Michael Pugliese put up a link to a long review of David Harvey's ``A Brief History of Neoliberalism'' (Oxford UP, 2005)
Since I haven't read the book, I hope the review is accurate. I want to repost the review here in several parts, probably 1, 2, 3 of about 10k each.
The reason to repost it is I doubt most of the list read Pugliese's post (and followed the link), and more important, the review outlines a process that I suspect will be followed in rebuilding New Orleans-- most likely the next great neoliberal experiment.
I've watched these neoliberal experiments before, close up, carried out in Emeryville, Ca---a low tax free-fire zone between Oakland and Berkeley with key highway, trucking and rail lines to feed its once working factories and warehouses. Emeryville was a classic post-industrial slum with long stretches of closed factories and warehouses, interspersed with dilapidated houses and apartments housing the remainders of an equally blighted multi-ethnic but mostly black working class. All of this was wiped clean or near enough in a five to six year period, mostly replaced with high-tech bio-science, dot-coms, and vast office complexes---inter-cut with high density, high priced condos and apartment high rises. With the private sector development boom, the public sector schools, streets, and municipal utilities were in receivership since the City of Emeryville had gone bankrupt. In effect Emeryville lived out in miniature what has been going on globally under the New Imperialism. Emeryville provided a first hand look at a brief history of neoliberalism...
I could watch the process of transformation on the street in front of the warehouse where I worked and on a single small elementary school. The street started off as wide industrial street with RR tracks down the middle where tanker cars dropped off huge quantities of corn syrup (196,000 lbs) in each tanker. The factory was closed, the street and tracks torn up, and a silly median strip was installed that virtually prohibited truck deliveries. Meanwhile the school went from elementary grades to a charter middle school where the kids had almost no room to run and play because the yard was too small---scaled to smaller kids. The charter school lost its accreditation and closed---only to become a storage yard for RR ties, tracks, scrap metal, and large piles of industrial debris stripped from surrounding streets and factories. Meanwhile, just a few addresses down the street a giant condo complex sprang up with trendy post-mod, fake art-deco architectural accouterments. The juxtaposition of what happened to the public space, verses what happened to private space was appalling to say the least.
New Orleans will mostly likely follow the same trace---unless local groups organize to stop it and figure out their own solutions.
CG
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Brain Holmes, The Scandal of the Word ?Class?
Wednesday September 28 2005,
from the brief-history-of-reactionary-nationalism dept.
http://info.interactivist.net/article.pl?sid=05/09/29/0511228
The Scandal of the Word ?Class?: A Review of David Harvey, A Brief History of Neoliberalism (Oxford UP, 2005)
David Harvey's new book has four faces on its cover: Reagan, Thatcher, Pinochet and Deng Xiaoping. It makes one self-evident, yet strangely scandalous assertion: the rise of neoliberal economics since the late 1970s - or more precisely, since the bankruptcy of New York City and the dictatorship in Chile - is the centerpiece of a deliberate project to restore upper-class power. True to its title, the book presents a concise but extremely well-documented economic history of the last three decades, encompassing not only the usual G-7 countries but the entire world, with a particular emphasis on the US and capitalist China.
It identifies structural trends of neoliberal governance that, as the book nears conclusion, serve equally to explicate the present crisis, both of the global economy and of interstate relations. And finally it asks the political question of how resurgent upper-class power can successfully be opposed. Here is where the most benefit could be gained by examining the aura of scandal that surrounds its central thesis.
But first let us consider in detail how this history unfolds. It is well known that Chicago-school economists, trained by Milton Friedman, applied the latter's free-market utopia to Chile after the consolidation of power by Pinochet in 1975. ?Freedom? was therefore a key word in the economic management propounded by the dictator.
Harvey begins not with that story, but instead with four orders issued on September 19, 2003 by Paul Bremer, head of the Coalition Provisional Authority in ?liberated? Iraq. The orders included ?the full privatization of public enterprises, full ownership rights by foreign firms of Iraqi businesses, full repatriation of foreign profits... the opening of Iraq's banks to foreign control, national treatment for foreign companies and... the elimination of nearly all trade barriers? (p. 6).
Only oil was exempted from these orders, presumably because of its status as a strategic (i.e. military) resource. In addition, a flat tax, long promoted by Republicans in the US, was imposed. Harvey sees these economic parameters as exemplary of a neoliberal state, defined as ?a state apparatus whose fundamental mission [is] to facilitate conditions for profitable capital accumulation on the part of both domestic and foreign capital.?
The freedoms embodied by that particular kind of state ?reflect the interests of private property owners, businesses, multinational corporations, and financial capital? (p. 8).
After drawing a striking parallel between the restructuring of the Iraqi and Chilean economies, he goes on to recount the sequence, relatively familiar from his previous books, whereby the postwar social compromise between capital and labor, instituted internationally by the 1944 Bretton Woods fixed exchange-rate system and by tariff barriers and capital controls negotiated within the General Agreement on Tariffs and Trade, gradually collapsed in the early 1970s after delivering two decades of sustained high growth. The central argument in this opening chapter is an account of the dramatic increase in the income of the upper 1% of the population of the most developed countries from the mid-1980s onward. By the end of the century, in the US case, that upper one-hundredth of American society commanded a full 15% of the national wealth - up from less than 8% at the close of WWII, and now very close to the level of 16% that had obtained before the war. On the same page Harvey offers another figure: ?the ratio of the median compensation of workers to the salaries of CEOs increased from just over 30 to 1 in 1970 to nearly 500 to 1 by 2000? (p. 16). And he points to similar concentrations of wealth in Britain, Russia, China and Mexico, as well as to the widening of the global income gap between the top fifth of the world's population in the richest countries and the bottom fifth in the poorest, which has gaped dramatically from 30 to 1 in 1960 to 74 to 1 in 1997. Over the same period, aggregate global growth rates fell from 3.5% for the decade of the 1960s to just 1.1% for the 1990s.
These statistics support the assertion that neoliberalism is less ?a utopian project to realize a theoretical design for the reorganization of international capitalism? than it is ?a political project to re-establish the conditions for capital accumulation and to restore the power of economic elites? (p. 19). In other words, despite all its purported advantages in terms of lower taxes, renewed growth, liberty from bureaucratic constraint, expanded job opportunities and consumer choices for the common man, free-market theory serves in practice to mask the recapture of state power by the rich.
The usefulness of history in an amnesiac society is simply to remember what happened in our lifetimes. Take the prolonged economic downturn of the 1970s, when worldwide competition intensified, resource prices rose, global demand fell, output stagnated, inflation climbed sharply, and the US was faced with the uncontrollability of its own corporations, which parked their global profits in offshore ?eurodollar? markets rather than taking them home where they would be taxed. Under the Keynesian logic of domestic economic management, which traditionally sought to ensure full employment and effective consumer demand for manufactured goods, the crisis could only be treated by lowering interest rates and expanding welfare entitlements and public-works investments.
But the result of those policies was an inflationary wage-price spiral, which combined with persistent low growth rather than alleviating it. The resulting paradox of ?stagflation? was finally countered in October 1979 by the so-called ?Volcker shock.?
Paul Volcker, chairman of the US Federal Reserve Bank under Carter, raised interest rates dramatically, reaching a nominal rate of 20% by July 1981. One major result was to make the new, fully liquid and negotiable US Treasury bonds an irresistible destination for investments that poured in from around the globe, thus re-establishing the central position of the US in world finance and permitting the unprecedented deficit-spending, or military Keynesianism, of the Reagan era.
But Harvey doesn't even mention that here - because the key effect in terms of the restoration of upper-class power was to precipitate a sharp recession that broke the wage-price spiral and weakened the bargaining position of trade unions, as workers were laid off and business after business failed. Reagan, who fully approved of Volcker's approach, would pursue this attack on labor after his accession to the presidency in 1980, notably by defeating the air-traffic controllers' strike in 1981, then by promulgating the sweeping tax cuts and broad deregulation of industry and finance for which he and Thatcher are renowned. ?Tax breaks on investment effectively subsidized the movement of capital away from the unionized north-east and midwest and into the non-union and weakly regulated south and west? of the United States, notes Harvey (p. 26). The top personal tax rate fell from 70 to 28 percent. But the Volcker shock had even more important consequences in the realm of international relations.
The originality of David Harvey's books is the way he is able to trace the dynamics of capital flows across time and across the geographical scales, from the intimate to the urban, regional, national, continental and world levels. Here he recalls how the OPEC price hike of 1973 placed huge amounts of capital in the hands of the oil-producing states; and he refers to Peter Gowan's account of the way the Saudis were forced by threat of invasion to continue pricing their oil sales exclusively in dollars, and to recycle these petrodollars through New York investment banks. Low US interest rates in the mid-1970s meant that this capital had to be placed elsewhere, and the solution was to lend it to the governments of developing countries.
?This required the liberalization of international credit and financial markets, and the US government began actively to promote and support this strategy globally during the 1970s? (pp. 28-9). The loans, however, were also designated in US dollars, with the result that any rise in the US interest rate could easily force debtor countries into default. This is exactly what happened to Mexico in 1982-84, in the wake of the Volcker shock - and it was at this point that economic crisis became the primary tool of neoliberal restructuring. Harvey makes this analysis:
?The Reagan administration, which had seriously thought of withdrawing support for the IMF in its first year in office, found a way to put together the powers of the US Treasury and the IMF to resolve the difficulty by rolling over the debt, but did so in return for neoliberal reforms. This treatment became standard after what Stiglitz refers to as a 'purge' of all Keynesian influences from the IMF in 1982. The IMF and the World Bank thereafter became centres for the propagation and enforcement of 'free market fundamentalism' and neoliberal orthodoxy. In return for debt rescheduling, indebted countries were required to implement institutional reforms, such as cuts in welfare expenditures, more flexible labour market laws, and privatization. Thus was 'structural adjustment' invented? (p. 29).