The world of neoliberalism, three years on

Submitted by AWL on 12 October, 2016 - 1:56 Author: Colin Foster

Three years ago, we surveyed “the world of neoliberalism” as it had emerged from the 2008 financial crash and the acute phase in 2010-12 of the eurozone government-debt crisis.

Many patterns have continued since 2013. Overall economic growth has been slow by historical standards, even slower by comparison with the rates expected in recovery from a big slump. Of the global growth, the bulk, 63% in 2015-6, has been in China and India, and the Chinese growth figures are dubious.

Output per worker-hour in the USA has stagnated, rising at only 0.4% a year between late 2010 and 2016. Real median household income in the USA is still 2.4% below its 1999 level. World trade growth has been especially slow, slower or not much faster than output growth, where for decades before 2008 it was almost always markedly faster than output growth. Some Marxists construe this as just continuation of “the crisis”, a state of affairs deemed to have been fundamentally fixed since the early 1970s, and only at best episodically glossed up by “artificial” credit expansions and the like. It is not.

The financial crash of 2008 was a distinct crisis, and, like all other capitalist crises in fact, had its own special features. The global near-stagnation since the immediate recovery from that crash, i.e. since about 2010, is, again, a distinct new period, different from the era between 1982 and 2008 which saw many financial crises but also substantial expansion of world capitalism. Resilient In this new period, the neoliberal framework for capitalist government policy developed in the 1980s and 90s remains, however, resilient. Governments’ priority is to craft their territories to be congenial bases for free-flowing global capital.

The Irish government’s plea to the EU not to make Apple pay it £13 billion in back taxes illustrates that priority vividly. With that priority come drives for privatisation, marketisation, reduction of social overheads (i.e. welfare cuts), lower tax rates for the rich and big business, and labour-market flexibility (i.e. erosion of workers’ rights). Central bank policies are heterodox by comparison with the norms of 1982-2008. The interest rates between central banks and commercial banks are near or sometimes even below zero (Japan, European Central Bank, Sweden, Switzerland, and Denmark). “Quantitative Easing”, i.e. buying-up of bonds by central banks, is commonplace.

Governments hope for revived inflation, rather than fearing it. The gist of these policies is to subsidise the banks in the hope of speeding (or avoiding slowdowns in) flows of credit into the productive economy. They produce no easing of the neoliberal drive to increase rates of exploitation.

Despite its economic, political, and strategic troubles, the USA remains hegemonic in the world-market system. In 2008 there was talk of the G20, a broader consortium of 20 governments, eclipsing US-dominated groups such as the G7, but it has not done so. Instructively, while the G20 was urgently mobilised to offset and help with the US-centred financial crisis of 2008, there has been no talk of the G20 doing anything to help with or offset the slumps currently hitting Brazil or China.

The USA’s centrality in what Ellen Wood called “the Empire of Capital” has never been like that of a metropolis in a colonial empire, wielding strong political control over the weaker countries. It has always been a looser, more flexible affair. Even middle-of-the-road bourgeois thinking is more sceptical and sour about the financial “Masters of the Universe” than it was before 2008; that fact is both illustrated by, and nourished by, the continuing stream since then of revelations about banks’ malpractices, and fines levied on them or negotiated with them for those malpractices. The 8 September 2016 fine of $185 million on Wells Fargo, which had become the biggest bank in the world, is the latest in a long chain. Yet no-one really argues that any of the fines, warnings, reports, and laws have done much to control the crisis-generating tendencies of today’s high finance which were displayed in 2008.

Another crisis like 2008’s — though it will surely be different in detail — is likely enough. And, as the bourgeois strategists worriedly note, the governments have now used “all the shots in their locker” of crisis-dampening measures. Since 2013 there has been a “third wave” of the turmoil flowing from the 2008 crash, namely, slumps and slowdowns in the stronger more-recently-industrialised countries called the “emerging economies”.

Brazil has been in a slump since 2013. Real output per head in South Africa has been falling since 2014, and in Russia since 2013. The Chinese economy is probably still growing, but more slowly. When China’s economic slowdown may trigger an explosion into direct working-class political and social contestation from the grassroots strike militancy which has been bubbling at a great level for years we do not know: this is the greatest unknown of world politics today.

Today, “de-industrialisation” and rustbelts are not confined to the old industrial countries. China’s growth is now mostly in “services”. Manufacturing employment in China seems now to be falling in absolute numbers. In South Korea, the manufacturing share of employment has fallen from 28% in 1991 to 17% today. Manufacturing employment in India is probably rising, but manufacturing is a small part of its economy compared to “services”. Some of this trend is an artefact of the often-arbitrary line between “manufacturing” and “services” and of the growth of contracting-out, but not all. Capitalism, including industrial capitalism, has expanded in Africa over the last decade or so.

Africa was previously one of the most difficult areas for post-colonial capitalist development, but it had average real annual GDP growth of 5.4% between 2000 and 2010. That slowed to 3.3% between 2010 and 2015. Chinese capitalist investment and trade links have played a large part. The stagnation of the prices of oil and other basic commodities, and China’s slowdown, mean that, as one reporter puts it: “2016 will be the toughest year for African economies for some time. And that’s not as if 2015 wasn’t hard enough for many”. The vote for Britain to quit the EU on 23 June 2016 was a local manifestation of a trend widespread across the world: the rise of plebeian resentments against modern globalised capitalism expressed in right-wing, populist, nationalist, “identity politics” forms.

Donald Trump’s candidacy for US president, and the strength of the Front National in France, are other cases. A poll found that 69% of those voting for Brexit thought the decision “might make us a bit better or worse off as a country, but there probably isn’t much in it either way”. (By contrast, 77% of those voting against Brexit thought that quitting the EU would be “disastrous”). The economic imprecision of the Brexit campaign — did the Brexiters want the Norwegian, the Swiss, the Canadian, the Albanian, or the Singaporean model of future relations with the continent? — evidently did not trouble Brexit voters much. Although the plebeian resentment is nourished by real economic grievances, its political expressions (Ukip, Trump, FN, etc.) offer few economic promises, even on a demagogic level — much fewer than the far-right demagogues of the 1930s offered. Their appeal is rather to identity. That does not stop them being potent.

The FN’s rise from an initial electorate heavily centred among ageing, white, male, worse-off former voters for the mainstream right to a much broader demographic shows that. In the French regional elections of late 2015, the FN’s overall vote of 28% included 35% of under-24 votes and 30% of public-sector workers. Confidence On the whole, it seems probable that the FN or such lack the confidence and the street-fighting base to try to crush the labour movement at the first stage, and that mainstream bourgeois interests will deter them from radical protectionism. They can do many ugly things short of that — and those ugly things can prepare the way for worse at the next stage, maybe in a new global crash.

Those new right-wing forces have been able to scoop so much of the plebeian discontent because of the accumulated weaknesses of the left, determined by the successive setbacks since the early 1980s and the ideological disarray of the left in the aftermath of the collapse of Stalinism in 1989-91.

Yet 2008 has also produced new surges on the left: the movements around Corbyn and Sanders; Syriza; Podemos. These new left movements have emerged at first at a fairly low political temperature. Such hesitancies are determined by the background of the previous decades: it is no use being impatient with them. Our task is neither to submerge ourselves uncritically, nor to attempt to jump over the immaturities of the movement by shrill declamations, but, in Lenin’s phrase, to “patiently explain”.

The patient explanation must include explaining the lessons of Greece and of Brazil. In Greece, Syriza came from a left-Eurocommunist background and drew in a lively variety of new activists, including revolutionary socialists able to get a hearing within the movement. But it never developed beyond the stage of wanting a left government which would be in some undefined way a “step towards” socialism; it never developed a workable international perspective. So before January 2015, when it won government office, it had already reduced its political platform to a promise to negotiate hard with the EU and to redistribute the proceeds of a better deal in welfare improvements.

From that unviable halfway-house programme flowed its collapse into administering neo-liberalism and the EU’s anti-refugee policy. In Brazil, the Workers’ Party, founded in 1980 out of a militant union movement in battle against the military dictatorship, long declared itself revolutionary socialist and anti-Stalinist, and had a lively internal democracy. Gradually it adapted to what seemed to “work” in the short term for administering municipalities, for assembling governing coalitions, and for winning run-off elections. By the time it won Brazil’s presidency in 2002, it had reduced its slogans to “Love and Peace” and “For a Decent Brazil”, and its economic programme to modified neo-liberalism.

Maybe uniquely among neo-liberal governments, the PT administration of 2002-2010 made reforms which significantly reduced economic inequality in Brazil (though they still left that inequality higher than, say, the USA). When slump hit Brazil in 2013, the PT administration could find no answer than orthodox neo-liberal cuts; and that paved the way for the right-wing to oust it with its “impeachment” coup in 2016. Meanwhile, the PT’s activist base had been progressively demobilised.

The new left movements must be won, as patiently as necessary, but urgently, to class-struggle socialism. Otherwise the next economic crisis is likely to produce terrible victories for the right.

2013 survey