Monday, May 07, 2018

How to Kill Off Neoliberalism

It's become the endless struggle of progressive thinking, how to kill off neoliberalism. As John Ralston Saul discussed in "The Collapse of Globalism," neoliberalism is just another ideology, another belief/faith based construct akin to a religion. Economics is, at best, a social science.  Hayek and Friedman got two key people to believe in their ideology, Thatcher and Reagan, and the rest is history. That it's a belief-based theory, not grounded in facts or science, is evident in the how both the International Monetary Fund and the World Trade Organization finally repudiated it.

It don't work although you might want to break that gently to our prime minister.

Ralston Saul enumerated a series of these ideologies to show that they come and go after a run of 30 to 40-years. Neoliberalism has obviously outstayed its welcome and it has left a lot of destruction in its wake.

At this point it's easy to be cynical about prescriptions for replacing the neoliberal order because it still has us in a powerful death grip.  Cliff DuRand offers his views. Like many before him he's insightfully dissected the malady but he offers only vague solutions.

While the Roosevelt administration is remembered for the New Deal, its most lasting impact was in the foundations it laid for a global capitalist order. Realizing that the US would emerge from WWII as the sole industrial power in the world, in the early 1940s, the administration began to plan to take on the responsibility to create the conditions for the expansion and reproduction of capitalism internationally. At the war's end, the US established the Bretton Woods institutions: the World Bank, the International Monetary Fund, and what later became the World Trade Organization -- all under the tutelage of the US Treasury Department. With the later addition of so-called free trade agreements, these gradually expanded the power of transnational corporations.

...Although Roosevelt had saved capitalism, capitalists were not happy with the social democracy of the New Deal, especially after its expansion in the 1960s. Under political challenge from social movements of that era, capitalists mounted a long-range counteroffensive in the class war that was outlined in the Powell Memorandum of 1971. As David Harvey has suggested in A Brief History of Neoliberalism, this was the strategic plan for the construction of neoliberal ideology as the new common sense of corporate capitalism. But what really turned the tide was the economic crisis of stagflation. As long as profits rose, capitalists had accepted an accord with labor where workers received a share of rising productivity in return for labor peace. But when profit margins grew smaller in the 1970s, they sought to reduce the share of value going to workers. An offensive against unions weakened their countervailing power, making possible the reduction of benefits and stagnation of wages. With assistance from the state, corporations increasingly moved production offshore in order to utilize low-wage labor in the Global South.
...While globalization and its attendant consequences provided a temporary fix for the crisis of capitalism, the underlying systemic crisis of over accumulation remains. This refers to the amassing of so much capital that there are insufficient ways to profitably reinvest it. The circuit of capital is complete only when the surplus value created by labor in production can be realized in exchange of its products, and that profit is then reinvested so as to yield further profit. Capital lives by the never-ending accumulation of value. The systemic problem that has been with us for some time is that so much capital has been accumulated that there are not enough places to reinvest it profitably. The movement of capital to the Global South has opened up new opportunities for increased profit by tapping low-wage labor. But this then adds to the mass of accumulated capital, exacerbating the long-run crisis of overaccumulation. Today, banks and other corporations have so much money lying around that they just don't know what to do with it.

And so another fix has been deployed. Rather than investing the money in production, capitalists are speculating with it by buying debt. The stream of interest on that debt is then counted as profit, even though no new value has been produced. It just moves existing value into their hands. Capital accumulated this way is "fictitious capital" that takes the form of money that does not represent any products of social labor. All this speculation drives up the price of debt until the Ponzi scheme collapses, as we saw in 2008. Then the state, acting as insurer of last resort, stepped in to save the financial system with a massive bailout that restored liquidity to the banks so they could continue to gamble without worrying about moral hazard.
...delegitimization of government had been under way at least since the state undertook promoting the flight of corporations to the Global South in the 1970s. The nation-state of earlier eras was being transformed into what I call a "globalized state," i.e. a state no longer serving the interests of its people, but the interests of transnational corporate capital. Under social democracy, the state had broad public support in so far as it was able to manage the economy, enabling a rising standard of living. As German economic sociologist Wolfgang Streeck remarks in How Will Capitalism End? Essays on a Failing System, "More than two decades of uninterrupted growth resulted in deeply rooted popular perceptions of continuous economic progress as a right of democratic citizenship." Neoliberal globalization undermined this "American Dream." By betraying this "right," the political elite had lost the support of the citizenry, as was decisively demonstrated in the 2016 national elections.
The Trump Trap
Media pundits have despaired at his inability to govern, but they miss the point: Trump was not elected to govern, but to destroy. And he is doing a good job of that. The polyarchic electoral process has opened the door for an offensive of capital to dismantle the remnants of social democracy and impose an unbridled neoliberal regime. That's not exactly what the electorate had expected. Voters driven by despair over the effects of neoliberalism ended up with a neoliberal administration. The Trump administration is dismantling every regulation or policy that might impinge on corporate profits. By deconstructing the administrative state with department heads opposed to the missions of their agencies, Trump seeks to free capital of social responsibilities. That has been followed by a massive tax reduction for corporations and the wealthy that will further starve the government of revenue needed to carry out essential functions. The resulting escalation of income and wealth inequality imposes austerity on the bottom 80 percent, dampening consumer demand, and further enriches the already rich, thereby intensifying the crisis of overaccumulation.
DuRand concludes by essentially calling for a progressive restoration. He advocates a return to government focused on the wellbeing of the public instead of the profitability of capital. There is nobody in Canada's inadequate political leadership making that case, laying out a convincing platform to rehabilitate our democracy. You can see the solutions but, for the moment, they're still just dangling beyond our reach.


Toby said...

Neoliberalism is running on autopilot. The next great idea has not caught mass attention. Consequently, it will take a Guillotine to kill off neoliberalism.

The Mound of Sound said...

I fear that's right, Toby.

Owen Gray said...

An important insight that, in the chaos, we have missed: Trump wasn't elected to govern. He was elected to destroy.Today provides yet another example as he pulls out of the Iran deal.