In our last post (“Neoliberalism” 6/15/2016), we looked at the definition and description of neoliberalism offered by Asin Shivani in “This Is Our Neoliberal Nightmare: Hillary Clinton, Donald Trump, and Why the Market and the Wealthy Win Every Time” (Alternet, June 8, 2016). I maintained that Shivani’s description focuses on the dynamics of neoliberalism in the core nations, and it lacks an historical and global perspective. This limitation is evident with respect to Shiyani’s speculation concerning the origin of neoliberalism. He writes:
“It’s an interesting question if it was the stagflation of the 1970s, following the unhitching of the United States from the gold standard and the arrival of the oil embargo, that brought on the neoliberal revolution, with Milton Friedman discrediting fiscal policy and advocating a by-the-numbers monetarist policy, or if it was neoliberalism itself, in the form of Friedmanite ideas that the Nixon administration was already pursuing, that made stagflation and the end of Keynesianism inevitable.”
The modern world-system and the capitalist world-economy were constructed on a foundation of colonial domination of the world by seven Western European nations from the beginning of the sixteenth to the beginning of the twentieth centuries. The conquered regions of Latin America, the Caribbean, Africa, the Middle East, South Asia and Southeast Asia (excepting China and Japan) were converted into suppliers of the raw materials of the nations of the core, on a base of forced labor. In addition, with their traditional economies destroyed, the conquered regions provided markets for the surplus industrial and agricultural goods of the core (see various posts on the origin and development of the modern world-system).
The conquered peoples resisted. At first, the resistance was military. Those initially conquered were no match for the politically concentrated and more militarily advanced emerging nation-states of Western Europe. As the Western European states were able to accumulate more power through the emerging colonial systems, the empires of China, India and the Islamic World ultimately would have to make significant concession to the new global powers of Western Europe. Later, the resistance of the conquered peoples took the form of anti-colonial and anti-neocolonial social movements, seeking to transform colonies into independent nations, and seeking to form an interstate system based on the principles of the equality and sovereignty of all nations. However, the European nations-states were able to contain the Third World movements through the development of a neocolonial world-system, characterized by formal political independence of the nations of the world, and by imperialist economic and financial penetration of the peripheralized zones, in practice maintaining inequality among nations and negating true sovereignty for the formerly colonized nations (see “The characteristics of neocolonialism” 9/16/2013).
In addition to managing the anti-colonial movements in the colonized regions, the world-system was able to contain popular movements in the core. These movements, formed by workers, artisans, peasants, farmers and the middle class, were a constant threat to take control of the core states from the capitalist class. However, the elite was able to undermine the revolutionary potential of the popular classes through the granting of material concessions and the development of a consumer society. The concessions to popular demands in the core were financed by the superexploitation of the peripheral and semi-peripheral regions and by government deficit spending.
The world-system provided a relatively high standard of living for the popular sectors of the European colonial nations and of the ascending European settler societies, such as the United States and Canada. Thus, the world-system worked fairly well for those who were strategically positioned to benefit from colonial and neocolonial domination of vast regions of the world. However, in the middle of the twentieth century, the world-system began to reach its geographical and ecological limits, in that had run out of lands and peoples to conquer, thus losing the principal motor that drove its expansion. And this was occurring just as the Third World national liberation movements were reaching their zenith, demanding more and more political and economic concessions from the global powers. At the same time, the deficit spending strategy in order to satisfy popular demands in the core had reached its limits, as core government debts exceeded sustainable levels.
In modern capitalism that have been periodic crises of overproduction, giving rise to economic recession or repression. And there have been other periodic crises, such as the Mexican debt crisis, the Third World debt crisis, and the financial crisis of 2008. But in the 1970s, the world-system was beginning to see signs of a more profound type of crisis: a fundamental structural crisis of the world-system, which was rooted its basic contradictions. There was, on the one hand, the contradiction between the economic system and the environment, in that it is a system that economically expands by conquering more lands and peoples, yet it pertains to a planet with a finite amount of land and peoples. Secondly, there is the contradiction between the democratic ideology, which proclaims the equality of persons and nations, that has been the dominant ideology of the system since the late eighteenth century; and the logic of colonial and neocolonial domination and the exploitation and superexploitation of labor, which provides the economic foundations of the system. The contradiction between democratic values and domination/exploitation had the consequence that popular movements were invoking democratic values as an arm of struggle, compelling the elite to continually make concessions to anti-colonial movements in the Third World as well as popular sectors in the core, concessions that were beyond the capacity of the system to sustain.
Thus, by the 1970s, the system had reached its limits. Corporate profits were stagnating. Economic stagnation was combined with inflation. Global production has surpassed ecological limits. Peoples all over the world, in core and peripheral zones, were in movement, demanding concessions and/or structural change. The hegemonic neocolonial power was overextended, with balance of payments and government deficits, which compelled it to eliminate the gold standard for the US dollar.
It would not have been unreasonable for global elites to respond to this situation by the taking of an enlightened turn, recognizing that the world-system had reached its limits, and that it would be necessary to change the logic of the system from domination to cooperation, and to search for mutually beneficial forms of international trade and ecologically sustainable forms of production. It would have been reasonable, given objective conditions, but it would have been inconsistent with the previous comportment of the elite, which had persistently pursued its interests at the expense of the common good. During the second half the nineteenth century and the first half of the twentieth, it had turned to monopoly capitalism, imperialism, consumerism, and war, seeking to maximize production and profits. Following World War II, rather than reconverting to a peacetime economy and seeking to develop peace and cooperation among nations, as Franklin Roosevelt had envisioned, the US power elite led the world in the development of a military-industrial complex, a permanent war economy, ecologically unsustainable forms of production and consumption, military intervention in the Third World, and new forms of imperialism. The neoliberal turn of the global elite in 1980, provoked by a fundamental structural crisis of the system, was fully predictable.
Consistent with its past behavior, perhaps true to its nature, the global elite, rather than taking a reasonable and enlightened turn, took an aggressive turn, driven by the pursuit of short-term particular interests. It sought to reassert its control over the world-system, reversing forty-five years of concessions. It imposed the neoliberal program on the neocolonies, using the debt of Third World governments as leverage, thus rolling back concessions that had been made to the Third World during the course of the twentieth century. At the same time, it turned to an economic war on the popular sectors of the core, rolling back programs that had been developed in response to popular demands.
As applied in the Third World, neoliberal policies had direct short-term benefits to core corporations. The neoliberal project required Third World governments to eliminate government protection of national currencies and to permit the trading of currency at a free market rate, thus greatly increasing the purchasing power of the US dollar in Third World nations, reducing the costs of labor. The neoliberal project compelled privatization of government-owned enterprises, thus making economic enterprises available for purchase at devalued prices. Neoliberal policies required Third World governments to reduce protection for their national industries, reducing or eliminating tariffs and taxes on imported goods, thus expanding the market for the goods of core corporations. Neoliberal policies facilitated the free flow of capital into and out of countries, thus making possible enormous profits through financial speculation. And neoliberal policies reduced or eliminated union restrictions, thus increasing profits to core corporations through the exploitation and superexploitation of labor in the Third World (Prieto 2009:108-11).
Thus, the neoliberal project of the core powers was an aggressive response by the global elite to the structural crisis of the world-system, and it had a certain logic to it. But the logic pertained only to the short-term. In dismissing the needs of the humble people who form the majority of humanity, the neoliberal project provoked popular indignation, giving rise to a renewal of popular movements that seek structural transformation of the world-system.
The origins of neoliberalism cannot be treated as a mystery or the subject of mere speculation. We intellectuals of the North have the duty to understand it, and to explain it to our people, so that our options can be more fully understood. We must be clear on two issues. First, the world-system, based on neocolonial domination and the superexploitation of labor, has overextended its ecological and political limits, and it cannot be sustained. Humanity must seek to develop an alternative world-system based on cooperation and mutually beneficial trade, if it hopes to avoid chaos and/or extinction. Second, the mainstream and established political-economic actors of the nations of the core have demonstrated that they are morally and politically unprepared to rule the world in anything approaching a necessary and responsible form. They must be removed from power by the people in movement.
If we intellectuals of the North were observing with a more open attitude what has been occurring in the Third World since the 1990s, we would see that there has begun a process of peoples in movement seeking to develop an alternative world-system. We intellectuals of the North must discern not only the unreasonable and morally irresponsible behavior of those in power, but also the dignified behavior of the world’s humble. We must call our peoples in the North to participation in the movement that has been formed by humanity in defense of itself.
Prieto Rozos, Alberto. 2009. Evolución de América Latina Contemporánea: De la Revolución Cubana a la actualidad. La Habana: Editorial de Ciencias Sociales.
Key words: neoliberalism, Shivani, crisis