net programs, e.g. in health care and education -- those programs almost always tend to be more expensive and more complicated when privatized. If the goal was to actually save taxpayer money, in the U.S. at least, it would have made a lot more sense to have a universal Medicare system, rather than a massive patch-work like the ACA and our hybrid market.
Entirely state controlled health care systems tend to be even more cost-effective. Part of the issue is that privatization tends to create feedback mechanism that increase the size of spending in programs. Even Eisenhower's noted "military industrial complex" is an illustration of what happens when privatization really takes hold.
daltonknox67 15 Nov 2016 21:46
After WWII most of the industrialised world had been bombed or fought over with destruction of infrastructure and manufacturing. The US alone was undamaged. It enjoyed a manufacturing boom that lasted until the 70's when competition from Germany and Japan, and later Taiwan, Korea and China finally brought it to an end.
As a result Americans born after 1950 will be poorer than the generation born in the 20's and 30's.
This is not a conspiracy or government malfunction. It is a quirk of history. Get over it and try working.
Arma Geddon 15 Nov 2016 21:11
Another nasty neoliberal policy of Reagan and Thatcher, was to close all the mental hospitals, and to sweeten the pill to sell to the voters, they called it Care in the Community, except by the time those hospitals closed and the people who had to relay on those institutions, they found out and are still finding out that there is very little care in the community left any more, thanks to Thatcher's disintegration of the ethos community spirit.
In their neoliberal mantra of thinking, you are on your own now, tough, move on, because you are hopeless and non productive, hence you are a burden to taxpayers.
Its been that way of thinking for over thirty years, and now the latest group targeted, are the sick and disabled, victims of the neoliberal made banking crash and its neoliberal inspired austerity, imposed of those least able to fight back or defend themselves i.e. vulnerable people again!
AlfredHerring GimmeHendrix 15 Nov 2016 20:23
It was in reference to Maggie slapping a copy of Hayek's Constitution of Liberty on the table and saying this is what we believe. As soon as you introduce the concept of belief you're talking about religion hence completeness while Hayek was writing about economics which demands consistency. i.e. St. Maggie was just as bad as any Stalinist: economics and religion must be kept separate or you get a bunch of dead peasants for no reason other than your own vanity.
Ok, religion based on a sky god who made us all is problematic but at least there's always the possibility of supplication and miracles. Base a religion on economic theory and you're just making sausage of your neighbors kids.
TanTan -> crystaltips2 15 Nov 2016 20:10
If you claim that the only benefit of private enterprise is its taxability, as you did, then why not cut out the middle man and argue for full state-directed capitalism?
Because it is plainly obvious that private enterprise is not directed toward the public good (and by definition). As we have both agreed, it needs to have the right regulations and framework to give it some direction in that regard. What "the radical left" are pointing out is that the idea of private enterprise is now completely out of control, to the point where voters are disenfranchised because private enterprise has more say over what the government does than the people. Which is clearly a problem.
As for the rest, it's the usual practice of gathering every positive metric available and somehow attributing it to neoliberalism, no matter how tenuous the threads, and as always with zero rigour. Supposedly capitalism alone doubled life expectancy, supports billions of extra lives, invented the railways, and provides the drugs and equipment that keep us alive. As though public education, vaccines, antibiotics, and massive availability of energy has nothing to do with those things.
As for this computer being the invention of capitalism, who knows, but I suppose if one were to believe that everything was invented and created by capitalism and monetary motives then one might believe that. Energy allotments referred to the limit of our usage of readily available fossil fuels which you remain blissfully unaware of.
Children have already been educated to agree with you, in no small part due to a fear of the communist regimes at the time, but at the expense of critical thinking. Questioning the system even when it has plainly been undermined to its core is quickly labelled "radical" regardless of the normalcy of the query. I don't know what you could possibly think left-wing motives could be, but your own motives are plain to see when you immediately lump people who care about the planet in with communist idealogues. If rampant capitalism was going to solve our problems I'm all for it, but it will take a miracle to reverse the damage it has already done, and only a fool would trust it any further.
YouDidntBuildThat -> Filipio 15 Nov 2016 20:06
Filipo
You argue that a great many government functions have been privatized. I agree. Yet strangely you present zero evidence of any downsides of that happening. Most of the academic research shows a net benefit, not just on budgets but on employee and customer satisfaction. See for example.
And despite these privitazation cost savings and alleged neoliberal "austerity" government keeps taking a larger share of our money, like a malignant cancer. No worries....We're from the government, and we're here to help.
Keypointist 15 Nov 2016 20:04
I think the damage was done when the liberal left co-opted neo-liberalism. What happened under Bill Clinton was the development of crony capitalism where for example the US banks were told to lower their credit standards to lend to people who couldn't really afford to service the loans.
It was this that created too big to fail and the financial crisis of 2008. Conservative neo-liberals believe passionately in competition and hate monopolies. The liberal left removed was was productive about neo-liberalism and replaced it with a kind of soft state capitalism where big business was protected by the state and the tax payer was called on to bail out these businesses. THIS more than anything else led to Trump's victory.
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Jan 30, 2012 | www.wsws.org
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This analysis has been vindicated by scholarly investigations into the causes of the Soviet economic collapse that facilitated the bureaucracy's dissolution of the USSR. In Russia Since 1980, published in 2008 by Cambridge University Press, Professors Steven Rosefielde and Stefan Hedlund present evidence that Gorbachev introduced measures that appear, in retrospect, to have been aimed at sabotaging the Soviet economy. "Gorbachev and his entourage," they write, "seem to have had a venal hidden agenda that caused things to get out of hand quickly." [p. 38] In a devastating appraisal of Gorbachev's policies, Rosefielde and Hedlund state:
History reveals that the grandsons of the Bolshevik coup d'état didn't destroy the Soviet Union in a valiant effort to advance the cause of communist prosperity or even to return to their common European home; instead, it transformed Soviet managers and ministers into roving bandits (asset-grabbing privateers) with a tacit presidential charter to privatize the people's assets and revenues to themselves under the new Muscovite rule of men. [p. 40]
Instead of displaying due diligence over personal use of state revenues, materials and property, inculcated in every Bolshevik since 1917, Gorbachev winked at a counterrevolution from below opening Pandora's Box. He allowed enterprises and others not only to profit maximize for the state in various ways, which was beneficial, but also to misappropriate state assets, and export the proceeds abroad. In the process, red directors disregarded state contracts and obligations, disorganizing inter-industrial intermediate input flows, and triggering a depression from which the Soviet Union never recovered and Russia has barely emerged. [p. 47]
Given all the heated debates that would later ensue about how Yeltsin and his shock therapy engendered mass plunder, it should be noted that the looting began under Gorbachev's watch. It was his malign neglect that transformed the rhetoric of Market Communism into the pillage of the nation's assets.
The scale of this plunder was astounding. It not only bankrupted the Soviet Union, forcing Russian President Boris Yeltsin to appeal to the G-7 for $6 billion of assistance on December 6, 1991, but triggered a free fall in aggregate production commencing in 1990, aptly known as catastroika.
In retrospect, the Soviet economy didn't collapse because the liberalized command economy devised after 1953 was marked for death. The system was inefficient, corrupt and reprehensible in a myriad of ways, but sustainable, as the CIA and most Sovietologists maintained. It was destroyed by Gorbachev's tolerance and complicity in allowing privateers to misappropriate state revenues, pilfer materials, spontaneously privatize, and hotwire their ill-gotten gains abroad, all of which disorganized production. [p. 49]
The analysis of Rosefielde and Hedlund, while accurate in its assessment of Gorbachev's actions, is simplistic. Gorbachev's policies can be understood only within the framework of more fundamental political and socioeconomic factors. First, and most important, the real objective crisis of the Soviet economy (which existed and preceded by many decades the accession of Gorbachev to power) developed out of the contradictions of the autarkic nationalist policies pursued by the Soviet regime since Stalin and Bukharin introduced the program of "socialism in one country" in 1924. The rapid growth and increasing complexity of the Soviet economy required access to the resources of the world economy. This access could be achieved only in one of two ways: either through the spread of socialist revolution into the advanced capitalist countries, or through the counterrevolutionary integration of the USSR into the economic structures of world capitalism.
For the Soviet bureaucracy, a parasitic social caste committed to the defense of its privileges and terrified of the working class, the revolutionary solution to the contradictions of the Soviet economy was absolutely unthinkable. The only course that it could contemplate was the second-capitulation to imperialism. This second course, moreover, opened for the leading sections of the bureaucracy the possibility of permanently securing their privileges and vastly expanding their wealth. The privileged caste would become a ruling class. The corruption of Gorbachev, Yeltsin and their associates was merely the necessary means employed by the bureaucracy to achieve this utterly reactionary and immensely destructive outcome.
On October 3, 1991, less than three months before the dissolution of the USSR, I delivered a lecture in Kiev in which I challenged the argument-which was widely propagated by the Stalinist regime-that the restoration of capitalism would bring immense benefits to the people. I stated:
In this country, capitalist restoration can only take place on the basis of the widespread destruction of the already existing productive forces and the social- cultural institutions that depended upon them. In other words, the integration of the USSR into the structure of the world capitalist economy on a capitalist basis means not the slow development of a backward national economy, but the rapid destruction of one which has sustained living conditions which are, at least for the working class, far closer to those that exist in the advanced countries than in the third world. When one examines the various schemes hatched by proponents of capitalist restoration, one cannot but conclude that they are no less ignorant than Stalin of the real workings of the world capitalist economy. And they are preparing the ground for a social tragedy that will eclipse that produced by the pragmatic and nationalistic policies of Stalin. ["Soviet Union at the Crossroads," published in The Fourth International (Fall- Winter 1992, Volume 19, No. 1, p. 109), Emphasis in the original.]
Almost exactly 20 years ago, on January 4, 1992, the Workers League held a party membership meeting in Detroit to consider the historical, political and social implications of the dissolution of the USSR. Rereading this report so many years later, I believe that it has stood the test of time. It stated that the dissolution of the USSR "represents the juridical liquidation of the workers' state and its replacement with regimes that are openly and unequivocally devoted to the destruction of the remnants of the national economy and the planning system that issued from the October Revolution. To define the CIS [Confederation of Independent States] or its independent republics as workers states would be to completely separate the definition from the concrete content which it expressed during the previous period." [David North, The End of the USSR, Labor Publications, 1992, p. 6]
The report continued:
"A revolutionary party must face reality and state what is. The Soviet working class has suffered a serious defeat. The bureaucracy has devoured the workers state before the working class was able to clean out the bureaucracy. This fact, however unpleasant, does not refute the perspective of the Fourth International. Since it was founded in 1938, our movement has repeatedly said that if the working class was not able to destroy this bureaucracy, then the Soviet Union would suffer a shipwreck. Trotsky did not call for political revolution as some sort of exaggerated response to this or that act of bureaucratic malfeasance. He said that a political revolution was necessary because only in that way could the Soviet Union, as a workers state, be defended against imperialism." [p. 6]
I sought to explain why the Soviet working class had failed to rise up in opposition to the bureaucracy's liquidation of the Soviet Union. How was it possible that the destruction of the Soviet Union-having survived the horrors of the Nazi invasion-could be carried out "by a miserable group of petty gangsters, acting in the interests of the scum of Soviet society?" I offered the following answer:
We must reply to these questions by stressing the implications of the massive destruction of revolutionary cadre carried out within the Soviet Union by the Stalinist regime. Virtually all the human representatives of the revolutionary tradition who consciously prepared and led that revolution were wiped out. And along with the political leaders of the revolution, the most creative representatives of the intelligentsia who had flourished in the early years of the Soviet state were also annihilated or terrorized into silence.
Furthermore, we must point to the deep-going alienation of the working class itself from state property. Property belonged to the state, but the state "belonged" to the bureaucracy, as Trotsky noted. The fundamental distinction between state property and bourgeois property-however important from a theoretical standpoint-became less and less relevant from a practical standpoint. It is true that capitalist exploitation did not exist in the scientific sense of the term, but that did not alter the fact that the day-to-day conditions of life in factories and mines and other workplaces were as miserable as are to be found in any of the advanced capitalist countries, and, in many cases, far worse.
Finally, we must consider the consequences of the protracted decay of the international socialist movement...
Especially during the past decade, the collapse of effective working class resistance in any part of the world to the bourgeois offensive had a demoralizing effect on Soviet workers. Capitalism assumed an aura of "invincibility," although this aura was merely the illusory reflection of the spinelessness of the labor bureaucracies all over the world, which have on every occasion betrayed the workers and capitulated to the bourgeoisie. What the Soviet workers saw was not the bitter resistance of sections of workers to the international offensive of capital, but defeats and their consequences. [p. 13-14]
The report related the destruction of the USSR by the ruling bureaucracy to a broader international phenomenon. The smashing up of the USSR was mirrored in the United States by the destruction of the trade unions as even partial instruments of working-class defense.
In every part of the world, including the advanced countries, the workers are discovering that their own parties and their own trade union organizations are engaged in the related task of systematically lowering and impoverishing the working class. [p. 22]
Finally, the report dismissed any notion that the dissolution of the USSR signified a new era of progressive capitalist development.
Millions of people are going to see imperialism for what it really is. The democratic mask is going to be torn off. The idea that imperialism is compatible with peace is going to be exposed. The very elements which drove masses into revolutionary struggle in the past are once again present. The workers of Russia and the Ukraine are going to be reminded why they made a revolution in the first place. The American workers are going to be reminded why they themselves in an earlier period engaged in the most massive struggles against the corporations. The workers of Europe are going to be reminded why their continent was the birthplace of socialism and Karl Marx. [p. 25]
The aftermath of the dissolution of the USSR: 20 years of economic crisis, social decay, and political reaction
According to liberal theory, the dissolution of the Soviet Union ought to have produced a new flowering of democracy. Of course, nothing of the sort occurred-not in the former USSR or, for that matter, in the United States. Moreover, the breakup of the Soviet Union-the so-called defeat of communism-was not followed by a triumphant resurgence of its irreconcilable enemies in the international workers' movement, the social democratic and reformist trade unions and political parties. The opposite occurred. All these organizations experienced, in the aftermath of the breakup of the USSR, a devastating and even terminal crisis. In the United States, the trade union movement-whose principal preoccupation during the entire Cold War had been the defeat of Communism-has all but collapsed. During the two decades that followed the collapse of the Soviet Union, the AFL-CIO lost a substantial portion of its membership, was reduced to a state of utter impotence, and ceased to exist as a workers' organization in any socially significant sense of the term. At the same time, everywhere in the world, the social position of the working class-from the standpoint of its influence on the direction of state policy and its ability to increase its share of the surplus value produced by its own labor-deteriorated dramatically.
Certain important conclusions flow from this fact. First, the breakup of the Soviet Union did not flow from the supposed failure of Marxism and socialism. If that had been the case, the anti-Marxist and antisocialist labor organizations should have thrived in the post-Soviet era. The fact that these organizations experienced ignominious failure compels one to uncover the common feature in the program and orientation of all the so-called labor organizations, "communist" and anticommunist alike. What was the common element in the political DNA of all these organization? The answer is that regardless of their names, conflicting political alignments and superficial ideological differences, the large labor organizations of the post-World War II period pursued essentially nationalist policies. They tied the fate of the working class to one or another nation-state. This left them incapable of responding to the increasing integration of the world economy. The emergence of transnational corporations and the associated phenomena of capitalist globalization shattered all labor organizations that based themselves on a nationalist program.
The second conclusion is that the improvement of conditions of the international working class was linked, to one degree or another, to the existence of the Soviet Union. Despite the treachery and crimes of the Stalinist bureaucracy, the existence of the USSR, a state that arose on the basis of a socialist revolution, imposed upon American and European imperialism certain political and social restraints that would otherwise have been unacceptable. The political environment of the past two decades-characterized by unrestrained imperialist militarism, the violations of international law, and the repudiation of essential principles of bourgeois democracy-is the direct outcome of the dissolution of the Soviet Union.
The breakup of the USSR was, for the great masses of its former citizens, an unmitigated disaster. Twenty years after the October Revolution, despite all the political crimes of the Stalinist regime, the new property relations established in the aftermath of the October Revolution made possible an extraordinary social transformation of backward Russia. And even after suffering horrifying losses during the four years of war with Nazi Germany, the Soviet Union experienced in the 20 years that followed the war a stupendous growth of its economy, which was accompanied by advances in science and culture that astonished the entire world.
But what is the verdict on the post-Soviet experience of the Russian people? First and foremost, the dissolution of the USSR set into motion a demographic catastrophe. Ten years after the breakup of the Soviet Union, the Russian population was shrinking at an annual rate of 750,000. Between 1983 and 2001, the number of annual births dropped by one half. 75 percent of pregnant women in Russia suffered some form of illness that endangered their unborn child. Only one quarter of infants were born healthy.
The overall health of the Russian people deteriorated dramatically after the restoration of capitalism. There was a staggering rise in alcoholism, heart disease, cancer and sexually transmitted diseases. All this occurred against the backdrop of a catastrophic breakdown of the economy of the former USSR and a dramatic rise in mass poverty.
As for democracy, the post-Soviet system was consolidated on the basis of mass murder. For more than 70 years, the Bolshevik regime's dissolution of the Constituent Assembly in January 1918-an event that did not entail the loss of a single life-was trumpeted as an unforgettable and unforgivable violation of democratic principles. But in October 1993, having lost a majority in the popularly elected parliament, the Yeltsin regime ordered the bombardment of the White House-the seat of the Russian parliament-located in the middle of Moscow. Estimates of the number of people who were killed in the military assault run as high as 2,000. On the basis of this carnage, the Yeltsin regime was effectively transformed into a dictatorship, based on the military and security forces. The regime of Putin-Medvedev continues along the same dictatorial lines. The assault on the White House was supported by the Clinton administration. Unlike the dissolution of the Constituent Assembly, the bombardment of the Russian parliament is an event that has been all but forgotten.
What is there to be said of post-Soviet Russian culture? As always, there are talented people who do their best to produce serious work. But the general picture is one of desolation. The words that have emerged from the breakup of the USSR and that define modern Russian culture, or what is left of it, are "mafia," "biznessman" and "oligarch."
What has occurred in Russia is only an extreme expression of a social and cultural breakdown that is to be observed in all capitalist countries. Can it even be said with certainty that the economic system devised in Russia is more corrupt that that which exists in Britain or the United States? The Russian oligarchs are probably cruder and more vulgar in the methods they employ. However, the argument could be plausibly made that their methods of plunder are less efficient than those employed by their counterparts in the summits of American finance. After all, the American financial oligarchs, whose speculative operations brought about the near-collapse of the US and global economy in the autumn of 2008, were able to orchestrate, within a matter of days, the transfer of the full burden of their losses to the public.
It is undoubtedly true that the dissolution of the USSR at the end of 1991 opened up endless opportunities for the use of American power-in the Balkans, the Middle East and Central Asia. But the eruption of American militarism was, in the final analysis, the expression of a more profound and historically significant tendency-the long-term decline of the economic position of American capitalism. This tendency was not reversed by the breakup of the USSR. The history of American capitalism during the past two decades has been one of decay. The brief episodes of economic growth have been based on reckless and unsustainable speculation. The Clinton boom of the 1990s was fueled by the "irrational exuberance" of Wall Street speculation, the so-called dot.com bubble. The great corporate icons of the decade-of which Enron was the shining symbol-were assigned staggering valuations on the basis of thoroughly criminal operations. It all collapsed in 2000-2001. The subsequent revival was fueled by frenzied speculation in housing. And, finally, the collapse in 2008, from which there has been no recovery.
When historians begin to recover from their intellectual stupor, they will see the collapse of the USSR and the protracted decline of American capitalism as interrelated episodes of a global crisis, arising from the inability to develop the massive productive forces developed by mankind on the basis of private ownership of the means of production and within the framework of the nation-state system.
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February 12, 2009 | Blog Is Dead
Review of David Harvey's A Brief History of Neoliberalism
David Harvey's 2005 book A Brief History of Neoliberalism
traces the origins of neoliberalism as a form of political economy through its recent history in an attempt to explain what the overarching goal of neoliberalism actually is. Although Harvey can be vague as to what the actual economic policies of neoliberalism entail, his argument as to what this new form of political economy sought to accomplish is definitely on the mark. For Harvey neoliberalism is essentially about the reconstitution of class power by the global economic elite. Thus neoliberalism in its practice has not been a "utopian project to realize a theoretical design for the reorganization of international capitalism" (Harvey, 2005, p. 19) but a practical political project meant to restore the power of economic elites. Harvey goes on to state that any time the theoretical economic principles of neoliberalism came into conflict with elite power, elite power took precedence. This is borne out by the willingness of governments who are certainly committed to theoretical neoliberalism, such as the Bush administration, to throw out free market neoliberal principles when they seriously threatened elite power. The obvious examples are the various bailouts of companies or entire industries, whom according to neoliberal theory, should be allowed to fail as a kind of punishment for market inefficiency.On this notion of class power Harvey is at his best, since a recurrent theme promoted by neoliberals has been the idea of allowing the free market to take its course and for the government to back off. Yet these demands for the rollback of government intervention in the economy have always been one sided. The government is called on to lesson regulations and intervention in the economy only when it will benefit the economic elites. Thus labour and environmental regulations were attacked by neoliberals as distorting the price mechanisms of the free market and were seen as examples of how government intervention in the economy always leads to inefficiency. Yet the same neoliberals were surprisingly quiet in 2001 when President Bush approved a massive bailout for the airline industry. Surely if government intervention in the economy distorts prices and subverts the more efficient market mechanisms then they would oppose such "government overreach" as a gross violation of neoliberal theory? Here is where we can apply Harvey's insight about neoliberalism as more of a practical attempt to restore elite class power than as a theoretical project driven by the works of Hayek or Friedman. Thus we end up in practice with a kind of one sided neoliberalism, where government intervention is bad if it would protect labour or the environment, but government intervention is good if it will help economic elites.
The second major point that Harvey makes which is well taken, is his argument that neoliberalism has not so much been about increasing wealth, but about redistributing it. Here we have an explanation of why, despite neoliberal theory which states that market mechanisms are more efficient and therefore better at generating wealth than forms of state intervention, GDP growth rates during the neoliberal era actually declined as shown by Harvey's statistics. Again this relates to the practical aspect of neoliberalism as a reconstitution of the power of economic elites, rather than adhering to any strict form of economic theory. So despite the poor growth rates, we have seen a dramatic increase in the wealth of the economic elite, borne out by the massive increase in CEO salaries, accompanied by a decline in real wages for the poorer sectors of the population. Thus the more unequal distribution of wealth that Harvey talks about, which also reinforces the class division between the economic elite and everyone else.
Harvey terms these techniques of upward redistribution of wealth accumulation by dispossession. Harvey argues that accumulation by dispossession is the main mechanism whereby neoliberalism achieved this redistribution of wealth. He sees accumulation by dispossession as a kind of continuation or extension of the Marxian concept of primitive accumulation whereby during the onset of capitalism, common lands were privatized, labour was commodified, and exchange was monetized and financialized. Harvey lists the main aspects of accumulation by dispossession in the modern neoliberal sense as privatization and commodification, financialization, the management and manipulation of crises, and state redistributions. This defining of the precise mechanisms of accumulation by dispossession is as close as Harvey comes to giving a definition of neoliberalism itself, but he sees accumulation by dispossession as a kind of technique of neoliberalism, not as what neoliberalism itself consists of.
By sketching out the brief history of neoliberalism, Harvey explains why the techniques of accumulation by dispossession were required as a means to reconstitute class power. Prior to neoliberalism the global political economy was dominated by the form of capitalism called embedded liberalism, whereby liberal market economies were embedded inside the regulatory framework of the state. These regulations included strong union rights, unemployment insurance, strict regulation of the financial system, and other such limits to the scope of market activities. Harvey explains that neoliberalism essentially sought to disembed the liberal economies from the state's regulatory framework, and thus went about essentially privatizing the commons a second time. This contrast of neoliberalism to embedded liberalism in a historical context is useful in explaining why economic elites gravitated towards neoliberalism as a way to restoring their class power and provides an example in the form of embedded liberalism of what neoliberalism is not.
In giving his brief history of neoliberalism, Harvey touches on a couple of intriguing points which would have been interesting to pursue further. The first is the way in which neoliberals were able to find an electoral base by aligning themselves with conservative religious groups, in particular the evangelical Christian Right in the United States. He also mentions the Hindu Nationalist Party in India which used religious and nationalist sentiment to win election, after which it preceded to undertake neoliberal economic reforms. In terms of the neoliberal harnessing of the Christian Right for an electoral base, Harvey shows the interesting symmetry between the anti-state economic approach of neoliberals, and the anti-state social approach of conservative Christians who saw the liberal state as providing special privileges or affirmative action to groups such as gays and lesbians (same sex marriage), and women (abortion), which they morally disagreed with. The interesting aspect here is of course that much of the American Bible belt which provides the core of the Christian Right is also the poorest part of the United States and stood the most to lose from an adoption of neoliberal economic reforms.
Harvey alludes to a kind of false consciousness going on where people are blinded to their material economic interests by their religious beliefs, which could certainly be the case to some extent, but in many cases neoliberal ethics have become part of the sermons of various megachurches themselves. Thus if we have neoliberalism involving a return to the primitive accumulation during the rise of capitalism, it seems we also have a re-emergence of Weber's protestant ascetics espousing a neoliberal economic ethic. This means that neoliberalism is not all a top down imposition which uses religion to trick people out of their true interests as Harvey alludes to in his standard Marxist reading of the situation, but as being spurred on by religion itself from below. Thus the Christian Right electoral base was not simply concerned about conservative moral values which the neoliberals in the Reagan Republicans hooked their wagon to in order to be elected, but they were in many ways already in favour of neoliberal economics as a result of their religious beliefs. A study of the symmetry between neoliberal economic elites pushing from above, and evangelical Christians pushing for neoliberalism from below would be interesting to pursue, but it is doubtful this would interest Harvey.
Sticking with the issue of religion, the second interesting albeit underdeveloped issue that Harvey raises is the depoliticization of society. Harvey talks about how neoliberalism entails a preference for technocratic rule over democracy, and how this has stripped political institutions of their democratic and inclusive character. Harvey explains that the result of this depoliticization and creation of a disposable workforce is that people seek out social solidarity in other non-political institutions. The biggest one of these institutions of course being religion, but people have also sought to find new means of social solidarity in everything from gangs to NGOs. This concept is much better developed by Rose (1999) in his concept of the Third Sector, which is neither social nor political, but takes on a community aspect. Thus neoliberalism has the effect of privatizing politics itself, as social welfare is off loaded to religious charity, trade unions are replaced with criminal gangs, and in less developed countries the role of the developmental state is replaced by international development NGOs. As Rose focuses more on the social and political aspects of neoliberalism whereas Harvey focuses on the economic aspects, Rose can be read as a supplement to Harvey in this manner.
Where Harvey starts to run into trouble is when his vague definition of neoliberalism starts to cause confusion, especially in his chapter on China where neoliberalism is used as a synonym for capitalism. To find an entire chapter dedicated to China in a book on neoliberalism seems extremely strange, as China is one of the few states that managed to resist the global trend of neoliberalism. As Nonini (2008) points out, China has certainly been undertaking a process of capitalist reform, but in an explicitly non-neoliberal form in which the state plays an extremely strong part in intervening and directing the economy. There certainly is a process of accumulation by dispossession as Harvey points out, but the newly created capitalist class is still subservient (in the cases where they are actually different people) to the direction of the political elites in the Communist Party.
If we are to talk about neoliberalism, then we need to realize that there are different forms of capitalism, with neoliberalism being one of them. At the same time, we must realize that all transitions to capitalism are not the same, and thus can adopt different forms. As Pollin (2005) points out, China's approach to the transition to capitalism was radically different from that of Russia, who legitimately did take a neoliberal path under Yeltsin where the economy was turned over to the market wholesale with disastrous results. The cautious state-directed approach towards capitalist transition taken by China is clearly a very different method from the turn everything over to the market approach taken by Russia. Calling both of these approaches neoliberalism is messy and confusing as clearly they are substantially different.
On this point I believe Harvey is making a common mistake that opponents of not just neoliberalism, but of capitalism in general make. Harvey no doubt does not like much of the economic changes happening in China and most likely would prefer them to take another path that was less explicitly capitalist, but since the term neoliberalism conjures up much more negative connotations than the word capitalism, Harvey lumps China in with neoliberalism in an attempt to paint its transition to capitalism in a negative light. This lumping of all types of capitalism under the neoliberal umbrella is also often employed by anti-capitalist critics of the recently elected left-wing South American governments who have for the most part rejected neoliberalism, but not capitalism. Thus in an attempt to paint Presidents Chavez or Morales in a negative light for not dismantling all aspects of capitalism overnight, they are mislabelled as neoliberal as a kind of slur rather than a descriptive category. Harvey is guilty of this with regards to China, and would have been better off including a chapter on Russia under Yeltsin instead, which would have shown a dramatic example of both turning a state-managed economy over to the market, and a much more extreme form of accumulation by dispossession than is found in his Chinese examples. In Harvey's defense it may have seemed like neoliberalization was inevitable for China back in 2005, with the US constantly pressuring China to undergo reforms, but in light of the recent financial crisis, any movement towards neoliberalism by China is now completely out of the picture.
In addition to the chapter on China which is out of place, the last chapter entitled Freedom's Prospect is problematic as well. Here Harvey gives an optimistic account of how neoliberalism can be overcome from below and places his hope in a kind of reconstituted class consciousness where class struggle can resume and replace neoliberalism from below. However this seems hopelessly optimistic, as while neoliberalism certainly restored class power to the economic elites, it at the same time worked to undermine any sense of class cohesion for those below. How can class struggle be reconstituted in an era of de-unionization, of labour flexibilization, of outsourcing? Not to mention the depoliticizing effects which have led people to find social cohesion in religion or identity and cultural groups, rather than any kind of economic or political groups like class or party. Harvey, like Hardt and Negri in Multitude (2004) thinks the lack of democracy inherent in neoliberalism will be enough to form an oppositional movement which can displace neoliberalism from below.
Although Harvey's point about a lack of democracy under neoliberalism is certainly valid, this is not a concern for most people, on account of precisely the depoliticizing factors inherent in neoliberalism. People in our post-political neoliberal world find their identities in religion or culture, and are increasingly hostile to other religious or cultural groups, thus placing stark divisions between those who are supposed to resurrect the class struggle. Do evangelical Christians and Islamists want democracy, let alone oppose neoliberalism as Harvey claims they do? Not at all, and even if they did favour democracy, there is no way they would ever work together to bring it about. Furthermore most of these religious movements Harvey cites as possible sources of opposition are thoroughly neoliberal in their outlook, or at least profit greatly from it, and in no way offer any resistance. As we are witnessing now in the aftermath of the global financial crisis which has demonstrated the failure of neoliberalism--even to many of the elites who benefitted from it--any new form of capitalism is going to come from the top down, it will be a technocratic solution which will aim to abate the economic problems that are hurting everyone in the world right now, while doing as little as possible to reign in the power of economic elites. The biggest advocates of an alternative to the global neoliberal economy seem to be political leaders like Gordon Brown of the UK and newly elected Australian Prime Minister Kevin Rudd, while grassroots activists in places like the United States are inexplicably aligning with die hard neoliberals to oppose bailouts, nationalizations, and the new found lust for government intervention in the economy.
David Harvey's A Brief History of Neoliberalism could work as an excellent introduction to the concept of neoliberalism for those unfamiliar with the term if it was just a little more brief. The chapter on China is completely out of place and the overly optimistic final chapter can be either viewed as an annoying statement of false hope or as somewhat irrelevant now that neoliberalism seems bound to be replaced or at least dramatically restructured in a technocratic manner. The book is useful in explaining why neoliberal practice has not always followed neoliberal theory, and the concept of accumulation by dispossession is certainly useful analytically. Harvey's focus on neoliberalism as political economy could be supplemented by Nikolas Rose's Powers of Freedom which focuses on neoliberalism in the social and political realm.
ReferencesHardt, M. & Negri. A. (2004). Multitude: War and Democracy in the Age of Empire. New York: Penguin Books.
Harvey, D. (2005). A Brief History of Neoliberalism. Oxford: Oxford University Press.
Nonini, D. M. (2008). Is China Becoming Neoliberal? Critique of Anthropology 28(2). 145-176.
Pollin, R. (2005). Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity (2nd ed.). London: Verso.
Rose, N. (1999). Powers of Freedom: Reframing Political Thought. Cambridge: Cambridge University Press.
Posted by T at 7:47 PM
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by Anup Shah This Page Last Updated Sunday, August 22, 2010This page: http://www.globalissues.org/article/39/a-primer-on-neoliberalism Neoliberalism is promoted as the mechanism for global trade and investment supposedly for all nations to prosper and develop fairly and equitably. Margaret Thatcher's TINA acronym suggested that There Is No Alternative to this. But what is neoliberalism, anyway?
This section attempts to provide an overview. First, a distinction is made between political and economic liberalism. Then, neoliberalism as an ideology for how to best structure economies is explained. Lastly, for important context, there is a quick historical overview as to how this ideology developed.
This web page has the following sub-sections:
- Political versus Economic Liberalism
- Neoliberalism is...
- Brief overview of Neoliberalism's History: How did it develop?
- Going bust? The Global Financial Crisis Shakes Confidence
- More Information
Political versus Economic Liberalism
There is an important difference between liberal politics and liberal economics. But this distinction is usually not articulated in the mainstream.
As summarized here by Elizabeth Martinez and Arnoldo Garcia:
"Liberalism" can refer to political, economic, or even religious ideas. In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right wing. Economic liberalism is different. Conservative politicians who say they hate "liberals" - meaning the political type - have no real problem with economic liberalism, including neoliberalism.
- Elizabeth Martinez and Arnoldo Garcia, What is "Neo-Liberalism"?, National Network for Immigrant and Refugee Rights, January 1, 1997 (posted at CorpWatch.org)
The web site, Political Compass, also highlights these differences very well.
They show Left and Right as an economic scale, with Authoritarian and Libertarian making up the political scale, crossing the economic scale resulting in quadrants:
In addition, they note that, "despite popular perceptions, the opposite of fascism is not communism but anarchism (ie liberal socialism), and that the opposite of communism (i.e. an entirely state-planned economy) is neo-liberalism (i.e. extreme deregulated economy)." This is made clear by another chart they have:
A few other charts of theirs are of interest:
1) The positions of some well-known political figures in the world
(In the above, it is interesting to note how most of the world's influential leaders, from the wealthiest and most poweful countries all fall into the area of authoritarian-right.)
2) A look at English political parties and how they fair (even the "left" ones.)
3) It is also interesting to see how the three main British political parties have changed over time, as Political Compass shows:
4) The last US elections (2004) show the political spectrum between John Kerry and George W. Bush was note that wide:
They also make a distinction about neo-conservatives and neoliberals:
U.S. neo-conservatives, with their commitment to high military spending and the global assertion of national values, tend to be more authoritarian than hard right. By contrast, neo-liberals, opposed to such moral leadership and, more especially, the ensuing demands on the tax payer, belong to a further right but less authoritarian region. Paradoxically, the "free market", in neo-con parlance, also allows for the large-scale subsidy of the military-industrial complex, a considerable degree of corporate welfare, and protectionism when deemed in the national interest. These are viewed by neo-libs as impediments to the unfettered market forces that they champion.
- About the Political Compass, January 6, 2004
What the above highlights then, is that in some countries, discourse on these topics may appear to fit into left-right balance, but when looked at a more global scale, the range of discourse may be narrow. Economic issues such as globalization, especially as it affects third world countries as well as those in the first world, require a broader range of discussion.
Neoliberalism is...
Neoliberalism, in theory, is essentially about making trade between nations easier. It is about freer movement of goods, resources and enterprises in a bid to always find cheaper resources, to maximize profits and efficiency.
To help accomplish this, neoliberalism requires the removal of various controls deemed as barriers to free trade, such as:
- Tariffs
- Regulations
- Certain standards, laws, legislation and regulatory measures
- Restrictions on capital flows and investment
The goal is to be able to to allow the free market to naturally balance itself via the pressures of market demands; a key to successful market-based economies.
As summarized from What is "Neo-Liberalism"? A brief definition for activists by Elizabeth Martinez and Arnoldo Garcia from Corporate Watch, the main points of neoliberalism includes:
- The rule of the market - freedom for capital, goods and services, where the market is self-regulating allowing the "trickle down" notion of wealth distribution. It also includes the deunionizing of labor forces and removals of any impediments to capital mobility, such as regulations. The freedom is from the state, or government.
- Reducing public expenditure for social services, such as health and education, by the government
- Deregulation, to allow market forces to act as a self-regulating mechanism
- Privatization of public enterprise (things from water to even the internet)
- Changing perceptions of public and community good to individualism and individual responsibility.
Overlapping the above is also what Richard Robbins, in his book, Global Problems and the Culture of Capitalism (Allyn and Bacon, 1999), summarizes (p.100) about some of the guiding principles behind this ideology of neoliberalism:
- Sustained economic growth is the way to human progress
- Free markets without government "interference" would be the most efficient and socially optimal allocation of resources
- Economic globalization would be beneficial to everyone
- Privatization removes inefficiencies of public sector
- Governments should mainly function to provide the infrastructure to advance the rule of law with respect to property rights and contracts.
At the international level then we see that this additionally translates to:
- Freedom of trade in goods and services
- Freer circulation of capital
- Freer ability to invest
The underlying assumption then is that the free markets are a good thing. They may well be, but unfortunately, reality seems different from theory. For many economists who believe in it strongly the ideology almost takes on the form of a theology. However, less discussed is the the issue of power and how that can seriously affect, influence and manipulate trade for certain interests. One would then need to ask if free trade is really possible.
From a power perspective, "free" trade in reality is seen by many around the world as a continuation of those old policies of plunder, whether it is intended to be or not. However, we do not usually hear such discussions in the mainstream media, even though thousands have protested around the world for decades.
Today then, neoliberal policies are seeing positives and negatives. Under free enterprise, there have been many innovative products. Growth and development for some have been immense. Unfortunately, for most people in the world there has been an increase in poverty and the innovation and growth has not been designed to meet immediate needs for many of the world's people. Global inequalities on various indicators are sharp. For example,
- Some 3 billion people - or half of humanity - live on under 2 dollars a day
- 86 percent of the world's resources are consumed by the world's wealthiest 20 percent
- (See this site's page on poverty facts for many more examples.)
Joseph Stiglitz, former World Bank Chief Economist (1997 to 2000), Nobel Laureate in Economics and now strong opponent of the ideology pushed by the IMF and of the current forms of globalization, notes that economic globalization in its current form risks exacerbating poverty and increasing violence if not checked, because it is impossible to separate economic issues from social and political issues.
And as J.W. Smith has argued:
One cannot separate economics, political science, and history. Politics is the control of the economy. History, when accurately and fully recorded, is that story. In most textbooks and classrooms, not only are these three fields of study separated, but they are further compartmentalized into separate subfields, obscuring the close interconnections between them.
- J.W. Smith, The World's Wasted Wealth 2, (Institute for Economic Democracy, 1994), p. 22.
Issues such as the criticisms of "free" trade, of protests around the world, and many others angles are discussed on this section's subsequent pages.
The history of neoliberalism and how it has come about is worth looking at first, however, to get some crucial context, and to understand why so many people around the world criticize it.
Brief overview of Neoliberalism's History: How did it develop?
Free Markets Were Not Natural. They Were Enforced
The modern system of free trade, free enterprise and market-based economies, actually emerged around 200 years ago, as one of the main engines of development for the Industrial Revolution.
In 1776, British economist Adam Smith published his book, The Wealth of Nations. Adam Smith, who some regard as the father of modern free market capitalism and this very influential book, suggested that for maximum efficiency, all forms of government interventions in economic issues should be removed and that there should be no restrictions or tariffs on manufacturing and commerce within a nation for it to develop.
For this to work, social traditions had to be transformed. Free markets were not inevitable, naturally occurring processes. They had to be forced upon people. John Gray, professor of European thought at the London School of Economics, a prominent conservative political thinker and an influence on Margaret Thatcher and the New Right in Britain in the 1980s, notes:
Mid-nineteenth century England was the subject of a far-reaching experiment in social engineering. Its objective was to free economic life from social and political control and it did so by constructing a new institution, the free market, and by breaking up the more socially rooted markets that had existed in England for centuries. The free market created a new type of economy in which prices of all goods, including labour, changed without regard to their effects on society. In the past economic life had been constrained by the need to maintain social cohesion. It was conducted in social markets - markets that were embedded in society and subject to many kinds of regulation and restraint. The goal of the experiment that was attempted in mid-Victorian England was to demolish these social markets, and replace them by deregulated markets that operated independently of social needs. The rupture in England's economic life produced by the creation of the free market has been called the Great Transformation.
- John Gray, False Dawn: The Delusions of Global Capitalism, (The New Press, 1998), p.1
A detailed insight into this process of transformation is revealed by Michael Perelman, Professor of Economics at California State University. In his book The Invention of Capitalism (Duke University Press, 2000), he details how peasants did not willingly abandon their self-sufficient lifestyle to go work in factories.
- Instead they had to be forced with the active support of thinkers and economists of the time, including the famous originators of classical political economy, such as Adam Smith, David Ricardo, James Steuart and others.
- Contradicting themselves, as if it were, they argued for government policies that deprived the peasants their way of life of self-provision, to coerce them into waged labor.
- Separating the rural peasantry from their land was successful because of "ideological vigor" from people like Adam Smith, and because of a "revision of history" that created an impression of a humanitarian heritage of political economy; an inevitability to be celebrated.
- This revision, he also noted has evidently "succeeded mightily."
Rooted in Mercantilism
Adam Smith's work did, however, expose the previous fraud that was the mercantilist system, which enriched the imperial powers at the expense of others. This mercantilism had its roots in the Middle and Dark Ages of Europe, many hundreds of years earlier and also parallels various methods used by empires throughout history (including today) to control their peripheries and appropriate wealth accordingly. Furthermore, as J.W. Smith argues, even though it is claimed to be Adam Smith free trade, neoliberalism was and is mercantilism dressed up with more friendly rhetoric, while the reality remains the same as the mercantilist processes over the last several hundred years:
The powerful throughout the past centuries not only claimed an excessive share of the wealth of nature which was properly shared by all within the community, through the unequal trades of mercantilism they claimed an excessive share of the wealth on the periphery of their trading empires. Adam Smith describes mercantilism for us:
[Mercantilism's] ultimate object… is always the same, to enrich the country [city or state] by an advantageous balance of trade. It discourages the exportation of the materials of manufacture [tools and raw material], and the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations [cities] in all foreign markets: and by restraining, in this manner, the exportation of a few commodities of no great price, it proposes to occasion a much greater and more valuable exportation of others. It encourages the importation of the materials of manufacture, in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities.
William Appleman Williams describes mercantilism at its zenith: "The world was defined as known and finite, a principle agreed upon by science and theology. Hence the chief way for a nation to promote or achieve its own wealth and happiness was to take them away from some other country."
When the injustice of mercantilism was understood, it became too embarrassing and was replaced by the supposedly just Adam Smith free trade. But free trade as practiced by Adam Smith neo-mercantilists was far from fair trade. Adam Smith unequal free trade is little more than a philosophy for the continued subtle monopolization of the wealth-producing-process, largely through continued privatization of the commons of both an internal economy and the economies of weak nations on the periphery of trading empires. So long as weak nations could be forced to accept the unequal trades of Adam Smith free trade, they would be handing their wealth to the imperial-centers-of-capital of their own free will. In short, Adam Smith free trade, as established by neo-mercantilists, was only mercantilism hiding under the cover of free trade.
- J.W. Smith, Cooperative Capitalism; A Blueprint for Global Peace and Prosperity, (Quality Books, Inc, 2003), pp.4-5
Colonialism and Imperialism Needed To Succeed
Free trade formed the basis of free enterprise for capitalists and up until the Great Depression of the 1930s was the primary economic theory followed in the United States and Britain. But from a global perspective, this free trade was accompanied by geopolitics making it look more like mercantilism. For both these nations (as well as others) to succeeded and remain competitive in the international arena, they had a strong foundation of imperialism, colonialism and subjugation of others in order to have access to the resources required to produce such vast wealth. As J.W. Smith notes above, this was hardly the free trade that Adam Smith suggested and it seemed like a continuation of mercantilist policies.
However, even during its prevalent times before the Second World War, neoliberalism had already started to show signs of increasing disparities between rich and poor.
Because of the Great Depression in the 1930s, an economist, John Maynard Keynes, suggested that regulation and government intervention was actually needed in order to provide more equity in development. This led to the "Keynesian" model of development and after World War II formed the foundation for the rebuilding of the U.S-European-centered international economic system. The Marshall Plan for Europe helped reconstruct it and the European nations saw the benefits of social provisions such as health, education and so on, as did the U.S. under President Roosevelt's New Deal.
In fact, the Bretton Woods Institutions (the International Monetary Fund (IMF) and World Bank) were actually designed with Keynesian policies in mind; to help provide international regulation and control of capital. As Susan George notes, "when these institutions were created at Bretton Woods in 1944, their mandate was to help prevent future conflicts by lending for reconstruction and development and by smoothing out temporary balance of payments problems. They had no control over individual government's economic decisions nor did their mandate include a license to intervene in national policy." This is very different from what they are doing today.
In 1945 or 1950, if you had seriously proposed any of the ideas and policies in today's standard neo-liberal toolkit, you would have been laughed off the stage at or sent off to the insane asylum. At least in the Western countries, at that time, everyone was a Keynesian, a social democrat or a social-Christian democrat or some shade of Marxist. The idea that the market should be allowed to make major social and political decisions; the idea that the State should voluntarily reduce its role in the economy, or that corporations should be given total freedom, that trade unions should be curbed and citizens given much less rather than more social protection - such ideas were utterly foreign to the spirit of the time. Even if someone actually agreed with these ideas, he or she would have hesitated to take such a position in public and would have had a hard time finding an audience.
- Susan George, A Short History of Neoliberalism: Twenty Years of Elite Economics and Emerging Opportunities for Structural Change, Conference on Economic Sovereignty in a Globalising World, Bangkok, 24-26 March 1999
However, as elites and corporations saw their profits diminish with this equalizing effect, economic liberalism was revived, hence the term "neoliberalism". Except, that this new form was not just limited to national boundaries, but instead was to apply to international economics as well. Starting from the University of Chicago with the philosopher-economist Friedrich von Hayek and his students such as Milton Friedman, the ideology of neoliberalism was pushed very thoroughly around the world.
Even before this though, there were indications that the world economic order was headed this way: the majority of wars throughout history have had economics, trade and resources at their core. The want for access to cheap resources to continue creating vast wealth and power allowed the imperial empires to justify military action, imperialism and colonialism in the name of "national interests", "national security", "humanitarian" intervention and so on. In fact, as J.W. Smith notes:
The wealth of the ancient city-states of Venice and Genoa was based on their powerful navies, and treaties with other great powers to control trade. This evolved into nations designing their trade policies to intercept the wealth of others (mercantilism). Occasionally one powerful country would overwhelm another through interception of its wealth though a trade war, covert war, or hot war; but the weaker, less developed countries usually lose in these exchanges. It is the military power of the more developed countries that permits them to dictate the terms of trade and maintain unequal relationships.
- J.W. Smith, The World's Wasted Wealth 2, (Institute for Economic Democracy, 1994), p. 120.
As European and American economies grew, they needed to continue expansion to maintain the high standards of living that some elites were attaining in those days. This required holding on to, and expanding colonial territories in order to gain further access to the raw materials and resources, as well exploiting cheap labor. Those who resisted were often met with brutal repression or military interventions. This is not a controversial perception. Even U.S. President Woodrow Wilson recognized this in the early part of the 20th century:
Since trade ignores national boundaries and the manufacturer insists on having the world as a market, the flag of his nation must follow him, and the doors of the nations which are closed against him must be battered down. Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process. Colonies must be obtained or planted, in order that no useful corner of the world may be overlooked or left unused.
- Woodrow Wilson, President of the United States, 1919, Quoted by Noam Chomsky, On Power and Ideology, (South End Press, 1990), p.14.
Richard Robbins, Professor of Anthropology and author of Global Problems and the Culture of Capitalism is also worth quoting at length:
The Great Global Depression of 1873 that lasted essentially until 1895 was the first great manifestation of the capitalist business crisis. The depression was not the first economic crisis [as there had been many for thousands of years] but the financial collapse of 1873 revealed the degree of global economic integration, and how economic events in one part of the globe could reverberate in others.…
The Depression of 1873 revealed another big problem with capitalist expansion and perpetual growth: it can continue only as long as there is a ready supply of raw materials and an increasing demand for goods, along with ways to invest profits and capital. Given this situation, if you were an American or European investor in 1873, where would you look for economic expansion?
The obvious answer was to expand European and American power overseas, particularly into areas that remained relatively untouched by capitalist expansion - Africa, Asia, and the Pacific. Colonialism had become, in fact, a recognized solution to the need to expand markets, increase opportunities for investors, and ensure the supply of raw material. Cecil Rhodes, one of the great figures of England's colonization of Africa, recognized the importance of overseas expansion for maintaining peace at home. In 1895 Rhodes said:
I was in the East End of London yesterday and attended a meeting of the unemployed. I listened to the wild speeches, which were just a cry for "bread", "bread," and on my way home I pondered over the scene and I became more than ever convinced of the importance of imperialism.… My cherished idea is a solution for the social problem, i.e., in order to save the 40,000,000 inhabitants of the United Kingdom from a bloody civil war, we colonial statesmen must acquire new lands for settling the surplus population, to provide new markets for the goods produced in the factories and mines. The Empire, as I have always said, is a bread and butter question. If you want to avoid civil war, you must become imperialist.
As a result of this cry for imperialist expansion, people all over the world were converted into producers of export crops as millions of subsistence farmers were forced to become wage laborers producing for the market and required to purchase from European and American merchants and industrialists, rather than supply for themselves, their basic needs.
- Richard H. Robbins, Global Problems and the Culture of Capitalism, (Allyn and Bacon), pp. 93-94
World War I was, in effect, a resource war as Imperial centers battled over themselves for control of the rest of the world. World War II was another such battle, perhaps the ultimate one. However, the former imperial nations realized that to fight like this is not the way, and became more cooperative instead.
Unfortunately, that cooperation was not for all the world's interests primarily, but their own. The Soviet attempt of an independent path to development (flawed that it was, because of its centralized, paranoid and totalitarian perspectives), was a threat to these centers of capital because their own colonies might "get the wrong idea" and also try for an independent path to their development.
Because World War II left the empires weak, the colonized countries started to break free. In some places, where countries had the potential to bring more democratic processes into place and maybe even provide an example for their neighbors to follow it threatened multinational corporations and their imperial (or former imperial) states (for example, by reducing access to cheap resources). As a result, their influence, power and control was also threatened. Often then, military actions were sanctioned. To the home populations, the fear of communism was touted, even if it was not the case, in order to gain support.
… you have to sell [intervention or other military actions] in such a way as to create the misimpression that it is the Soviet Union the you are fighting…
- Professor Samuel Huntingdon, Harvard University, Quoted by Noam Chomsky in Latin America: From Colonization to Globalization, (Ocean Press, 1999), p.18)
The net effect was that everyone fell into line, as if it were, allowing a form of globalization that suited the big businesses and elite classes mainly of the former imperial powers. (Hence, there is no surprise that some of the main World War II rivals, USA, Germany and Japan as well as other European nations are so prosperous, while the former colonial countries are still so poor; the economic booms of those wealthy nations have been at the expense of most people around the world.) Thus, to ensure this unequal success, power, and advantage globalization was backed up with military might (and still is).
Hence, even with what seemed like the end of imperialism and colonialism at the end of World War II, and the promotion of Adam Smith free trade and free markets, mercantilist policies still continued. (Adam Smith exposed the previous system as mercantilist and unjust. He then proposed free market capitalism as the alternative. Yet, a reading of Adam Smith's Wealth of Nations would reveal that today is a far cry from the free market capitalism he suggested, and instead could still be considered monopoly capitalism, or the age-old mercantilism that he had exposed! More about this in the next section on this site.) And so, a belief system had to accompany the political objectives:
When the blatant injustices of mercantilist imperialism became too embarrassing, a belief system was imposed that mercantilism had been abandoned and true free trade was in place. In reality the same wealth confiscation went on, deeply buried within complex systems of monopolies and unequal trade hiding under the cover of free trade. Many explanations were given for wars between the imperial nations when there was really one common thread: "Who will control resources and trade and the wealth produced through inequalities in trade?" All this is proven by the inequalities of trade siphoning the world's wealth to imperial centers of capital today just as they did when the secret of plunder by trade was learned centuries ago. The battles over the world's wealth have only kept hiding behind different belief systems each time the secrets of laying claim to the wealth of others' have been exposed.
- J.W. Smith, Economic Democracy; The Political Struggle for the 21st Century, (M.E. Sharpe, 2000) p.126
Going Global
The Reagan and Thatcher era in particular, saw neoliberalism pushed to most parts of the globe, almost demonizing anything that was publicly owned, encouraging the privatization of anything it could, using military interventions if needed. Structural Adjustment policies were used to open up economies of poorer countries so that big businesses from the rich countries could own or access many resources cheaply.
Lori Wallach, Director of Global Trade Watch, also describes in a video clip (4:30 minutes, transcript) how even the term free "trade" is misleading, for the free trade agenda pushed through the World Trade Organization includes many non-trade issues, such that trade is just one small part:
Lori Wallach, Free Trade-The Price Paid (Part One), April 13, 2005, © Big Picture TV
The belief in free markets (or the version being promoted) was very ideological:
So, from a small, unpopular sect with virtually no influence, neo-liberalism has become the major world religion with its dogmatic doctrine, its priesthood, its law-giving institutions and perhaps most important of all, its hell for heathen and sinners who dare to contest the revealed truth. Oskar Lafontaine, the ex-German Finance Minister who the Financial Times called an "unreconstructed Keynesian" has just been consigned to that hell because he dared to propose higher taxes on corporations and tax cuts for ordinary and less well-off families.
1979, the year Margaret Thatcher came to power and undertook the neo-liberal revolution in Britain. The Iron Lady was herself a disciple of Friedrich von Hayek, she was a social Darwinist and had no qualms about expressing her convictions. She was well known for justifying her program with the single word TINA, short for There Is No Alternative. The central value of Thatcher's doctrine and of neo-liberalism itself is the notion of competition - competition between nations, regions, firms and of course between individuals. Competition is central because it separates the sheep from the goats, the men from the boys, the fit from the unfit. It is supposed to allocate all resources, whether physical, natural, human or financial with the greatest possible efficiency.
In sharp contrast, the great Chinese philosopher Lao Tzu ended his Tao-te Ching with these words: "Above all, do not compete". The only actors in the neo-liberal world who seem to have taken his advice are the largest actors of all, the Transnational Corporations. The principle of competition scarcely applies to them; they prefer to practice what we could call Alliance Capitalism.
- Susan George, A Short History of Neoliberalism: Twenty Years of Elite Economics and Emerging Opportunities for Structural Change, Conference on Economic Sovereignty in a Globalising World, Bangkok, 24-26 March 1999
As former World Bank Chief Economist Josepth Stiglitz notes, it is a simplistic ideology which most developed nations have resisted themselves:
The Washington Consensus policies, however, were based on a simplistic model of the market economy, the competitive equilibrium model, in which Adam Smith's invisible hand works, and works perfectly. Because in this model there is no need for government - that is, free, unfettered, "liberal" markets work perfectly - the Washington Consensus policies are sometimes referred to as "neo-liberal," based on "market fundamentalism," a resuscitation of the laissez-faire policies that were popular in some circles in the nineteenth century. In the aftermath of the Great Depression and the recognition of other failings of the market system, from massive inequality to unlivable cities marred by pollution and decay, these free market policies have been widely rejected in the more advanced industrial countries, though within these countries there remains an active debate about the appropriate balance between government and markets.
- Joseph Stiglitz, Globalization and Its Discontents, (Allen Lane/Penguin Books, 2002), p.74
Activist and academic Raj Patel explains that prices do not accurately reflect the value of commodities due to so many externalities (a $4 hamburger should cost $200 for example if some environmental aspects are factored in, for example), and also notes that various leading proponents of neoliberalism are now admitting it too, in the wake of the financial crash in 2008. Furthermore, markets aren't separate from social and political contexts in which they function, yet, business leaders and governments were all too willing to go for the simpler soundbites:
The problem with the Efficient Markets Hypothesis is that it doesn't work. If it were true, then there'd be no incentive to invest in research because the market would, by magic, have beaten you to it. Economists Sanford Grossman and Joseph Stiglitz demonstrated this in 1980, and hundreds of subsequent studies have pointed out quite how unrealistic the hypothesis is, some of the most influential of which were written by Eugene Fama himself [who first formulated the idea as a a Ph.D. student in the University of Chicago Business School in the 1960s]. Markets can behave irrationally-investors can herd behind a stock, pushing its value up in ways entirely unrelated to the stock being traded.
Despite ample economic evidence to suggest it was false, the idea of efficient markets ran riot through governments.
- Raj Patel, Flaw
, The Value of Nothing, (Picador, 2010), pp.10-11, 12-13
Since the Cold War has ended, it is almost no surprise that today's globalization has come in the form we see it - that is where it would have been had the Cold War not got "in the way". The World Wars were about rival powers fighting amongst themselves to the spoils of the rest of the world; maintaining their empires and influence over the terms of world trade, commerce and, ultimately, power.
Throughout the Cold War, we contained a global threat to market democracies: now we should seek to enlarge their reach.
- Anthony Lake, National Security adviser, 1990, quoted from Noam Chomsky, World Orders Old and New, (Columbia University Press, 1996), p.71.
John Gray, mentioned above, notes that the same processes to force the peasantry off their lands and into waged labor, and to socially engineer a transformation to free markets is also taking place today in the third world:
The achievement of a similar transformation [as in mid-nineteenth century England] is the overriding objective today of transnational organizations such as the World Trade Organisation, the International Monetary Fund and the Organisation for Economic Cooperation and Development. In advancing this revolutionary project they are following the lead of the world's last great Enlightenment regime, the United States. The thinkers of the Enlightenment, such as Thomas Jefferson, Tom Paine, John Stuart Mill and Karl Marx never doubted that the future for every nation in the world was to accept some version of western institutions and values. A diversity of cultures was not a permanent condition of human life. It was a stage on the way to a universal civilization, in which the varied traditions and culture of the past were superseded by a new, universal community founded on reason.
- John Gray, False Dawn: The Delusions of Global Capitalism, (The New Press, 1998), pp.1-2
Gray also notes how this western view of the world is not necessarily compatible with the views of other cultures and this imposition for a western view of civilization may not be accepted by everyone. Ironically then, using terms like "Enlightenment", "freedom", "liberty", etc, which is common in such discourse, as Gray notes, results in conformity, almost totalitarian in nature.
Going bust? The Global Financial Crisis Shakes Confidence
Around mid-2008 a financial crisis, starting in the US, spread around the world into a global financial crisis, and then into a more general economic crisis, which, as of writing this, the world has still not recovered from.
The crisis has been so severe, criticisms of market fundamentalism and neoliberalism are more widespread than before.
The Value of Nothing, Raj Patel, July 28, 2010
Raj Patel argues that the markets in their current shape have created a convoluted idea of value; "value meals" are cheap but unhealthy whereas fruit and veg are often more expensive; rainforests are hardly valued whereas felling trees adds to the economy.
Flawed assumptions about the underlying economic systems contributed to this problem and had been building up for a long time, the current financial crisis being one of its eventualities.
This problem could have been averted (in theory) as people had been pointing to these issues for decades. Yet, of course, during periods of boom no-one (let alone the financial institutions and their supporting ideologues and politicians largely believed to be responsible for the bulk of the problems) would want to hear of caution and even thoughts of the kind of regulation that many are now advocating. To suggest anything would be anti-capitalism or socialism or some other label that could effectively shut up even the most prominent of economists raising concerns.
Of course, the irony that those same institutions would now themselves agree that those "anti-capitalist" regulations are required is of course barely noted. Such options now being considered are not anti-capitalist. However, they could be described as more regulatory or managed rather than completely free or laissez faire capitalism, which critics of regulation have often preferred. But a regulatory capitalist economy is very different to a state-based command economy, the style of which the Soviet Union was known for. The points is that there are various forms of capitalism, not just the black-and-white capitalism and communism. And at the same time, the most extreme forms of capitalism can also lead to the bigger bubbles and the bigger busts.
In that context, the financial crisis, as severe as it was, led to key architects of the system admitting to flaws in key aspects of the ideology.
At the end of 2008, Alan Greenspan was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Federal Reserve had been long and lauded, and Congress wanted to know what had gone wrong. Henry Waxman questioned him:
- Greenspan:
I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
- Waxman:
In other words, you found that your view of the world, your ideology, was not right, it was not working.
- Greenspan:
Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
[Greenspan's flaw] warped his view about how the world was organized, about the sociology of the market. And Greenspan is not alone. Larry Summers, the president's senior economic advisor, has had to come to terms with a similar error-his view that the market was inherently self-stabilizing has been "dealt a fatal blow." Hank Paulson, Bush's treasury secretary, has shrugged his shoulders with similar resignation. Even Jim Cramer from CNBC's Mad Money admitted defeat: "The only guy who really called this right was Karl Marx." One after the other, the celebrants of the free market are finding themselves, to use the language of the market, corrected.
- Raj Patel, Flaw
Quoting Stiglitz again, he captures the sentiments of a number of people:
We had become accustomed to the hypocrisy. The banks reject any suggestion they should face regulation, rebuff any move towards anti-trust measures - yet when trouble strikes, all of a sudden they demand state intervention: they must be bailed out; they are too big, too important to be allowed to fail.
…
America's financial system failed in its two crucial responsibilities: managing risk and allocating capital. The industry as a whole has not been doing what it should be doing … and it must now face change in its regulatory structures. Regrettably, many of the worst elements of the US financial system … were exported to the rest of the world.
- Joseph Stiglitz, The fruit of hypocrisy; Dishonesty in the finance sector dragged us here, and Washington looks ill-equipped to guide us out, The Guardian, September 16, 2008
Some of these regulatory measures have been easy to get around for various reasons. Some reasons for weak regulation that entrepreneur Mark Shuttleworth describes include that regulators
- Are poorly paid or are not the best talent
- Often lack true independence (or are corrupted by industries lobbying for favors)
- May lack teeth or courage in face of hostile industries and a politically hostile climate to regulation.
Given its crucial role, it is extremely important to invest in it too, Shuttleworth stresses.
However, this crisis wasted almost a generation of talent:
It was all done in the name of innovation, and any regulatory initiative was fought away with claims that it would suppress that innovation. They were innovating, all right, but not in ways that made the economy stronger. Some of America's best and brightest were devoting their talents to getting around standards and regulations designed to ensure the efficiency of the economy and the safety of the banking system. Unfortunately, they were far too successful, and we are all - homeowners, workers, investors, taxpayers - paying the price.
- Joseph Stiglitz, The fruit of hypocrisy; Dishonesty in the finance sector dragged us here, and Washington looks ill-equipped to guide us out, The Guardian, September 16, 2008
Paul Krugman also notes the wasted talent, at the expense of other areas in much need:
How much has our nation's future been damaged by the magnetic pull of quick personal wealth, which for years has drawn many of our best and brightest young people into investment banking, at the expense of science, public service and just about everything else?
- Paul Krugman, The Madoff Economy, New York Times, Opinion, December 19, 2008
The wasted capital, labor and resources all add up.
British economist John Maynard Keynes, is considered one of the most influential economists of the 20th century and one of the fathers of modern macroeconomics. He advocated an interventionist form of government policy believing markets left to their own measure (i.e. completely "freed") could be destructive leading to cycles of recessions, depressions and booms. To mitigate against the worst effects of these cycles, he supported the idea that governments could use various fiscal and monetary measures. His ideas helped rebuild after World War II, until the 1970s when his ideas were abandoned for freer market systems.
Keynes' biographer, professor Robert Skidelsky, argues that free markets have undermined democracy and led to this crisis in the first place:
What creates a crisis of the kind that now engulfs us is not economics but politics. The triumph of the global "free" market, which has dominated the world over the last three decades has been a political triumph.
It has reflected the dominance of those who believe that governments (for which read the views and interests of ordinary people) should be kept away from the levers of power, and that the tiny minority who control and benefit most from the economic process are the only people competent to direct it.
This band of greedy oligarchs have used their economic power to persuade themselves and most others that we will all be better off if they are in no way restrained-and if they cannot persuade, they have used that same economic power to override any opposition. The economic arguments in favor of free markets are no more than a fig leaf for this self-serving doctrine of self-aggrandizement.
- Bryan Gould, Who voted for the markets? The economic crisis makes it plain: we surrendered power to wealthy elites and fatally undermined democracy, The Guardian, November 26, 2008
Furthermore, he argues that the democratic process has been abused and manipulated to allow a concentration of power that is actually against the idea of free markets and real capitalism:
The uncomfortable truth is that democracy and free markets are incompatible. The whole point of democratic government is that it uses the legitimacy of the democratic mandate to diffuse power throughout society rather than allow it to accumulate-as any player of Monopoly understands-in just a few hands. It deliberately uses the political power of the majority to offset what would otherwise be the overwhelming economic power of the dominant market players.
If governments accept, as they have done, that the "free" market cannot be challenged, they abandon, in effect, their whole raison d'etre. Democracy is then merely a sham. … No amount of cosmetic tinkering at the margins will conceal the fact that power has passed to that handful of people who control the global economy.
- Bryan Gould, Who voted for the markets? The economic crisis makes it plain: we surrendered power to wealthy elites and fatally undermined democracy, The Guardian, November 26, 2008
Despite Keynesian economics getting a bad press from free market advocates for many years, many are now turning to his policies and ideas to help weather the economic crisis.
We are all Keynesians now. Even the right in the United States has joined the Keynesian camp with unbridled enthusiasm and on a scale that at one time would have been truly unimaginable.
… after having been left in the wilderness, almost shunned, for more than three decades … what is happening now is a triumph of reason and evidence over ideology and interests.
Economic theory has long explained why unfettered markets were not self-correcting, why regulation was needed, why there was an important role for government to play in the economy. But many, especially people working in the financial markets, pushed a type of "market fundamentalism." The misguided policies that resulted - pushed by, among others, some members of President-elect Barack Obama's economic team - had earlier inflicted enormous costs on developing countries. The moment of enlightenment came only when those policies also began inflicting costs on the US and other advanced industrial countries.
…
The neo-liberal push for deregulation served some interests well. Financial markets did well through capital market liberalization. Enabling America to sell its risky financial products and engage in speculation all over the world may have served its firms well, even if they imposed large costs on others.
Today, the risk is that the new Keynesian doctrines will be used and abused to serve some of the same interests.
- Joseph Stiglitz, Getting bang for your buck, The Guardian, December 5, 2008
Some of the world's top financiers and officials are reluctantly accepting that the version of capitalism that has long favored them may not be good for everyone.
Stiglitz observed this remarkable resignation at the annual Davos forum, usually a meeting place of rich world leaders and the corporate elite, who usually together reassert ways to go full steam ahead with a form of corporate globalization that has benefited those at the top. This time, however, Stiglitz noted that
[There was a] striking … loss of faith in markets. In a widely attended brainstorming session at which participants were asked what single failure accounted for the crisis, there was a resounding answer: the belief that markets were self-correcting.
The so-called "efficient markets" model, which holds that prices fully and efficiently reflect all available information, also came in for a trashing. So did inflation targeting: the excessive focus on inflation had diverted attention from the more fundamental question of financial stability. Central bankers' belief that controlling inflation was necessary and almost sufficient for growth and prosperity had never been based on sound economic theory.
… no one from either the Bush or Obama administrations attempted to defend American-style free-wheeling capitalism.… Most American financial leaders seemed too embarrassed to make an appearance. Perhaps their absence made it easier for those who did attend to vent their anger. Labor leaders working for the … business community were particularly angry at the financial community's lack of remorse. A call for the repayment of past bonuses was received with applause.
- Joseph Stiglitz, Fear and loathing in Davos, The Guardian, February 6, 2009
Some at the top, however, have tried to play the role of victim:
Indeed, some American financiers were especially harshly criticized for seeming to take the position that they, too, were victims … and it seemed particularly galling that they were continuing to hold a gun to the heads of governments, demanding massive bailouts and threatening economic collapse otherwise. Money was flowing to those who had caused the problem, rather than to the victims.
Worse still, much of the money flowing into the banks to recapitalize them so that they could resume lending has been flowing out in the form of bonus payments and dividends.
- Joseph Stiglitz, Fear and loathing in Davos, The Guardian, February 6, 2009
And as much as this crisis affects wealthier nations, the poorest will suffer most in the long run:
… This crisis raises fundamental questions about globalization, which was supposed to help diffuse risk. Instead, it has enabled America's failures to spread around the world, like a contagious disease. Still, the worry at Davos was that there would be a retreat from even our flawed globalization, and that poor countries would suffer the most.
But the playing field has always been uneven. If developing countries can't compete with America's subsidies and guarantees, how could any developing country defend to its citizens the idea of opening itself even more to America's highly subsidized banks? At least for the moment, financial market liberalization seems to be dead.
- Joseph Stiglitz, Fear and loathing in Davos, The Guardian, February 6, 2009
In effect, the globalization project, an ideal that sounded appealing for many around the world, was flawed by politics and greed; the inter-connectedness it created meant that as any flaws revealed themselves, the unraveling of such a system would have far greater reach and consequences, especially upon people who had nothing to do with its creation in the first place.
More Information
The above may seem long, but many volumes could be written to expand on the above themes. Until I can get to do something like that, the following are links to some useful resources to help understand neoliberalism and its historical and current context:
- A Short History of Neo-Liberalism: Twenty Years of Elite Economics and Emerging Opportunities for Structural Change by Susan George, from a conference on Economic Sovereignty in a Globalising World, Bangkok, 24-26 March 1999
- What is "Neo-Liberalism"? A brief definition for activists by Elizabeth Martinez and Arnoldo Garcia, National Network for Immigrant and Refugee Rights, January 1, 1997 (posted at CorpWatch.org)
- Has Globalisation Really Made Nations Redundant? The States We are Still In, by Noelle Burgi and Philip S. Golub, Le Monde Diplomatique, April 2000.
- The Essence of Neoliberalism by Pierre Bordieu, Le Monde Diplomatique, December 1998
- The Institute for Economic Democracy has a wealth of information.
- Program on Corporations Law & Democracy looks at the creation and development of English commercial corporations and the abolition of democratic control over their behavior. From UK-based Corporate Watch (not related to the above-mentioned US-based organization of the same name!)
- This web site's look at projecting power introduces the link between geopolitics and economics; of the use of military to back up trade objectives.
- The Citizens' Guide to Trade, Environment and Sustainability from Friends of the Earth gives an overview of the world trade system, the ideology, the impact on society, environment, etc.
- Neoliberalism: origins, theory, definition is a detailed look by Paul Treanor, a political thinker and writer.
- The Luckiest Nut In The World is an 8 minute video (sorry, no transcript available, as far as I know), produced by Emily James. It is a useful and light way of explaining some of the issues around free trade (in its current form) and its impact on poorer countries. Under their license, it has been reposted here. (Please note the license of this video is not covered by this site's own license).
Where next?
Related articles
- Global Financial Crisis
- A Primer on Neoliberalism
- Criticisms of Current Forms of Free Trade
- The WTO and Free Trade
- WTO Doha "Development" Trade Round Collapse, 2006
- Deregulation or Protectionism?
- Some Regional Free Trade Agreements
- The Mainstream Media and Free Trade
- Public Protests Around The World
- WTO Protests in Seattle, 1999
Anup Shah, A Primer on Neoliberalism, Global Issues, Updated: August 22, 2010
Alternatively, copy/paste the following MLA citation format for this page:
Shah, Anup. "A Primer on Neoliberalism." Global Issues. 22 Aug. 2010. Web. 29 Aug. 2015. <http://www.globalissues.org/article/39/a-primer-on-neoliberalism>.
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[Sep 19, 2017] Neoliberalism: the deep story that lies beneath Donald Trumps triumph: How a ruthless network of super-rich ideologues killed choice and destroyed people s faith in politics by George Monbiot Published on Nov 16, 2017 | www.theguardian.com
[Feb 23, 2020] Never Let a Serious Crisis Go to Waste How Neoliberalism Survived the Financial Meltdown by Philip Mirowski Published on Oct 12, 2017 | www.amazon.com
[Nov 27, 2018] American capitalism could afford to make concessions assiciated with The New Deal because of its economic dominance. The past forty years have been characterized by the continued decline of American capitalism on a world stage relative to its major rivals. The ruling class has responded to this crisis with a neoliberal counterrevolution to claw back all gains won by workers. This policy has been carried out under both Democratic and Republican administrations and with the assistance of the trade unions. Published on Nov 27, 2018 | thenewkremlinstooge.wordpress.com
[Dec 15, 2017] Rise and Decline of the Welfare State, by James Petras Published on Dec 13, 2017 | www.unz.com
[Dec 14, 2017] The 1970's was in many ways the watershed decade for the neoliberal transformation of the American economy and society Published on Dec 14, 2017 | www.unz.com
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