Neo-Liberalism And The Restoration Of Class Power
Source News for Social Justice Action
Date 04/08/09/23:26

Submitted to Portside by

David Harvey

With every other justification for the invasion of Iraq
discredited, President Bush has increasingly resorted
to the argument that at least Iraq is free.  "Freedom,"
he says, "is the Almighty's gift to every man and woman
in this world" and "as the greatest power on earth we
have an obligation to help the spread of freedom."
But, as Matthew Arnold long ago argued, "freedom is a
great horse to ride but to ride somewhere."  So where
are the Iraqis supposed to ride their horse of freedom?

The US answer was spelled out in September 2003, when
Paul Bremer, head of the Coalition Provisional
Authority, promulgated decrees that included the full
privatization of the economy, full ownership rights by
foreign firms of Iraqi businesses, the right of foreign
firms to take profits abroad and the elimination of
nearly all trade barriers.  The orders applied to all
areas of the economy, including public services,
banking and finance, the media, manufacturing,
services, transportation and construction. Only oil was
exempt. A regressive tax system much in favor with
conservatives in the US known as "the flat tax" was
also imposed. The right to strike was outlawed and
unionization banned in key sectors.

This amounts to the imposition of a particular kind of
state apparatus - called neo-liberal - on Iraq.
Interestingly, the first case of neo-liberalization
occurred thirty years earlier in Chile.  In the wake of
a violent US supported coup by General Pinochet against
the democratically elected Salvador Allende in
September 1973, US economic advisors espousing the neo-
liberal doctrines of Milton Friedmann went to Chile to
help set up an almost identical state structure to that
now decreed for Iraq.

The era that separates the violence in Chile and Iraq
has seen the creation of neo-liberal states -
capitalist dream regimes as the Economist calls them -
all around the world by mixes of coercion and consent.
Britain's Margaret Thatcher was the first world leader
freely to embrace free-market fundamentalism when
elected in the spring of 1979.  She attacked trade
union power, diminished the welfare state and reduced
taxes.  She sought privatization, to liberate
entrepreneurial energies, and argued that social well-
being depended upon personal responsibility and not the
state.  "There is no such thing as society," she
famously said, "only individuals and their families."
She accomplished all this by democratic means.
"Economics are the method," she said, "but the object
is to change the soul."  And change it she did.

In the fall of 1979, Paul Volcker, then Chair of the
Federal Reserve under President Carter, shifted the
target of monetary policy in the US from full
employment to curbing inflation.  He raised interest
rates to a very high level and plunged the US into
recession.  In the event of any conflict between the
integrity of the financial system and the welfare of
the population, he signaled, the former interest would
prevail. President Reagan, taking office in 1981, took
the necessary political steps to consolidate Volcker's
move.  He attacked union power, dramatically reduced
taxes, cut back on state benefits and failed to enforce
regulatory laws covering consumer rights, occupational
health and safety, consumer protection, the minimum
wage, and the like.  With two of the major capitalist
powers going neo-liberal could the rest of the world be
far behind?

Neo-liberal orthodoxy, pushed by both Britain and the
US, swept through the international financial
institutions after 1980.  The International Monetary
Fund became a prime agent in the promotion of neo-
liberal  "structural adjustment" policies whenever it
had to deal with a credit crisis.  As a result,
countries like Mexico, Argentina, Brazil and South
Africa were swept into the neo-liberal camp.  The price
of entry into the global economic system for much of
the old Soviet Empire was privatization and the
assumption of a neo-liberal stance.  Global competition
has drawn many other countries, even China and India,
into something approximating a neo-liberal state
structure.  There are still some states, as in Europe
and Scandinavia that are holdouts for social democracy
and in East Asia many states have managed to combine
neo-liberalism externally with concern for equity at
home.  But some variant of the neo-liberal state now
dominates world-wide. This all happened in part because
of a crisis of capitalism in the 1970s. Profit rates
were low, inflation and unemployment were everywhere
soaring upwards when the economic consensus (called
Keynesian) of the 1960s said they should offset each
other.  Financial systems were in a mess, the stock
market was in decline, and there was a fiscal crisis of
state expenditures (with the bankruptcy of New York
City in 1975 being emblematic).  The "social
democratic" state form that had emerged after 1945
could not cope. Something new had to be invented. Neo-
liberalism won out as the answer. But has it been
successful?  In terms of stimulating growth it has been
a dismal failure.  Global growth rates in the 1950s and
1960s stood at around 3.5 percent and fell in the
troubled 1970s to around 2.4 percent.  But in the 1980s
they came down to 1.4 percent and fell even further in
the 1990s to 1.2 percent and since 2000 have barely
made it above 1 percent.  So why are we so persuaded of
the benefits of neo-liberalism?

There are two main answers.  Firstly, neo-liberalism
has introduced considerable volatility into the global
system so there are usually some places that are doing
well while the rest do badly.  In the 1980s it was
Japan and West Germany that led the pack and the US was
in the doldrums, but in the 1990s both fell behind with
Japan suffering from a decade of severe recession.  In
the 1990s the US, Britain and some of the "tiger"
economies of Southeast Asia came out on top.  Then
Southeast Asia crashed in 1997 followed by the collapse
of the "new economy" in the US and now China and India
seem to be racing ahead.  In a Darwinian world, the
neo-liberal argument runs, you fall behind because you
are not competitive. You only survive if you are fit
enough.  There is nothing systemically wrong.  The
fault lies with you.  You are not neo-liberal enough.

Secondly, and more importantly, the richest income
groups have become infinitely better off under neo-
liberalism. Social inequality has increased rather than
diminished.  In the US, for example, the top one
percent of income earners claimed 16 percent of the
national income before World War Two but during the
1950s and 1960s this fell to 8 percent and the failures
of the 1970s threatened their power even more.  But by
2000 this group was back to claiming 15 percent of the
national income and this may shoot up to 20 percent in
the near future if the tax cuts stand.  Similar trends,
though not quite so dramatic, can be detected in other

So neo-liberalism has been about the restoration of
class power to a small elite of financiers and CEOs.
And since that class has overwhelming control of the
political process and of instruments of persuasion, of
course it insists that the world is a much better
place.  And it is, for them.  Yet in the US, as
elsewhere, most of the people are worse off than they
were in 1970, particularly when access to decent public
education, health care, and the like is factored in.
In those countries that have recently turned to neo-
liberalism, like China, Russia and India, we see the
emergence of extraordinarily rich oligarchies at the
expense of the rest of the population.

But if aggregate growth is so low, how does the upper
class accumulate such wealth?  They largely do so
through predatory practices, by dispossessing others.
This "accumulation by dispossession" takes many forms.
Cheap labor is everywhere preyed upon and the cheaper
and more docile the better. Profit rates of US
corporations are twice as high abroad as they are at
home. Common property rights (water, land, etc) get
privatized. Peasant populations get thrown off the
land.  Environments are degraded.  Patent rights on
everything from genetic materials, seeds,
pharmaceutical products to ideas allow rents to be
extracted from low-income populations.

Fundamental goods like education and health care get
commodified and user fees escalate.  The list goes on
and on.  But most important of all the credit and
financial system is actively used to accumulate wealth
at one pole while extracting it from another.  Family
farms are foreclosed even in the US. Pension rights are
privatized (Chile pioneered with social security) and
then all too often diminished or erased (as with Enron
or in China most recently).  Even more dramatic are the
violent financial crises that have periodically wracked
much of Latin America, Central and East Europe, and
East and Southeast Asia.  These allow productive assets
to be bought up by wealthy investors for a song.  Neo-
liberalism has seen a massive transfer of asset wealth
from the poor to the rich.

These injustices have sparked innumerable protests
around the world, loosely knit together in the anti-
globalization or global justice movement. The neo-
liberal response has often been state repression.
Mexico, for example, is advised by the US to crush the
Zapatista movement for indigenous rights. Given its
class basis, the neo-liberal state is understandably
antidemocratic.  In some cases, such as Singapore and
China, it never bothered with democracy at all.  And in
the West, it easily morphs into neo-conservative
authoritarianism.  The so-called "war on terror" now
provides a cover for the extension of police
surveillance, militarization and authoritarian

Curiously, the protest movements against neo-liberalism
often accept its terms.  Before 1980, individual human
rights were a fringe interest, but neo-liberalism's
emphasis upon individual responsibility has sparked a
huge wave of interest in them in recent years.
Evocation of such rights can provide a rhetoric for
progressive politics. But this can also legitimize
interventions in sovereign states by imperialist
powers. Furthermore, since most individuals cannot
bring their cases to court a vast apparatus of advocacy
has emerged. The rise of the NGOs to political
prominence has been another stunning consequence of the
neo-liberal turn.  NGOs sometimes aid and abet the
withdrawal of the state from social provision.  In
other cases they offer tough critiques of neo-liberal
policies. But, unfortunately, NGOs are no more
democratic and transparent than the neo-liberal state
they criticize. The rise of human rights discourses and
of NGO power provides a limited terrain upon which to
mount effective opposition.

The fear of social dissolution under an individualizing
neo-liberalism has also sparked the search for a moral
high-ground from which to secure the restoration of
class rule. Appeals to nationalism (China, Japan, USA),
to superior cultural values ("American," "Asiatic."
"Islamic"), to religion (Christian, Confucian, Hindu)
or to ethical commitments ("rights" and cosmopolitan
ethics) erupt into the discussion.  The so-called
"culture wars" - however misguided some of them may
have been - cannot be sloughed off as some unwelcome
distraction. The transformation of moral repugnance
towards the  alienations of neo-liberalism into
cultural and then political resistance is one of the
signs of our times. Social movements against neo-
liberalism, for example, frequently articulate their
opposition in moral economy terms.  But purely moral
argument is at best a weak ground on which to contest
the alienations and anomie that neo-liberalism

We have, in short, lived through an era of
sophisticated class struggle on the part of the upper
strata in society to restore or, as in China and
Russia, to reconstruct an overwhelming class power.
The turn to authoritarianism and neo-conservatism is
illustrative of the lengths to which that class will go
and the strategies it is prepared to deploy in order to
preserve and enhance its powers.  The mass of the
population has either to submit to this overwhelming
class power or respond to it in class terms.  If this
looks like, acts like and feels like class struggle
then we must be prepared to name it for what it is and
act accordingly.

Though class movements may make themselves, they do not
do so under conditions of their own choosing. These
conditions are currently highly diverse and fragmented.
Finding the organic links between highly variegated
oppositional social movements is an urgent task.   The
links are there. The gap between the promise of neo-
liberalism (the benefit of all) and its realization
(the benefit of a small ruling class) increases. Class
and regional inequalities both within states (such as
China, Russia, India and Southern Africa) as well as
internationally pose a serious political problem.  The
idea that the market is about competition is negated by
the facts of monopolization, centralization and
internationalization of corporate and financial power.
The idea that neo-liberalism is about fairness is
brutally offset by the extensive facts of
dispossession.  The idea that neo-liberalism is about
individual freedoms confronts the increasing
authoritarianism of the neo-liberal and now neo-
conservative state apparatus. The more neo-liberalism
is revealed as a failed utopian project masking the
restoration of class power for the few, the more it
lays the basis for a resurgence of mass movements
voicing egalitarian political demands, seeking economic
justice, fair (rather than "free") trade and greater
economic security.

The profoundly anti-democratic nature of neo-liberalism
is becoming a potent political issue.  The democratic
deficit in nominally democratic countries is now
enormous. Institutional arrangements, like the Federal
Reserve, are biased, outside of democratic control.
They lack transparency. Internationally, there is no
accountability let alone democratic control over
institutions such as the IMF, the WTO and the World
Bank. To bring back the demands for democratic
governance and for economic, political and cultural
equality and justice is not to suggest some return to a
golden past. The meaning of democracy in ancient Athens
has little to do with the meanings we must invest it
with today.   But right across the globe, from China,
Brazil, Argentina, Taiwan, Korea as well as South
Africa, Iran, India, Egypt, the struggling nations of
Eastern Europe as well as in the heartlands of
contemporary capitalism, there are groups and social
movements in motion that are rallying to the cause of
democratic values.

The Bush Presidency has projected upon the world the
idea that American values are supreme and that values
matter since they are the heart of what civilization is
about.  The world is in a position to reject that
imperialist gesture and refract back into the heartland
of neo-liberal capitalism and neo-conservatism a
completely different set of values: those of an open
democracy dedicated to the achievement of social
equality coupled with economic, political and cultural

David Harvey is Distinguished Professor of Anthropology
at the Graduate Center of the City University of New
York.  His most recent book is The New Imperialism
published by Oxford University Press.

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