Neoliberalism as a Class Practice
A trademark of our times is the dominance of neoliberalism in the major economic, political, and social forums of the developed capitalist countries and in the international agencies they influence—including the IMF, the World Bank, the WTO, and the technical agencies of the United Nations such as the World Health Organization, Food and Agricultural Organization, and UNICEF. Starting in the United States during the Carter administration, neoliberalism expanded its influence through the Reagan administration and, in the United Kingdom, the Thatcher administration, to become an international ideology. Neoliberalism holds to a theory (though not necessarily a practice) that posits the following:
- The state (or what is wrongly referred to in popular parlance as “the government”) needs to reduce its interventionism in economic and social activities.
- Labor and financial markets should be deregulated in order to liberate the enormous creative energy of the markets.
- Commerce and investments should be stimulated by eliminating borders and barriers to allow for full mobility of labor, capital, goods, and services.
This celebration of the process of globalization is also evident among some sectors of the left. Michael Hardt and Antonio Negri, in their widely cited Empire (Harvard University Press, 2000), celebrate the great creativity of what they consider to be a new era of capitalism. This new period, they claim, breaks with obsolete state structures and establishes a new international order, which they define as an imperialist order. They further postulate that this new order is maintained without any state dominating or being hegemonic. Thus, they write:
Hardt and Negri applaud, along with neoliberal authors, the expansion of globalization. Other left-wing authors, however, mourn rather than celebrate this expansion, holding globalization as the cause of the world’s growing inequalities and poverty. It is important to stress that even though the authors in this latter group—which includes, for example, Susan George and Eric Hobsbawm—lament globalization and criticize neoliberal thinking, they still share with neoliberal authors the basic assumption of neoliberalism: that states are losing power in an international order in which the power of multinational corporations has replaced that of states.
The Contradiction Between Theory and Practice in Neoliberalism
Let’s be clear right away that neoliberal theory is one thing and neoliberal practice is another thing entirely. Most members of the Organisation for Economic Co-operation and Development (OECD) —including the U.S. federal government—have seen state intervention and state public expenditures increase during the last thirty years. My area of scholarship is public policy and I study the nature of state interventions in many parts of the world. I can testify to the expansion of state intervention in most countries in the developed capitalist world. Even in the United States, President Reagan’s neoliberalism did not translate into a decline of the federal public sector. Instead, federal public expenditures increased under his mandate, from 21.6 to 23 percent of GNP, as a consequence of a spectacular growth in military expenditures from 4.9 to 6.1 percent of GNP (Congressional Budget Office National Accounts 2003). This growth in public expenditures was financed by an increase in the federal deficit (creating a burgeoning of the federal debt) and an increase in taxes. As the supposedly anti-tax president, Reagan in fact increased taxes for a greater number of people (in peace time) than any other president in U.S. history. And he increased taxes not once, but twice (in 1982 and 1983). In a demonstration of class power, he drastically reduced taxes for the 20 percent of the population with the highest incomes, while raising taxes for the majority of the population.
It is not accurate, therefore, to say that Reagan reduced the role of the state in the United States by reducing the size of the public sector and lowering taxes. What Reagan (and Carter before him) did was dramatically change the nature of state intervention, such that it benefited even more the upper classes and the economic groups (such as military-related corporations) that financed his electoral campaigns. Reagan’s policies were indeed class policies that hurt the majority of the nation’s working class. Reagan was profoundly anti-labor, making cuts in social expenditures at an unprecedented level. It bears repeating that Reagan’s policies were not neoliberal: they were Keynesian, based on large public expenditures and large federal deficits. Also, the federal government intervened very actively in the nation’s industrial development (mainly, but not exclusively, through the Defense Department). As Caspar Weinberger, secretary of defense in the Reagan administration, once indicated (in response to criticisms by the Democrats that the administration had abandoned the manufacturing sector), “Our Administration is the Administration that has a more advanced and extended industrial policy in the western world” (Washington Post, July 13, 1983). He was right. No other western government had such an extensive industrial policy. Indeed, the U.S. federal state is one of the most interventionist states in the western world.
There exists very robust scientific evidence that the United States is not a neoliberal society (as it is constantly defined) and that the U.S. state is not reducing its key role in developing the national economy, including in the production and distribution of goods and services by large U.S. corporations. This empirical evidence shows that federal government interventionism (in the economic, political, cultural, and security spheres) has increasedover the last thirty years. In the economic sphere, for example, protectionism has not declined. It has grown, with higher subsidies to the agricultural, military, aerospace, and biomedical sectors. In the social arena, state interventions to weaken social rights (and most particularly labor rights) have increased enormously (not only under Reagan, but also under Bush Senior, Clinton, and Bush Junior), and surveillance of the citizenry has increased exponentially. Again, there has been no diminution of federal interventionism in the United States, but rather an even more skewed class character to this intervention during the last thirty years.
Neoliberal narratives about the declining role of the state in people’s lives are easily falsified by the facts. Indeed, as John Williamson, one of the intellectual architects of neoliberalism, once indicated, “We have to recognize that what the U.S. government promotes abroad, the U.S. government does not follow at home,” adding that “the U.S. government promotes policies that are not followed in the U.S.” (“What Washington Means by the Policy Reform,” in J. Williamson, ed., Latin America Adjustment, 1990, 213). It could not have been said better. In other words, if you want to understand U.S. public policies, look at what the U.S. government does, not what it says. This same situation occurs in the majority of developed capitalist countries. Their states have become more, not less, interventionist. The size of the state (measured by public expenditures per capita) has increased in most of these countries. Again, the empirical information on this point is strong. What has been happening is not a reduction of the state but rather a change in the nature of state intervention—further strengthening its class character.
|Table 1: Economic Growth, 1960–2000|
|Rate of economic growth in developing countries (except China):|
|Annual economic growth||5.5%||2.6%|
|Annual economic growth per capita||3.2%||0.7%|
|Rate of economic growth in China:|
|Annual economic growth||4.5%||9.8%|
|Annual economic growth per capita||2.5%||8.4%|
|Sources: World Bank, World Development Indicators, 2001 CD-ROM; Robert Pollin, Contours of Descent (Verso, 2003) 131.|
|A. Average Annual Rate of Per Capita Economic Growth in the OECD and Developing Countries|
|(A) OECD countries||3.5%||2.0%|
|(B) Developing countries (except China)||3.2%||0.7%|
|Growth differential (A/B)||0.3%||1.3%|
|B. Growth in World Income Inequalities, 1980–1998 (Excluding China)|
|Income of richest 50% as share of poorest 50%||4% more unequal|
|Income of richest 20% as share of poorest 20%||8% more unequal|
|Income of richest 10% as share of poorest 10%||19% more unequal|
|Income of richest 1% as share of poorest 1%||77% more unequal|
|Sources: World Bank, World Development Indicators, 2001; Robert Sutcliffe, A More or Less Unequal World? (Political Economy Research Institute, 2003); Robert Pollin, Contours of Descent (Verso, 2003), 133.|
It bears emphasizing that even though poverty has increased worldwide and within countries that are following neoliberal public policies, this does not mean the rich within each country (including developing countries) have been adversely affected. Instead, the rich saw their incomes and their distance from the non-rich increase substantially. Class inequalities have increased greatly in most capitalist countries.
Neoliberalism as a Class Practice: The Roots of Inequalities
In each of these countries, then, the income of those at the top has increased spectacularly as a result of state interventions. Consequently, we need to turn to some of the categories and concepts discarded by large sectors of the left: class structure, class power, class struggle, and their impact on the state. These scientific categories continue to be of key importance to understanding what is going on in each country. Let me clarify that a scientific concept can be very old but not antiquated. “Ancient” and “antiquated” are two different concepts. The law of gravity is very old but is not antiquated. Anyone who doubts this can test it by jumping from the tenth floor. There is a risk that some sectors of the left may pay an equally suicidal cost by ignoring scientific concepts such as class and class struggle simply because these are old concepts. We cannot understand the world (from Iraq to the rejection of the European Constitution) without acknowledging the existence of classes and class alliances, established worldwide between the dominant classes of the developed capitalist world and those of the developing capitalist world. Neoliberalism is the ideology and practice of the dominant classes of the developed and developing worlds alike.
But before we jump ahead, let’s start with the situation in each country. Neoliberal ideology was the dominant classes’ response to the considerable gains achieved by the working and peasant classes between the end of the Second World War and the mid-1970s. The huge increase in inequality that has occurred since then is the direct result of the growth in income of the dominant classes, which is a consequence of class-determined public policies such as: (a) deregulation of labor markets, an anti-working-class move; (b) deregulation of financial markets, which has greatly benefited financial capital, the hegemonic branch of capital in the period 1980–2005; (c) deregulation of commerce in goods and services, which has benefited the high-consumption population at the cost of laborers; (d) reduction of social public expenditures, which has hurt the working class; (e) privatization of services, which has benefited the richest 20 percent of the population at the expense of the well-being of the working classes that depend on public services; (f) promotion of individualism and consumerism, hurting the culture of solidarity; (g) development of a theoretical narrative and discourse that pays rhetorical homage to the markets, but masks a clear alliance between transnationals and the state in which they are based; and (h) promotion of an anti-interventionist discourse in clear conflict with the actual increased state interventionism to promote the interests of the dominant classes and the economic units—the transnationals—that foster their interests. Each of these class-determined public policies requires a state action or intervention that conflicts with the interests of the working and other popular classes.
The Primary Conflict in Today’s World: Not Between North and South But Between an Alliance of Dominant Classes of North and South Against Dominated Classes of North and South
It has become part of the conventional wisdom that the primary conflict in the world is between the rich North and the poor South. The North and the South, however, have classes with opposing interests that have established alliances at the international level. This situation became clear to me when I was advising President Allende in Chile. The fascist coup led by General Pinochet was not, as was widely reported, a coup imposed by the rich North (the United States) on the poor South (Chile). Those who brutally imposed the Pinochet regime were the dominant classes of Chile (the bourgeoisie, petit bourgeoisie, and upper-middle professional classes), with the support not of the United States (U.S. society is not an aggregate of 240 million imperialists!) but of the Nixon administration, which was, at that time, very unpopular in the United States (having sent the army to put down the coalminers’ strike in Appalachia).
A lack of awareness of the existence of classes often leads to condemnation of an entire country, frequently the United States. But, in fact, the U.S. working class is one of the first victims of U.S. imperialism. Some will say that the U.S. working class benefits from imperialism. Gasoline, for example, is relatively cheap in the United States (although increasingly less so). It costs me thirty-five dollars to fill my car in the United States and fifty-two euros to fill the same model in Europe. But, by contrast, public transportation is practically nonexistent in many regions of the United States. The working class of Baltimore, for example, would benefit much more from first-class public transportation (which it does not have) than having to depend on cars, whatever the price of gasoline. And let’s not forget that the energy and automobile industry interests have been major agents in opposing and destroying public transportation in the United States. The U.S. working class is a victim of its nation’s capitalist and imperialist system. It is not by chance that no other country in the developed capitalist world has such an underdeveloped welfare state as the United States. More than 100,000 people die in the United States every year due to the lack of public health care.
The tendency to look at the distribution of power around the world while ignoring class power within each country is also evident in the frequent denunciations that the international organizations are controlled by the rich countries. It is frequently pointed out, for example, that 10 percent of the world population, living in the richest countries, has 43 percent of the votes in the IMF, but it is not true that the 10 percent of the population living in the so-called rich countries controls the IMF. It is the dominant classes of those rich countries that dominate the IMF, putting forward public policies that hurt the dominated classes of their own countries as well as of other countries. The director of the IMF, for example, is Rodrigo Rato, who while Spain’s economy minister in the ultra-right government of José María Aznar (who partnered with Bush and Blair to support the Iraq war) carried out the brutal austerity policies that severely reduced the standard of living of the Spanish popular classes (Vincent Navarro, “Who is Mr. Rato?” Counterpunch, June 2004).
Let me also clarify another point. Much has been written about the conflict within the WTO between rich and poor countries. The governments of the rich countries, it is said, heavily subsidize their agriculture while raising protective barriers for industries such as textiles and foods that are vulnerable to products coming from the poor countries. While these obstacles to world trade do indeed adversely affect poor countries, it is wrong to assume that the solution is freer worldwide trade. Even without the barriers, the higher productivity of the rich countries would guarantee their success in world trade. What poor countries need to do is to change from export-oriented economies (the root of their problems) to domestic-oriented growth—a strategy that would require a major redistribution of income and is thus resisted by the dominant classes of those (and of the rich) countries. It is extremely important to realize that most countries already have the resources (including capital) to break with their underdevelopment. Let me quote from an unlikely source. The New York Times, on September 12, 1992 (when the population explosion was held to be the cause of world poverty), published a surprisingly candid assessment of the situation in Bangladesh, the poorest country in the world. In this extensive article, Ann Crittenden touched directly on the root of the problem: the patterns of ownership of the production asset—the land:
Let me add that in the U.S. State Department’s classification of political regimes, Bangladesh is placed in the democratic column. Meanwhile, hunger and underweight are the primary cause of child mortality in Bangladesh. The hungry face of a child in Bangladesh has become the most common poster used by many charitable organizations to shame people in developed countries into sending money and food aid to Bangladesh. With what results?
The States and Class Alliances
In the establishment of class alliances, states play a key role. U.S. foreign policy, for example, is oriented towards supporting the dominant classes of the South (where, incidentally, 20 percent of the world’s richest persons live). These alliances include, on many occasions, personal ties among members of the dominant classes. Examples are many—among them, the traditional support of the Bush family for the Middle East feudal regimes; Clinton’s support for the United Arab Emirates (UAE), one of the major supporters of the Clinton Library in Little Rock, Arkansas, and a major donor to Clinton in speaking fees (up to a million dollars) and to causes favoring Clinton (Financial Times, March 4, 2006). The UAE is one of the world’s most oppressively brutal regimes. The dominant classes deny citizenship to 85 percent of the working population (called “guest workers”). Needless to say, international agencies (heavily influenced by the U.S. and European governments) promote such alliances based on the neoliberal rhetoric of free markets. Cutting social public expenditures, advocated by the IMF and the World Bank, is part of the neoliberal public policies pushed by the dominant classes of both the North and South at the expense of the well-being and quality of life of the dominated classes throughout the world. In all these examples, the states of the North and the South play a critical role.
Another example of alliances among dominant classes is the current promotion of for-profit health insurance by the Bush administration, both to the U.S. population and, increasingly, to the developing world. This is done with the advice and collaboration of conservative governments in Latin America on behalf of their dominant classes, which benefit from private insurance schemes that select clientele and exclude the popular classes. Those popular classes, in the United States and Latin America, profoundly dislike this push toward for-profit health care. (The movie John Q relates the hostility against health insurance companies among the U.S. working class.) The fact that the dominant classes in the developed and developing countries share class interests does not mean they see eye-to-eye on everything. Of course not. They have major disagreements and conflicts (just as there are disagreements and conflicts among the different components of the dominant classes in each country). But these disagreements cannot conceal the commonality of their interests as clearly exposed in the neoliberal forums (such as at Davos) and neoliberal instruments that have a hegemonic position (such as the Economist and the Financial Times).
The chief of the U.S. occupation in Iraq, Paul Bremer, fired half a million government workers, slashed business taxes, gave investors extraordinary new rights, and eliminated all import restrictions for all business except the oil industry. As Jeff Faux relates in The Global Class War (Wiley, 2006), the only laws from the brutal Iraqi dictatorship that the occupation retained were those that were anti-labor union, including a restrictive collective-bargaining agreement that took away all workers’ bonuses and food and housing subsidies. As theEconomist editorialized, the economic reforms in Iraq are a “capitalist’s dream” (September 25, 2003).
Inequalities among Countries and Their Social Consequences
That inequalities contribute to a lack of social solidarity and increase social pathology is well documented. Many people, including myself, have documented this reality (The Political Economy of Social Inequalities: Consequences for Health and Quality of Life, Baywood, 2002). The scientific evidence supporting this position is overwhelming. In any given society, the greatest number of deaths would be prevented by reducing social inequalities. Michael Marmot studied the gradient of heart disease mortality among professionals at different authority levels, and he found that the higher the level of authority, the lower the heart disease mortality (The Status Syndrome, 2005). And he further showed that this mortality gradient could not be explained by diet, physical exercise, or cholesterol alone; these risk factors explained only a small part of the gradient. The most important factor was the position that people held within the social structure (in which class, gender, and race play key roles) and the social distance between groups, and the differential control that people have over their own lives.
This enormously important scientific finding has many implications; one of them is that the major problem we face is not simply eliminating poverty but rather reducing inequality. The first is impossible to resolve without resolving the second. Another implication is that poverty is not just a matter of resources, as is wrongly assumed in World Bank reports that measure worldwide poverty by quantifying the number of people who live on a dollar a day. The real problem, again, is not absolute resources but the social distance and the different degrees of control over one’s own resources. And this holds true in every society.
Let me elaborate. An unskilled, unemployed, young black person living in the ghetto area of Baltimore has more resources (he or she is likely to have a car, mobile phone, and TV, and more square feet per household and more kitchen equipment) than a middle-class professional in Ghana, Africa. If the whole world were just a single society, the Baltimore youth would be middle class and the Ghana professional would be poor. And yet, the first has a much shorter life expectancy (forty-five years) than the second (sixty-two years). How can that be, when the first has more resources than the second? The answer is clear. It is far more difficult to be poor in the United States (the sense of distance, frustration, powerlessness, and failure is much greater) than to be middle class in Ghana. The first is far below the median; the second is above the median.
Does the same mechanism operate in inequalities among countries? The answer is increasingly, yes. And the reason for adding “increasingly” is communication—with ever more globalized information systems and networks, more information is reaching the most remote areas of the world. And the social distance created by inequalities is becoming increasingly apparent, not only within but also among countries. Because this distance is more and more perceived as an outcome of exploitation, we are facing an enormous tension, comparable with that of the nineteenth and early twentieth centuries, when class exploitation became the driving force for social mobilization. The key element for defining the future is through what channels that mobilization takes place. What we have seen is an enormous mobilization, instigated and guided by an alliance of the dominant classes of the North and the South, aimed at—as mentioned earlier—stimulating multi-class religious or nationalistic mobilizations that leave key class relations unchanged. We saw this phenomenon at the end of the nineteenth and beginning of the twentieth centuries. Christian Democracy in Europe, for example, appears as the dominant classes’ response to the threat of socialism and communism.
The left-wing alternative must be centered in alliances among the dominated classes and other dominated groups, with a political movement that must be built upon the process of class struggle that takes place in each country. As Hugo Chávez of Venezuela said, “It cannot be a mere movement of protest and celebration like Woodstock.” It is an enormous struggle, an endeavor in which organization and coordination are key, calling for a Fifth International. This is the challenge to the international left today.