Neoliberalism

Submitted by Janine on 13 August, 2006 - 9:07

Review of Alfredo Saad-Filho and Deborah Johnston, eds Neoliberalism: A Critical Reader, Pluto, 271 pages, paperback, £15.99

By Paul Hampton

Neoliberalism is the dominant ideology of the epoch and this book is the most comprehensive analysis of the subject by Marxist and radical political economists published to date.

The editors argue that: “the most basic feature of neoliberalism is the systematic use of state power to impose (financial) market imperatives, in a domestic process that is replicated internationally by ‘globalisation’.” [p.3]

Neoliberalism means the imposition of privatisation, deregulation, cuts in welfare spending and free trade by governments and by international financial institutions such as the IMF and the World Bank.

Neoliberalism was a response to the economic and political crisis that began in the 1970s, exemplified by the US government uncoupling the dollar from gold, by the oil price shock in 1973 and subsequent recession, and by the US defeat in the Vietnam War. It offered a “finance-friendly solution to the problems of capital accumulation at the end of a relatively long cycle of prosperity.” [p.4]

It was first imposed by the most powerful states on their own working classes – with 1979-80 a crucial turning point – with Paul Volcker becoming head of the US Federal Reserve, Thatcher’s election in Britain and a year later Reagan to the presidency in the US.

Al Campbell’s chapter on the birth of neoliberalism in the United States goes beyond the usual explanations – namely that neoliberalism represents the return to hegemony of finance capital and that the period between 1950 and 1973 was founded on a capital-labour truce. He points out that US finance capital never accepted the Keynesian compromise of capital controls and that class struggle took place throughout the golden age after the Second World War.

He argues that neoliberalism was adopted because of the structural crisis of capitalist accumulation by the early 1970s – in particular the “diminished relative economic power of US productive capital”. [p. 191] The neoliberal response meant principally US capital attacking the US working class. It did this through increasing overseas production and purchase of foreign-produced productive inputs, wage freezes and outright wage cuts, eliminating cost of living clauses, introducing two-tier wage structures, using temporary workers and union busting. [pp.196-197]

John Milios’ chapter describes how 25 years of neoliberalism in Europe have influenced every aspect of social life. In particular the Maastricht treaty (1992), the Stability and Growth Pact (1996-97) and the draft European constitution represent successive agreements legitimising neoliberalism – though as Milios points out, the process has been subject to contradictions and setbacks.

Having triumphed in capitalist heartlands, neoliberalism has been systematically imposed on the rest of the world. Beginning with the Third world debt crisis in the early 1980s, as the editors put it new converts won “a refurbished international airport, one brand new branch of McDonalds, two luxury hotels, 3,000 NGOs and one US military base”. [p.2]

Alejandro Colas provides a nuanced Marxist understanding of international relations. Colas argues that the capitalist market not as a realm of opportunity but one of necessity – meaning that it imposes and reproduces certain social relations through imperatives, such as the divorce of peasants from the means of production, and the necessity for workers to work for a wage in the absence of other forms of remuneration. He understands classes and states as vehicles for these imperatives, with force operative in opening markets not just in recent decades but throughout the last three hundred years of the history of capitalism.

Today a more transnationally integrated ruling class, working through the G8 and other institutions, has imposed neoliberal policies over the past two decades. However he points to domestic political forces, including in developing countries, whose ruling classes have also consciously adopted neoliberal policies.

Terence Byres puts neoliberalism in the context of Marx’s conception of primitive accumulation. He says, “The central feature of primitive accumulation was the separation of peasants from their land and other means of production; transferring assets to potential capitalists.” [p.84]

Byres examines the way primitive accumulation proceeded in the first capitalist states – for example through enclosure in England - and then contrasts this with what he calls “colonial primitive accumulation”. The latter did completely separate producers from the means of production, creating an urban surplus population while leaving a large stratum of poor peasants in possession of land – largely as tenants and sharecroppers.

Only in South Korea and Taiwan (and perhaps China after 1978) has land reform been thoroughgoing enough for capitalism accumulation. However Byres suggests that the harsh policies of neoliberalism may have generated at least some of the conditions of primitive accumulation. He argues:

“Neoliberal policies have, surely, acted to hasten the primitive accumulation among less developed countries, by quickening and intensifying the processes of dispossession. But, in the absence of strong states, these have not noticeably served to accelerate the pace of capitalist transformation.” [p.90]

Other chapters challenge other aspects of ruling ideas – both those openly advocated (such as free trade) and others underlying them (such as imperialism).

Anwar Shaikh provides a much needed Marxist critique of the theory of comparative advantage – the theory behind demands for free international trade. Shaikh shows that the theory does not explain the reality of actual trade patterns and is theoretically flawed. Instead he locates the explanation of trade patterns in the nature of capitalist competition between firms.

Hugo Radice’s chapter on imperialism emphasises how the “economics of markets and the politics of states play complementary roles in expanding and consolidating capitalism as a social order based on exploitation and oppression”. [p.91]

Radice argues that imperialism after 1945 has taken mainly an economic form, in contrast to the more overt political control exercised over colonies. Neoliberalism grows out of this tendency but as a new form of imperialism, “amounts to nothing less than the ‘re-embedding’ of capitalism across the world”. [p. 97]

But neoliberalism has not been a success. It has not fostered rapid accumulation, with growth rates persistently lower than the golden age of 1950-73. It has also elicited revolt and resistance – with strikes, riots, popular uprisings, demonstrations and spurred the creation of a young global justice movement. But for opposition to be effective, class politics are necessary.

Few of the contributors put forward an explicitly class answer to neoliberalism, but at least one puts it well. John Milios says to change the balance of class forces, “the working classes must once again elaborate their own autonomous class objectives, independently of the capitalist imperative of labour discipline and profit maximisation”. [p.213]

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