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Conclusion: Brief History of Neoliberalism

by andrethegiant Wed Mar 28th, 2007 at 11:31:02 AM EST

I'm back with an ending to my excursion into Harvey's A Brief History of Neoliberalism.  You can catch part I and part II if you're interested in more of the details.

The Geographies of Neoliberalism

Harvey's analysis of the variations of neoliberalism across the globe provide fascinating accounts of neoliberalism's successes and failures.  While I will not delve into the details of his examples, one of the general trends that he notes is that countries that followed neoliberal "shock therapy," inevitably encountered tremendous economic road blocks.  The shining neoliberal examples of the 1970s--New York, Chile--provided "proof" needed to instigate institutional change in the early 80s.   The Wall Street-IMF-Treasury became increasingly univocal and redundant, leading to a self-reinforcing "Washington consensus" (92-93).  This was mirrored by the arrival of a monetarist neoliberal cohort in departments of economics all across the U.S., a development not unrelated to the influence of the thinktanks setup by Neoconservatives a decade or so earlier.  As Harvey and many others have noted, neoliberalism and neoconservatism simply became common sense.

Harvey's main point is that neoliberalism leads to highly uneven flows of capital and geographical development.  This is related to what he says in a recent book, The New Imperialism, that the period of 'primitive accumulation' is on-going. (Primitive accumulation refers to the marxian notion of the initial periods of capitalism where monetary power differentials became established.  For Harvey, this is not a historical notion, but a dialectical one that is inherent (and therefore ongoing) in all forms of capitalism.  Primitive accumulation can be defined simply as "theft," but with social institutions--The World Bank and IMF for example--providing the means and excuses.)

more below

The examples of neoliberal failure are numerous.  Chile's economy, far from self-sustaining, crashed in 1982 as speculative capital dried up.  Argentina, which became a destination for "vulture capital,"  has likewise suffered one tremendous crisis after another related to neoliberal adjustments through the IMF (an organization they are currently distancing themselves from--successfully for the time being).  One of the most interesting readings of recent financial history refers to Asia in 1997-98. Harvey quotes Stiglitz's Globalization and its discontents:

As the crisis progressed, unemployment soared, GDP plummeted, banks closed.  The unemployment rate was up fourfold in Korea, threefold in Thailand, tenfold in Indonesia.  In Indonesia almost 15 percent of males working in 1997 had lost their jobs by August 1998, and the economic devastation was even worse in the urban areas of the main island, Java.  In South Korea, urban poverty almost tripled, with almost a quarter of the population falling into poverty; in Indonesia, poverty doubled... In 1998, GDP in Indonesia fell by 13.1 percent, in Korea by 6.7 percent, and in Thailand, by 10.8 percent.  Three years after the crisis, Indonesia's GDP was still below that before the crisis, Thailand's 2.3 per cent lower. (Harvey 96)

Harvey then goes on to narrate the neoliberal approach to these crises:

As Indonesia's GDP fell and unemployment surged, the IMF stepped in to mandate austerity by abolishing subsidies on food and kerosene.  The riots that followed 'tore the country's social fabric' apart.  The capitalist classes, mainly ethnic Chinese, were widely blamed for the debacle.  While the wealthiest Chinese business elite decamped to Singapore, a wave of revenge killings and attacks on property engulfed the rest of the Chinese minority...The standard IMF/US Treasury explanation for the crisis was too much state intervention and corrupt relationships between state and business ('crony capitalism').  Further neoliberalization was the answer.  The Treasury and the IMF acted accordingly, with disastrous consequences.  The alternative view of the crisis was the impetuous financial deregulation and the failure to construct adequate regulatory controls over unruly and speculative portfolio investments lay at the heart of the problem.  The evidence for the latter view is substantial:  those countries that had not liberated capital markets--Singapore, Taiwan, and China--were far less affected than those countries, such as Thailand, Indonesia, Malaysia and the Phillippines, that had.  Furthermore, the one country that ignored the IMF and imposed capital controls--Malaysia--recovered faster.  After South Korea likewise rejected IMF advice on industrial and financial restructuring, it also staged a faster recovery. (96-97)

Harvey then goes on to explore the possibly nefarious roles of hedge funds in all of this.  Yet the main point here is that capitalism has had far more trials during the last thirty years than most in the West realize.  Japan, partly due to U.S. currency manipulation, has remained in economic doldrums for the last 20 years.  While Wall Street and London have profited, important social unrest has made regular appearances in all Western countries, from the Rodney King revolts to the poll-tax riots in Britain.  Social programming continues to suffer due to neoliberal choices to divert government funds to the Rich and to the military. (As always, the need to "balance the budget" is quoted when it is time to justify cuts in education and social programs.)  Throughout all of Harvey's examples, a central tendency towards social inequality and a revitalization of the class system become apparent.  Nowhere is this more true than in the case of China, a country to which Harvey devotes a fascinating chapter.  Again, what is apparent in China is what is happening in all countries where neoliberalism has appeared: increasingly large disparities between rich and poor, a tearing down of social fabrics which is often replaced by fundamentalist religion (Falon Gong), and the need for the state to maintain tight oversight and outright oppression of the society in spite of the freedom the opening of markets supposedly entails.

Neoliberalism on Trial
Harvey's critiques of neoliberal policy and practice are both implicit and explicity within his book.  However, in a latter chapter, the turns to a more overt form of critique that not only questions some of the dubious pretenses of neoliberalism, but to the very dangerous implications of its consequences--past, present and future:

The two economic engines that have powered the world through the global recession that set in after 2001 have been the United States and China. The irony is that both have been behaving like Keynesian states in a world supposedly governed by neoliberal rules. The US has resorted to massive deficit-financing of its militarism and its consumerism, while China has debt-financed with non-performing bank loans massive infrastructural and fixed capital investments. True blue neoliberals will doubtless claim that the recession is a sign of insufficient or imperfect neoliberalization, and they could well point to the operations of the IMF and the army of well-paid lobbyists in Washington that regularly pervert the US budgetary process for their special-interest ends as evidence for their case. But their claims are impossible to verify, and, in making them, they merely follow in the footsteps of a long line of eminent economic theorists who argue that all would be well with the world if only everyone behaved according to the precepts of their textbooks.     .
But there is a more sinister interpretation of this paradox. If we lay aside, as I believe we must, the claim that neoliberalization is merely an example of erroneous theory gone wild (pace the economist Stiglitz) or a case of senseless pursuit of a false utopia (pace the conservative political philosopher John Gray), then we are left with a tension between sustaining capitalism, on the one hand, and the restoration/reconstitution of ruling class power on the other. If we are at a point of outright contradiction between these two objectives, then there can be no doubt as to which side the current Bush administration is leaning, given its avid pursuit of tax cuts for the corporations and the rich. Furthermore, a global financial crisis in part provoked by its own reckless economic  policies would permit the US government to finally rid itself of any obligation whatsoever to provide for the welfare of its citizens except for the ratcheting up of that military and police power that might be needed to quell social unrest and compel global discipline. Saner voices within the capitalist class, having listened carefully to the warnings of the likes of Paul Volcker that there is a high probability of a serious financial crisis in the next five years, may prevail. But this will mean rolling back some of the privileges and power that have over the last thirty years been accumulating in the upper echelons of the capitalist class. Previous phases of capitalist history-one thinks of 1873 or the 1920s-when a similarly stark choice arose, do not augur well. The upper classes, insisting on the sacrosanct nature of their property rights, preferred to crash the system rather than surrender any of their privileges and power. In so doing they were not oblivious of their own interest, for if they position themselves aright they can, like good bankruptcy lawyers, profit from a collapse while the rest of us are caught most horribly in the deluge. (Harvey 152-53)

Even a cursory glance at the environmental degradation of the planet, the increasing disparities between Rich and Poor, and the growing unease with the downsides of the economic "freedoms" of neoliberalism, should lead anyone to question whether its benefits outweigh its costs.  Harvey clearly wonders whether neoliberalism can provide anything other than short-term financial growth and whether it is sustainable without means of socio-political coercion.

I cannot convince anyone by philosophical argument that the neoliberal regime of rights is unjust.  But the objection to this regime of rights is quite simple: to accept it is to accept that we have no alternative except to live under a regime of endless capital accumulation and economic growth no matter what the social, ecological or political consequences.  Reciprocally, endless capital accumulation implies that the neoliberal regime of rights must be geographically expanded across the globe by violence (as in Chile and Iraq), by imperialist practices (such as those of the World Trade Organization, the IMF, and the World Bank) or through primitive accumulation (as in China and Russia) if necessary.  By hook or by crook, the inalienable rights of private property and the profit rate will be universally established.  This is precisely what Bush means when he says the US dedicates itself to extend the sphere of freedom across the globe.

    But these are not the only inalienable rights available to us....there are also entirely different rights to which we may appeal--of access to the global commons or to basic food security, for example. 'Between equal rights, force decides.'  Political struggles over the proper conception of rights, and even of freedom itself, move center stage in the search for alternatives. (Harvey 181-182)

There is much more to Harvey's book than what is outlined and quoted above.  One important thing to note is that, while serious and at times extremely worrying in his analysis, Harvey refuses to believe that all hope is lost.   He delineates numerous possibilities for realigning and reaffirming the rights of people as more important than those of corporations and nation states.

x-listed at Progressive  Historians.

 You should also check out the diary on sugar powah! too!

I promise to stop beating everyone over the head with thoughts on neoliberalism now...at least for a few days.
by andrethegiant on Mon Mar 26th, 2007 at 10:47:47 AM EST
Thank you very much for these diaries: they induced me to purchase Harvey's book, which I received today.

I had no idea that Harvey is an anthropologist.

A bomb, H bomb, Minuteman / The names get more attractive / The decisions are made by NATO / The press call it British opinion -- The Three Johns

by Alexander on Mon Mar 26th, 2007 at 07:30:08 PM EST
Great!  Let me know what you think.  He's an anthropological geographer/anthropologist/sociologist/post-modern critic/smart guy.  

I'll have to write him and see if I can get a cut of the royalties. (Just kidding...I more into the creative commons)

by andrethegiant on Mon Mar 26th, 2007 at 09:41:54 PM EST
[ Parent ]
Better have him contribute on ET!

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Wed Mar 28th, 2007 at 04:58:16 PM EST
[ Parent ]
Thanks a lot for these diaries on Harvey, andre!

Harvey clearly wonders whether neoliberalism can provide anything other than short-term financial growth and whether it is sustainable without means of socio-political coercion.

I wonder why he still wonders! I usually don't like to use  the word neoliberal, especially in France, because many people use it instead of capitalism or market economy, bringing a lot of confusion in the debate. However, as defined by Harvey, it's what I call "Slash and Burn Economy".

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Wed Mar 28th, 2007 at 04:57:02 PM EST

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