A Brief History of Neoliberalism by David Harvey
Oxford University Press, 2005
Neoliberalism – a theory of political economic practices proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade.
The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to guarantee, for example, the quality and integrity of money. It must also set up those military, defence, police, and legal structures and functions required to secure private property rights and to guarantee, by force if need be, the proper functioning of markets. Furthermore, if markets do not exist (in areas such as land, water, education, health care, social security, or environmental pollution) then they must be created, by state action if necessary. But beyond these tasks the state should not venture. (p.2)
Neoliberalism values market exchange as ‘an ethic in itself, capable of acting as a guide to all human action, and substituting for all previously held ethical beliefs’. (p.3)
‘Time-space compression’ (p.4)
‘Embedded liberalism’ – market processes and entrepreneurial and corporate activities were surrounded by a web of social and political constraints and a regulatory environment that sometimes restrained but in other instances led the way in economic and industrial strategy. (…) Redistributive politics (including some degree of political integration of working-class trade union power and support for collective bargaining), controls over the free mobility of capital (some degree of financial repression through capital controls in particular), expanded public expenditures and welfare state-building, active state interventions in the economy, and some degree of planning of development. (p.11)
The rise of neoliberal theory – A small and exclusive group of passionate advocates––mainly academic economists, historians, and philosophers––had gathered together around the renowned Austrian political philosopher Friedrich von Hayek to create the Mont Pelerin Society (named after the Swiss spa where they first met) in 1947 (the notables included Ludvig von Mises, the economist Milton Friedman, and even, for a time, the noted philosopher Karl Popper)… This movement remained on the margins of both policy and academic influence until the troubled years of the 1970s. At that point it began to move centre-stage, particularly in the US and Britain, nurtured in various well-financed think-tanks (offshoots of the Mont Pelerin Society, such as the Institute of Economic Affairs in London and the Heritage Foundation in Washington), as well as through its growing influence within the academy, particularly at the University of Chicago, where Milton Friedman dominated… The dramatic consolidation of neoliberalism as a new economic orthodoxy regulating public policy at the state level in the advanced capitalist world occurred in the United States and Britain in 1979 (Reagan and Thatcher). Pp.19-23
Neoliberalization as a political project to re-establish the conditions for capital accumulation and to restore the power of economic elites. (p.19)
Neoliberalization has meant, in short, the financialization of everything (p.33).
While neoliberalization may have been about the restoration of class power, it has not necessarily meant the restoration of economic power to the same people. (p. 31)
Nevertheless, there are some general trends that can be identified.
The first is for the privileges of ownership and management of capitalist enterprises––traditionally separated––to fuse by paying CEOs (managers) in stock options (ownership titles).
The second trend has been to dramatically reduce the historical gap between money capital earning dividends and interest, on the one hand, and production, manufacturing, or merchant capital looking to gain profits on the other.
A power shift away from production to the world of finance (pp. 31-33).
How was neoliberalization accomplished, and by whom?
The ‘long march’ of neoliberal ideas through these institutions that Hayek had envisaged back in 1947, the organization of think-tanks (with corporate backing and funding), the capture of certain segments of the media, and the conversion of many intellectuals to neoliberal ways of thinking, created a climate of opinion in support of neoliberalism as the exclusive guarantor of freedom. (p.40)
The constructing (manufacturing of the consent):
- Powerful ideological influences that circulate through the corporations, the media, and the numerous institutions that constitute civil society––such as the universities, schools, churches, and professional associations.
- Appeals to traditions and cultural values under the pretext of an attempt to advance the cause of individual freedoms.
- Once the state apparatus made the neoliberal turn it could use its powers of persuasion, co-optation, bribery, and threat to maintain the climate of consent necessary to perpetuate its power.
- The penetration of universities
- The alliance with the Christian Right and the moral majority (pp.40-49).
But we must look beyond these infinitely varied ideological and cultural mechanisms––no matter how important they are––to the qualities of everyday experience in order to better identify the material grounding for the construction of consent.
And it is at that level––through the experience of daily life under capitalism in the 1970s––that we begin to see how neoliberalism penetrated ‘common-sense’ understandings. The effect in many parts of the world has increasingly been to see it as a necessary, even wholly ‘natural’, way for the social order to be regulated. (pp.40-41)
Neoliberalization required both politically and economically the construction of a neoliberal market-based populist culture of differentiated consumerism and individual libertarianism. (p.42)
Corporate welfare substituted for people welfare. (p.47)
In the US – the unholy alliance between big business and conservative Christians backed by the neoconservatives (p.50)
The commonality between the US and the UK cases most obviously lies in the fields of labour relations and the fight against inflation. (pp.58-59)
The neoliberal state in theory:
According to theory, the neoliberal state should favour strong individual private property rights, the rule of law, and the institutions of freely functioning markets and free trade.
While personal and individual freedom in the marketplace is guaranteed, each individual is held responsible and accountable for his or her own actions and well-being.
The free mobility of capital between sectors, regions, and countries is regarded as crucial.
Neoliberal theorists are, however, profoundly suspicious of democracy. Governance by majority rule is seen as a potential threat to individual rights and constitutional liberties…Neoliberals therefore tend to favour governance by experts and elites. (pp.64-66)
Contradictions of neoliberalism:
There is the problem of how to interpret monopoly power.
The second major arena of controversy concerns market failure.
Asymmetries of power or of information that interfere with the capacity of individuals to make rational economic decisions in their own interests.
A contradiction arises between a seductive but alienating possessive individualism on the one hand and the desire for a meaningful collective life on the other. (pp.66-69)
The neoliberal state in practice.
There are two arenas in particular where the drive to restore class power twists and in some respects even reverses neoliberal theory in its practice.
The first of these arises out of the need to create a ‘good business or investment climate’ for capitalistic endeavours.
The second arena of bias arises because, in the event of a conflict, neoliberal states typically favour the integrity of the financial system and the solvency of financial institutions over the well-being of the population or environmental quality. (pp.70-71)
Internally, the neoliberal state is necessarily hostile to all forms of social solidarity that put restraints on capital accumulation. (p.75)
Neoliberalism does not make the state or particular institutions of the state (such as the courts and police functions) irrelevant, as some commentators on both the right and the left have argued. There has, however, been a radical reconfiguration of state institutions and practices (particularly with respect to the balance between coercion and consent, between the powers of capital and of popular movements, and between executive and judicial power, on the one hand, and powers of representative democracy on the other). p.78
Contradictions of the neoliberal state:
1. On the one hand the neoliberal state is expected to take a back seat and simply set the stage for market functions, but on the other it is supposed to be activist in creating a good business climate and to behave as a competitive entity in global politics.
2. Authoritarianism in market enforcement sits uneasily with ideals of individual freedoms.
3. While it may be crucial to preserve the integrity of the financial system, the irresponsible and self-aggrandizing individualism of operators within it produces speculative volatility, financial scandals, and chronic instability.
4. While the virtues of competition are placed up front, the reality is the increasing consolidation of oligopolistic, monopoly, and transnational power within a few centralized multinational corporations.
5. At the popular level, the drive towards market freedoms and the commodification of everything can all too easily run amok and produce social incoherence. (pp.79-80)
Neoconservatism = some neoliberalism (elite governance, mistrust of democracy, and the maintenance of market freedoms) + a concern for order + a concern for an overweening morality as the necessary social glue to keep the body politic secure (p.82)
The general progress of neoliberalization has therefore been increasingly impelled through mechanisms of uneven geographical developments. Successful states or regions put pressure on everyone else to follow their lead. Leapfrogging innovations put this or that state (Japan, Germany, Taiwan, the US, or China), region (Silicon Valley, Bavaria, Third Italy, Bangalore, the Pearl River delta, or Botswana), or even city (Boston, San Francisco, Shanghai, or Munich) in the vanguard of capital accumulation. But the competitive advantages all too often prove ephemeral, introducing an extraordinary volatility into global capitalism (pp.87-88).
Forces and fluxes at work.
- Power of neoliberal ideas (held to be particularly strong in the cases of Britain and Chile).
- The need to respond to financial crises of various sorts (as in Mexico and South Korea).
- A more pragmatic approach to reform of the state apparatus (as in France and China) to improve competitive position in the global market.
- An interplay of internal dynamics and external forces.
- Contingent geopolitical considerations (pp.115).
Neoliberalism on trial.
Neoliberal achievements:
- Capital accumulation – Its actual record turns out to be nothing short of dismal.
- The reduction and control of inflation is the only systematic success neoliberalization can claim.
- A number of spectacular shifts of emphasis under neoliberalization – the rise of finance and of financial services, paralleled by a remarkable shift in the remuneration of financial corporations as well as a tendency for the larger corporations (such as General Motors) to fuse the two functions.
- An extraordinary burst in information technologies.
- The main substantive achievement of neoliberalization, however, has been to redistribute, rather than to generate, wealth and income.
- The commodification and privatization of land and the forceful expulsion of peasant populations.
- Conversion of various forms of property rights (common, collective, state, etc.) into exclusive private property rights (most spectacularly represented by China).
- Suppression of rights to the commons.
- Commodification of labour power and the suppression of alternative (indigenous) forms of production and consumption.
- Colonial, neocolonial, and imperial processes of appropriation of assets (including natural resources).
- Monetization of exchange and taxation, particularly of land.
- The slave trade (which continues particularly in the sex industry).
- The use of the credit system as a radical means of accumulation by dispossession (pp.154 – 159).
Accumulation by dispossession comprises four main features:
1. Privatization and commodification.
2. Financialization.
3. The management and manipulation of crises.
4. State redistributions. (pp.160- 164)
The Commodification of Everything.
Commodification presumes the existence of property rights over processes, things, and social relations, that a price can be put on them, and that they can be traded subject to legal contract (p.165).
Environmental degradations.
Attacks on rights.
Freedom’s Prospect.
The emergence of diverse oppositional cultures that from both within and without the market system either explicitly or tacitly reject the market ethic and the practices that neoliberalization imposes:
- environmental movements
- anarchist movements among the young
- religious communities
- discontent within ruling policy circles as to the wisdom of neoliberal propositions and prescriptions.
- A revival of academic and institutional interest in the cosmopolitan ethic (‘an injury to one is an injury to all’) as a basis for global governance (pp.186-188)
Alternatives.
But we first need to initiate a political process that can lead us to a point where feasible alternatives, real possibilities, become identifiable.
There are two main paths to take. We can engage with the plethora of oppositional movements actually existing and seek to distil from and through their activism the essence of a broad-based oppositional programme. Or we can resort to theoretical and practical enquiries into our existing condition (of the sort I have engaged in here) and seek to derive alternatives through critical analysis (pp.198-199).
The idea is to work through the whole of civil society in a more open and fluid search for alternatives that would look to the specific needs of the different social groups and allow them to improve their lot (p.199).
The first lesson we must learn, therefore, is that if it looks like class struggle and acts like class war then we have to name it unashamedly for what it is (p.202).