A Brief History of Neoliberalism, Review (part 2)
It is crucial for the overarching thesis of the book that the reader should remark how institutions controlled by the American state (as is the case of the IMF) act to further the interests of private banks directing enormous capital flows for the exclusive profit of a few. The fact is that the US overcame its stagnating industrial growth by becoming the pivot - and policeman - of global finance. At this point Harvey identifies a key difference between classic liberal theory and actual neoliberal practice: ?under the former, lenders take the losses that arise from bad investment decisions, while under the latter the borrowers are forced by state and international powers to take on board the costs of debt repayment no matter what the consequences for the livelihood and well-being of the local population? (p. 29).
If one were to summarize A Brief History of Neoliberalism on a world map rather than a sheet of paper, by inscribing names and dates on the places mentioned and then using arrows to retrace capital flows, the result would be a dynamic picture of many of the hidden tensions that animate contemporary geopolitics. Yet these capital flows, and the corresponding transformations in daily life, are not just results of primary changes originating in the US and Britain. Another strong thesis of the book is that ?the general progress of neoliberalization has... been increasingly impelled through mechanisms of uneven geographical development? (p. 87). On the one hand, specific states, regions and cities are upheld as successful models for capital accumulation, resulting in government programs that strive to make populations everywhere behave like, say, Japanese, North Italians, or Singaporeans, or to make our productive environments resemble Ireland, Silicon Valley or Hyderabad (with the next fashionable role model likely to be authoritarian China). On the other hand, and far more effectively, each new crisis - and these have become increasingly frequent since the mid-1970s - represents a chance for monopoly concentration, foreign takeover of assets, and structural adjustment, as exemplified by the case of the so-called ?Asian crisis? that also wreaked its havoc on Russia and Brazil in 1997-98. Harvey lists four main factors to explain the rising turbulence: the financialization of everything (i.e. the conversion of ownership rights into titles that can be traded instantaneously, along with all their derivatives, on electronic marketplaces); the increasing mobility of capital thanks to international agreements, culminating in the founding of the WTO in 1995; the pressure to enact neoliberal reforms exercised by the ?Wall Street-IMF-Treasury complex?; and the spread of the new monetarist and neoliberal orthodoxy in university economics departments the world over, eliminating the former Keynesian paradigm. These give rise to a world system where capital accumulation proceeds, not despite, but because of the uneven geographic fluctuations of continuous crisis.
Incisive studies of the transformations in Mexico, Argentina, South Korea and Sweden illustrate the vicissitudes of the ?Washington Consensus? that wove these four main threads together into a dominant pattern by the early 1990s, as Clinton and then Blair consolidated the neoliberal paradigm from a center-left position (which, to be sure, no longer has anything recognizably ?left? about it).
One of the advantages of a geographic treatment of history is to avoid lumping everything together into a single global picture: ?The degree to which neoliberalism has become integral to common-sense understandings among the populace at large has varied greatly depending on the strength of belief in the power of social solidarities and the importance of traditions of collective social responsibility and provision? (p. 116). Implementation of the upper-class agenda varied consequently. Thus one can speak of a ?circumscribed? neoliberalism in the Swedish case, or note the failure of French elites to reach the income gaps attained in most other developed countries.
Crucially, Harvey draws attention to the interplay of local capitalist classes and external forces: ?It sometimes seems as if the IMF merely takes the responsibility for doing what some internal class forces want to do anyway? (p. 117). A phrase which in my view applies perfectly to the recent crisis in Argentina, among others. The key to understanding the dynamics of the world system is therefore to pierce the imbroglios surrounding the ways that national and transnational elites collude to take advantage, not only of industrial or financial booms, but also of the periodic busts that inevitably offer a chance for the big fish to swallow the assets of the smaller ones, while destroying the common people's means of livelihood.
This type of collusion is central to the process that Harvey calls ?accumulation by dispossession.? The thing we are asked to conceive, therefore, is the way that uneven geographic development knits itself together into the dynamics of far-reaching crisis. The geopolitical Gordian knot that appears so clearly at the end of the book (particularly if you have also read The New Imperialism) is the one that intertwines the ever-expanding debt of the United States, the industrial boom of China and the coveted oil reserves of the Middle East.
It would be interesting to hear an informed opinion on the chapter dealing with China's economic and social history, since 1978 when Deng Xiaoping began the privatization of state enterprises and agricultural collectives, and the opening of coastal cities to foreign capital. What's compelling for the ordinary reader is the way Harvey recounts a series of isolated experiments that gradually fit together into a coherent pattern of practice (indeed, all his historical accounts adopt this empirical approach). The Communist Party is credited with managing ?to construct a form of state-manipulated market economy that delivered spectacular economic growth (averaging close to 10 percent a year) and rising standards of living for a significant portion of the population for more than twenty years.? At the same time, the Party is hardly spared critique: ?It almost certainly embraced economic reforms in order to amass wealth and upgrade its technological capacities so as to be better able to manage internal dissent, to better defend itself against external aggression, and to project its power outwards onto its immediate geopolitical sphere of interest? (p. 112). The authoritarianism of Deng and the successive leadership is repeatedly stressed.
But it is China's overwhelming growth that takes your breath away: 114 million migrant workers who have left the countryside for the city; a rate of urbanization of around 15% a year; foreign direct investment at 40% of GDP in 2002; automobile production of 250,000 a month in 2004 (mostly for internal consumption, and with ecological consequences one would rather not imagine...). A phrase from a New York Times report sums it up: ?In 2003 China took '30 per cent of the world's coal production, 36 per cent of the world's steel and 55 per cent of the world's cement? (p. 139). One imagines endless highways, skyscrapers, shopping malls, airports.
China is now the world's second largest oil importer after the US, with its hungry eye on all the world's reserves. This phenomenal growth stems from a pattern of strategically privatizing, profit-driven management, which broadly corresponds to that of the neoliberal state. ?But in one respect the Chinese Depart glaringly from the neoliberal template,? Harvey writes. And he continues:
?China has massive labor surpluses, and if it is to achieve social and political stability it must either absorb or violently repress that surplus. It can do the former only by debt-financing infrastructural and fixed-capital formation projects on a massive scale (fixed-capital investment increased by 25 per cent in 2003)... But all of this requires that the Chinese state depart from neoliberal orthodoxy and act like a Keynesian state. This requires that it maintain capital and exchange rate controls. These are inconsistent with the global rules of the IMF, the WTO, and the US Treasury.... The enforcement of capital flow controls is becoming increasingly difficult as Chinese yuan seep across a highly porous border via Hong Kong and Taiwan into the global economy. It is worthwhile recalling that one of the conditions that broke up the whole Keynesian post-war Bretton Woods system as the formation of a eurodollar market as US dollars escaped the discipline of its own monetary authorities. The Chinese are already well on their way to replicating that problem, and their Keynesianism is correspondingly threatened? (p. 141).
What plainly worries Harvey are the possibly violent consequences of a crisis affecting the US-China relation. For the two continent-sized countries are now the double engine of world productivity: as the one constantly struggles to consume what the other struggles to produce, domestic peace in both comes to depend on the continuity of what looks like a mad race to nowhere. Harvey, like Giovanni Arrighi and his collaborators, thinks that a major hegemonic shake-up - i.e. the displacement of the US from its now-fragile position as linchpin of the world economy - may well be in the offing. But he does not see any way this could occur peacefully:
``A peculiar symbiosis emerges, in which China, along with Japan, Taiwan, and other Asian central banks, fund the US debt so that the US can conveniently consume their surplus output. But this renders the US vulnerable to the whims of Asian central bankers. Conversely, Chinese economic dynamism is held hostage to US fiscal and monetary policy. The US is also currently behaving in a Keynesian fashion - running up enormous federal deficits and consumer debt while insisting that everyone else must obey neoliberal rules. This is not a sustainable position, and there are now many influential voices in the US suggesting that it is steering right into the hurricane of a major financial crisis. For China, this would entail switching from a politics of labour absorption to a politics of overt repression. Whether or not such a tactic can succeed, as it did in Tiananmen Square in 1989, will depend crucially upon the balance of class forces and how the Communist Party positions itself in relation to those forces'' (p. 142).
Every contemporary conflict can be assessed within this wider panorama. Is the oil-grabbing Iraq occupation the opening gambit in a long-term struggle that will violently oppose the two seemingly inseparable trading partners over the control of the world's key strategic resource? This was the question Harvey asked in The New Imperialism. But the current book, having demonstrated with greater precision the extent to which the neoliberal model of economic management has become the ruling paradigm across the earth, tends rather to focus on the balance of class forces that will be decisive in the resolution of a major crisis. It is here that the political question of the foundations of the neoliberal consensus becomes crucially important to the citizens of the purportedly democratic nations, who still may have some chance to swing the balance of majority opinion towards a rejection of the worst kinds of decisions (like those taken systematically by the Bush administration). For the paradoxical and sobering truth (I have to say this directly to Americans) is not only that we elected those who have brought the country to the present impasse, but more pertinently, that no one among the so-called ?Left? or ?progressives,? and least of all among the Democrats, has been able to come up with an alternative that can unseat the neoliberal model. Clinton, in this respect, merely upped the ante of the speculative boom, thereby ushering in the disastrous crisis-management of Bush, after the stock-market crash of mid-2000 and the events of September 2001. The citizens of practically every other developed country can make a similar self-critique, even if, with the partial exception of Britain, their governments did not face such tests and do not bear such direct responsibility. So one crucial question is, where have we gone wrong on the Left, since the mid-1970s when the neoliberal option first emerged, then the early 1980s when it already began to take on its definitive political configuration? And more importantly, what sort of counter-hegemony could safely steer the world beyond the looming likelihood of a violently imperial slicing of the Gordian knot, on a scale tragically greater than that of the current disaster in Iraq?
These are the problems that challenge the reader of A Brief History of Neoliberalism to overcome sheer fascination with such an intricate account of the road to capital bondage in the name of individual freedom. Indeed, this book of exacting historical detail is also a sustained invitation to consider the different meanings of the word freedom, which, as Harvey points out with a quote from Karl Polanyi's The Great Transformation, can be ?the freedom to exploit one's fellows, or the freedom to make inordinate gains without commensurate service to the community, the freedom to keep technological inventions from being used for public benefit, or the freedom to profit from public calamities secretly engineered for private advantage? (p. 36). By retracing the way that the very premises of nineteenth century liberal capitalism led to the disasters of the two World Wars, Polanyi sought to make the reader consider all the complex economic and institutional balances that would be needed to insure the justice and equity of ?freedom in a complex society? (which is the title of the last chapter of The Great Transformation). Harvey's book has similar ambitions. So let's restate the major political questions that it raises. Why did neoliberal theory gain such a hold over the ?common sense? of broad majorities? How did it then evolve into an electorally effective neoconservativism? What has halted the formation of a counter-hegemony? Why does the seemingly self-evident thesis of a resurgence of upper-class power have so little political currency in today's debates?