Lefty Resource Library

Posting articles as I go

Tag: neoliberalism

A basic history of the US war on welfare

LBJ set up a lot of welfare, but already by Nixon the government and people had turned on it, blaming it for the massive deficits obviously caused by the war effort.


Austerity in the UK and the waning of the left

‘As political theorist Antonio Gramsci pointed out, it is the “traditional ruling class” rather than its opponents who are best positioned to take command of a crisis.

‘the right and even much of the centre-left argue that austerity is simple economic common sense: addressing the deficit boosts the confidence of consumers and investors and enables new cycles of growth. If this were the case, the project would have to be deemed a failure. The evidence of present and past austerity programmes, and even the view of the Office for Budget Responsibility, is that they retard growth rather than stimulate it. They certainly don’t make the repayment of debts easier.

‘let’s take an example of an early austerity programme. In New York in the mid-1970s the city was running an increasingly unmanageable deficit, with the servicing of debt consuming about a fifth of its operating funds. Underlying the crisis was the evisceration of the city’s manufacturing base in the postwar era, which drove up unemployment and thus welfare rolls. One of the main factors sustaining employment had been the growth of the city administration. The growing power of public sector employees allowed them to win better pay and conditions, and gave them a degree of political clout. The costs of the state’s expansion were partly supported by federal funding, but taxes on local business and property owners made up the rest. The postwar agenda of liberal reform, especially that associated with Lydon Johnson’s Great Society programme, was ideologically legitimised by the idea of America as a wealthy, growing economy in which some of the benefits should be extended to the poorest.

‘However, as the global economy tanked in the early 70s and the Bretton Woods systemcollapsed, New York began to accumulate more and more debt. Ironically, the same banks that would later complain of fiscal irresponsibility profited greatly from the debt. As it mounted they demanded that the financial system should have first line on the city’s funds in the event of bankruptcy. From 1975 to 1978, therefore, New York City was subject to an austerity regime. This involved not simply a set of policies, but an exceptional form of the state – a set of special institutions with extraordinary, wide-ranging legal powers, the most important of which was the Emergency Financial Control Board. Dominated by bankers, corporate interests and the city executive, these institutions took command of the crisis by cutting services to low-income New Yorkers, attacking working conditions for the city’s unionised workers, and offering incentives to its wealthy financial class.

‘The elite argument for austerity was simple. The city’s crisis was primarily one of overspending, driven by too many services for the poor, too many bureaucrats to run them, a union-driven cost of labour increases, and a corrupt and inefficient city management driving the productive layers out of the city with burdensome taxes. The solution was to reduce the burden of the unproductive on the productive, and let wealth creators keep more of their wealth. This argument was supported by the majority of the media. The union-led opposition highlighted the tremendous wealth enjoyed by the bankers and corporations who were demanding austerity, but the business interests were canny enough to recede into the background and refuse to publicly comment on controversies in which they were deeply involved.

‘The unions were no match for the organised business offensive. The major corporations had their control of markets and operating capital as a considerable leverage over the city. The political clout of the unions, meanwhile, was based around bargaining mechanisms designed to swerve the very kind of confrontation they could not avoid. They accepted the dominant narrative about the crisis and its causes, accepted the need for some cutbacks, and then sought to narrowly protect their conditions within that framework.

‘The austerity solutions worked in the precise sense intended: by drastically reconfiguring the city’s class relations, reorganising the state to marginalise popular constituencies, and winning the ideological battle for placing more authority and wealth in the hands of entrepreneurs, they started to restore profitability to capital. Soon, the austerity project would be launched nationwide, beginning with the Volcker shock in which loan rates were raised to a crippling 21%, thus driving down incomes, suppressing growth and breaking the spine of organised labour, with similar overall effects.

‘The austerity project thus took hold of a situation in flux, a crisis, and imposed a solution in the interests of a specific class. It did so along three axes: class, state and ideology. First, it reorganised the balance of class power in such a way as to transfer wealth away from popular consumption and towards business investment. Second, it reorganised the state apparatus in a profoundly undemocratic way, linked to a wider tilt in the balance of power toward authoritarianism, marginalising and excluding popular constituencies. And third, it reorganised the ideological terrain: while the wider crisis was caused by generic dysfunctions inherent in capitalism – the decline of manufacturing, for instance, due in part to capital’s drive to reduce costs and rationalise production – the narrow focus on the fiscal crisis allowed elites to highlight overspending as the key problem. On the basis that theirs was the only solution that could restore growth and general prosperity, they could link their particular class interests to the interests of the whole city. And in the process they began to displace the postwar liberal consensus in favour of a neoliberal orthodoxy that placed the emphasis on markets and competition.

‘The austerity projects we face today are different in one important respect: they come after almost 40 years of neoliberal offensive. This is something which large sections of the left have totally misunderstood; a significant reason for its disarray. For most of the past three decades, neoliberalism has been chiefly analysed as a kind of free market fundamentalism, which is but a glimpsing scratch of the surface.

‘If neoliberalism was chiefly about free market fundamentalism, then it would be possible to understand the salience of the state as a post-credit crunch economic factor as a repudiation of that orthodoxy. Indeed, many on the left did prematurely pronounce neoliberalism deceased.

‘However, the dominant strains of neoliberalism have always favoured an interventionist state. It is not the volume of state activity that is the concern of neoliberals, but its character. Neoliberalism is unlike classical liberalism in that it does not assume a human propensity to truck, barter and trade as the basis for political organisation; neoliberals learned through the bitter experience of the 20th century that human behaviour could be as collective as it could be competitive. Thus, a strong state was required not merely to protect property, but to discipline its subjects and educate them in the new neoliberal dispensations.

‘Ideologically, there has been a long-term generational shift against the welfare state, and in favour of competitive behaviour. Indeed, competition has increasingly been built into the public sector (“internal markets”), and disciplinary techniques built into social security (in the form of “workfare”, for example.) While older generations experienced the welfare state as part of a collective unity, younger generations have experienced it as part of a zero-sum competition for resources. This is the ground on which support for some of the most punitive aspects of austerity, such as welfare cuts, has been constructed; this is the result of a conscious political strategy. The traditional ruling class is not merely good at exploiting opportunities; it thinks long-term in a way the left must learn to do.’


Neoliberalism and the lie of small government

‘Loïc Wacquant, for instance, has described the “centaur state” of neoliberalism, in which a humanist liberalism reigns for the upper classes, while the lower classes face the punitive state apparatus in all its bestiality. But Mirowski shows us that the world of the rich under neoliberalism in no way corresponds to the laissez-faire of classical liberalism. The state does not so much leave the rich alone as actively work to reshape the world in their interests, helping to create markets for the derivatives and securities that made (and then destroyed) so many of the fortunes of the recent past. The neoliberal state is an eminently interventionist one, and those mistaking it for the austere nightwatchman of libertarian utopianism have little hope of combating it.’


Intro to illegitimate public debt (as neoliberal ploy)

‘The crucial point is to demonstrate, as the French audit did, that debt is a political construction, that it doesn’t just happen to societies when they supposedly live above their means. This is what justifies calling it illegitimate, and may lead to cancellation procedures.

‘while the living conditions of the majority are worsening, a small group of individuals and financial institutions has consistently taken advantage of high levels of public indebtedness…the political nature of debt’


A bit on the World Bank and neoliberalism

‘On a macro scale, international organizations such as the World Bank and the IMF have historically deferred to a similar list of policy prescriptions known as the Washington Consensus, a one-size-fits-all policy package of fiscal austerity, privatization of public institutions/industries, and market liberalization.

‘During his tenure at the World Bank in the late 1990s, Joseph Stiglitz saw the macro side firsthand; in his 2002 book, Globalization and Its Discontents, he observed that the institutions dictating measures to developing states “tended to ignore the problems” underlying their condition and — in every case where the state was not permitted to implement reforms itself — actually exacerbated that condition. In East Asia especially, states went from having practical economic management that encouraged saving, exports, and safety nets for the poor to a regional crisis where “the IMF itself had become a part of the countries’ problem rather than part of the solution.” Elsewhere around the globe, “[t]he transition from communism to a market economy [had] been so badly managed that, with the exception of China, Vietnam, and a few Eastern European countries, poverty has soared as incomes have plummeted.”

‘At its core, the Washington Consensus approach, as the policy manifestation of market fundamentalism, is about disruption. Its self-selection of jargon like “shock therapy” makes that clear. It makes available new markets, labor, and raw materials for the benefit of the world’s largest corporations, without assuming any responsibility when things go awry. In The White Man’s Burden, another well-known foreign aid and development treatise, former World Bank economist William Easterly’s own appellation for the type of change agent now engaging in disruption is “Planner,” one who “thinks he already knows the answers; he thinks of poverty as a technical engineering problem that his answers will solve.” Planners, according to Easterly, are “why dying poor children don’t get twelve-cent medicines, while healthy rich children do get Harry Potter.”’

‘Like a virus, neoliberalism has rapidly infected many aspects of civil society. It spreads by capitalizing on spheres of inequality, by redirecting capital flows from one side to the other with no regulation or regard for the consequences. Thus, instead of a public health care option subsidized by public funds for the public good, millions of Americans are being shunted into privatized insurance plans in one of the grandest moves to privatize civil society in a generation; public funds for public schools are being redirected to private charter schools and corporate curriculum- and test-makers, with many thanks to the great change agent of our day: Barack Obama.

‘Such acts of privatization have led to an unprecedented amassing of wealth by select individuals, turning some billionaires and corporate leaders into modern-day Phoebuses with the will, means, and lack of accountability to insinuate themselves into whatever circle of society they like, just because they can. As Oppenheimer notes, a primary cause behind public education’s ongoing tryst with privatization is chronic underfunding — especially in times of austerity such as now — that leaves school administrators beleaguered and open to exploring easy solutions pitched their way. The same can be argued for development efforts that backfire and reinforce the status quo of gross inequality abroad — the needy are left even needier and dependent on the wealthy.’


Case study in Thaterism, mining, and supposed trickle-down economics

‘Britain had its share of North Sea oil, described by one PM as “God’s gift” to the economy. We pumped hundreds of billions out of the water off the coast of Scotland. Only unlike the Norwegians, we’ve got almost nothing to show for it. Our oil cash was magicked into tax cuts for the well-off

‘All this was kick-started by Margaret Thatcher, the woman who David Cameron claims saved the country. The party she led still touts itself as the bunch you can trust with the nation’s money. But that isn’t the evidence from the North Sea. That debacle shows the Conservatives as being as profligate as sailors on shore leave

‘According to the chief economist at PricewaterhouseCoopers, John Hawksworth, had all this money been set aside and invested in ultra-safe assets it would have been worth £450bn by 2008. He admits that is a very conservative estimate

‘Hawksworth titled his 2008 paper on the subject: “Dude, where’s my oil money?” We don’t have any new hospitals or roads to show for it: public sector net investment plunged from 2.5% of GDP at the start of the Thatcher era to just 0.4% of GDP by 2000. It is sometimes said that the money was ploughed into benefits for the miners and all the other workers Thatcherism chucked on the scrapheap, but that’s not what the figures show. Public sector current spending hovered around 40% of GDP from Thatcher through to the start of the banking crisis.

‘So where did our billions go? Hawksworth writes: “The logical answer is that the oil money enabled non-oil taxes to be kept lower.” In other words: tax cuts. When the North Sea was providing maximum income, Thatcher’s chancellor, Nigel Lawson slashed income and other direct taxes, especially for the rich. The top rate of tax came down from 60p in the pound to just 40p by 1988. He also reduced the basic rate of income tax; but the poor wouldn’t have seen much of those pounds in their pockets, as, thanks to the Tories, they were paying more VAT.

‘What did Thatcher’s grateful children do with their tax cuts? “They used the higher disposable income to bid up house prices,” suggests Hawskworth. For a few years, the UK enjoyed a once-in-a-lifetime windfall; and it was pocketed by the rich. The revolution begun by Thatcher and Reagan is often seen as being about competition and extending markets. But that’s to focus on the process and overlook the motivation or the result. As the historian of neoliberalism Philip Mirowski argues, what the past 30 years have been about is using the powers of the state to divert more resources to the wealthy. You see that with privatisation: the handing over of our assets at knock-down prices to corporations and supposed “investors”, who then skim off the profits. The transformation of the North Sea billions into tax cuts for the wealthy is the same process but at its most squalid.’


The self under neoliberalism

It can be argued that ‘the neoliberal project is less about the rich imposing an agenda from the top down and more a matter of forming subjects from the bottom up.’

‘the neo in neoliberalism is “the remaking and redeployment of the state as the core agency that actively fabricates the subjectivities, social relations and collective representations suited to making the fiction of markets real and consequential…In neoliberal society markets don’t serve the pre-existing needs of subjects; subjects are fabricated to serve the market. The subject’s purpose in life becomes synonymous with the facilitation of economic growth. Entrepreneurship becomes the ethical model of how to live. For Mirowski, neoliberalism constructs a subject who “has to somehow manage to be simultaneously subject, object, and spectator … the neoliberal self dissolves the distinction between producer and consumer.” The self thus becomes more a malleable set of economic relationships than a coherent and continuous whole. This coincides with policymakers’ calls for increased “flexibility” on the part of individual workers when it comes to labor’s vulnerabilities to the business cycle.

‘The individual is too fragmented to sustain broader forms of belonging, If this is too theory heavy, consider Jennifer Silva’s recent Coming Up Short (2013), which interviews numerous working-class young people in the wake of the economic crisis. Silva finds that they define adulthood in the rejection of social groups and institutions and an embrace of an individualized, therapeutic, self, matching the theory remarkably welllet alone class solidarity, and this alienation from collective identity is matched by an ontological, even religious understanding of “risk” perceived as a given, one that isn’t to be mitigated but instead mastered…[an] entrepreneurial view of risk as spiritual calling…

‘the neoliberal self ends up resembling the corporate firm as defined by Ronald Coase: an entity articulated by a loose set of contracts, with the primary purpose of minimizing its “transaction costs.” Like the Coasean firm, the neoliberal subject makes a fetish of efficiency and aspires to be able to reorient itself at a moment’s notice, to expedite the flow of goods, though it has no ontological cohesion outside an imperative to engage in the swirling needs of the marketplace. This is the self under neoliberalism, an executive function carved out by the entrepreneurial embrace of economic risk.’


‘At the same time as neoliberal commonsense trickles down from above, Mirowski argues that it also wells up from below, reinforced by our daily patterns of life. Social networking sites like Facebook encourage people to view themselves as perpetual cultural entrepreneurs, striving to offer a newer and better version of themselves to the world. Sites like LinkedIn prod their users to present themselves as a fungible basket of skills, adjustable to the needs of any employer, without any essential characteristics beyond a requisite subservience. Classical liberalism always assumes the coherent individual self as its basic unit. Neoliberalism, by contrast, sees people as little more than variable bundles of human capital, with no permanent interests or even attributes that cannot be remade through the market. For Mirowski, the proliferation of these forms of everyday neoliberalism constitute a “major reason the neoliberals have emerged from the crisis triumphant.”