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Acknowledgements
We would like to thank the Economic and Social Research Council (ESRC) for funding the seminar series titled ‘Neoliberalism, antineoliberalism and de-ideologisation’ (RES-451-25-4258) from which these chapters are drawn. We would also like to thank our excolleague and co-organizer of the seminar series Katherine Trebeck for her help and advice during the editing process. Further thanks to all the contributors for their forbearance, including to those who withdrew, and to the editors at Zed Books, Ellen Hallsworth and Ken Barlow.
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About the Contributors Anthony Bebbington is professor in the School of Environment and Development, University of Manchester, an ESRC professorial fellow, and research associate of the Centro Peruano de Estudios Sociales. Paul Chatterton is a writer, researcher and scholar-activist based in the School of Geography at the University of Leeds. Ben Fine is professor of economics at the School of Oriental and African Studies, University of London. Shaun French is lecturer in economic geography at the University of Nottingham. Leonith Hinojosa is researcher and fellow lecturer at the School of Environment and Development in the University of Manchester, faculty associate in the Brooks World Poverty Institute and research fellow in the Impact Assessment Research Centre. Bob Jessop is distinguished professor of sociology and co-director of the Cultural Political Research Centre at Lancaster University. Larry Lohmann is an activist based at The Corner House, a UK nongovernmental organization. Julie MacLeavy is a lecturer in human geography in the School of Geographical Sciences at the University of Bristol. David Miller is professor of sociology in the Department of Geography and Sociology at the University of Strathclyde. Paul Routledge is a reader in human geography at the Department of Geographical and Earth Sciences at the University of Glasgow. Jean Shaoul is professor of public accountability at Manchester Business School. Adam Swain is an associate professor of economic geography at the School of Geography, University of Nottingham. Adam Tickell is vice principal at Royal Holloway, University of London. David Tyfield is a lecturer at the Centre for Mobilities Research (CeMoRe), Sociology Department, Lancaster University. Elisa van Waeyenberge is a lecturer in the Economics Department at the School of Oriental and African Studies, University of London.
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INTRODUCTION • A World Turned Right Way Up KEAN BIRCH AND VLAD MYKHNENKO
Writing about neoliberalism in 2010 is a challenge. On the one hand, the credit crunch and banking crisis have exposed the fault lines in the neoliberal economic order that has been dominant for the last three decades: Margaret Thatcher’s confident assertion that ‘there is no alternative’ springs to mind here. On the other hand, the different impacts and implications of the recent economic crises illustrate the diversity in the implementation and embeddedness of neoliberalism in many countries, thereby suggesting that neoliberalism is not (and never was) a single hegemonic system in the first place. Such a challenge, however, represents an opportunity to further our understanding of neoliberal economic order(s) and how this order grew to such prominence and held sway over national and international policy for so long. According to David Harvey (2006), neoliberalism has failed even to come close to, let alone achieve, the growth rates of the golden age of Keynesianism (1960s), which raises a serious question about how it has maintained legitimacy in the face of its own failed raison d’être – to ensure wealth for all through market efficiency. Thus it is pertinent to consider the core contradiction underpinning the seeming collapse of neoliberalism: the extent to which the current crisis is tied to the very foundations on which neoliberalism was built, namely the expansion of finance capitalism and the associated housing and stock market booms of the 1990s and 2000s. There is a terrible irony in the fact that neoliberal policies of privatization, marketization and liberalization over the last thirty years have produced proceeds with a monetary value (€1.3 trillion) that is only twice the recent bank bail-outs by the US and European governments (see Hall 2008: 6), a fact that can be lost in the soulsearching of mainstream commentators. Furthermore, government
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guarantees for bank debts – at €6 trillion – dwarf the proceeds of privatization to such an extent that, should there be widespread defaults, our governments would have effectively not only given away the ‘family silver’, but paid someone handsomely to take it off their hands. Who then benefited from this economic order? We can point fingers at the bankers, as government have found it politically expedient to do, but we have also to acknowledge that the financialization of the global economy has gone hand in hand with property booms that have effectively enrolled citizens in the expansion of neoliberalism – a windfall largely limited to citizens in the Global North, it must be stressed. For example, Matthew Watson (2008) argues that as individuals have been incorporated into the British housing market, which was (and still is) dependent upon ever-increasing house prices, they have been remade politically as ‘monetary conservatives’, more concerned with inflation than welfare spending. More generally, Stuart Hall (2003: 10) argues that ‘a new neoliberal common-sense’ has ‘colonized’ civil society. What is evident in this mess is that the conceit at the heart of neoliberal thought has been exposed. The very idea that markets are self-organizing, efficient and liberating is no longer credible, but illustrates the extent to which neoliberalism – as shorthand for market-like rule – is an economic, political and ideological project pursued by certain groups (such as governments and corporations) to construct a reality that is perceived to be founded in the inherent properties of economic markets. This circular reasoning has replaced any sense of what we ought to do to achieve democratic goals and ambitions with a logic built on the perception of the inherently good and essential qualities of markets. Thus morality and ethics have been turned right way up in response to the ‘natural law’ of economic exchange in which the rich can buy more freedom than the poor. This book is an attempt to understand how this has happened, how it has come undone, and what alternatives we can turn to now.
The Ideological and Historical Origins of Neoliberalism The origins of neoliberalism as an ideology can be traced back to the late 1930s when a group of liberal intellectuals met in Paris to discuss the threat posed not only by totalitarianism, such as National Socialism in Germany, but also by collectivist planning of the 2
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economy as in the British Keynesian state and the New Deal in the USA. This meeting, held in 1938 and organized by Louis Rougier, led to the coining of the term ‘neoliberalism’ to update nineteenthcentury liberalism by introducing the idea that governments play an important role as the guardian of ‘free markets’ by securing the rule of law (Turner 2007; Peck 2008). In part, this ‘new’ liberalism was the consequence of the incorporation of marginalist economic thought (see Fine, this volume) with critiques of equilibrium theory, both of which had characterized the emerging Austrian School of economics. As such, economics is directly implicated in the two main foundational tenets of neoliberalism: first, in the view of von Mises that ‘egoism is the basic law of society’ (quoted in Peet 2007: 73); and, second, in Hayek’s view that free markets lead to ‘spontaneous order’ that solves the problem of economic calculation. In many ways, these two individuals – Ludwig von Mises (1881–1973) and Friedrich von Hayek (1899–1992) – represent the founding fathers of neoliberalism, providing the theoretical backbone for the political and ideological claims made by others. In this sense, neoliberalism was very much an ideological project, one that attempted to counter what neoliberal thinkers saw as the inherent totalitarianism of collectivist and state planning of the economy by drawing on economic theories which, in turn, posited the impossibility of economic planning in the first place. The Second World War and the emigration of Austrian economists helped to spread neoliberal thinking around the world as figures like von Mises, Fritz Machlup and Michael Polanyi fled Nazism. It was also during this time that Hayek wrote The Road to Serfdom, published in 1944, in which he outlined the main case against central planning and defended capitalism against the claims that it had led to fascism: in essence, the book upheld the idea that market freedom came before democratic freedom because ‘only capitalism makes democracy possible’ (quoted in Turner 2007: 73). Following the war, neoliberalism was more formally established in intellectual networks such as the Mont Pelerin Society (MPS), founded in 1947. Bringing together several diverse strands of neoliberal thought, including Austrian émigrés, British intellectuals from the London School of Economics (LSE) and University of Manchester, Americans from the Chicago School – including Milton Friedman – and Germans from the Freiburg School, the MPS built on the work of the earlier meeting in Paris (Peck 2008). 3
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Two of the MPS’s aims are relevant for the discussions in this book: first, that the role of the state needs to be redefined; second, that an international order needs to be created to ensure international economic agreement (Plehwe and Walpen 2006: 33–4). Implicit in the establishment of the MPS was the view that ideas matter, playing an important role in determining the outcome of events as they circulate through government, universities, civil society and the media. Consequently, neoliberal thinkers and their business sponsors – such as Sir Antony Fraser – helped to found numerous organizations to promote neoliberalism, particularly think tanks and business forums (see Miller; Birch and Tickell, this volume). Examples of the establishment of such neoliberal think tanks include the Institute of Economic Affairs (IEA) in the UK (1955) and the Heritage Foundation in the USA (1973) – see the work of Carroll and Carson (2006) for a more thorough analysis. These ‘idea centres’ represent the emergence of a neoliberal political project to counter Keynesian policy and government intervention in markets, incorporating a number of often seemingly diverse theories and ideas from across economics and political science. Mark Blyth (2002) demonstrates particularly clearly that the combination of Milton Friedman’s monetarism with theories of rational expectations, supply-side economics and public choice contributed to the breakdown of the post-war consensus through the promotion of a neoliberal agenda and economic policies. The motivation lying behind this attack on Keynesianism was primarily a concern with taxation and inflation, brought to widespread attention during the stagflation crisis of the 1970s when both unemployment and inflation rose dramatically. Duménil and Lévy (2004: 23–4) attribute this ‘structural crisis’ to the falling rate of profit; that is, the declining return on capital invested in machines and technology. Consequently the only way to increase profit was by controlling labour costs, which means that neoliberalism can be seen as a political project intent on restoring class power (Harvey 2005). The neoliberal political project was also enabled by the collapse of the Bretton Woods system in 1971 when the USA ended the convertibility of dollars to gold, ushering in a new era of free-floating currencies and international capital flows (Hutton 1995). The 1970s therefore provided the political opportunity to push for a new economic project founded on neoliberal assumptions about economic efficiency, reduced state intervention and free markets. 4
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This economic project found its advocates in a number of new right-wing politicians around the world exemplified by Margaret Thatcher (1979–90) in the UK and Ronald Reagan (1981–9) in the USA, whose policies became known respectively as Thatcherism and Reaganomics. Other countries have followed suit by implementing neoliberal policies (see Swain, Mykhnenko and French, this volume), whilst some started even earlier than the UK and USA. For example, the ‘Chicago boys’ – Chilean economists trained at the University of Chicago where Milton Friedman worked – helped the dictator Augusto Pinochet to privatize and deregulate the economy after the coup that ended Salvador Allende’s government and life in September 1973 (Harvey 2005). Although the spread of neoliberal economic policies around the world has been uneven, in that each country has witnessed varying levels of ideological and political adherence to different economic policies (see Jessop, this volume), what has characterized them all has been an emphasis on five core principles (Hall 2003; Hay 2004; Mudge 2008): privatization of staterun assets (firms, council housing et cetera); liberalization of trade in goods and capital investment; monetarist focus on inflation control and supply-side dynamics; deregulation of labour and product markets to reduce ‘impediments’ to business; and, the marketization of society through public–private partnerships and other forms of commodification (see Tyfield; Lohmann; Shaoul, this volume). These principles are all meant to enable individual freedom through recourse to a ‘free’ market that is efficient in allocating resources across society and the world because only the market can coordinate all the information signals from numerous agents (such as sellers and buyers). As will be shown in several chapters in this book, such assumptions are rightly castigated, having led to severe hardship for many people in society in many parts of the world.
Waves (and Waves) of Neoliberalism It is useful to distinguish – as we have done above – between the ideological, political and economic projects of ‘neoliberalism’ in order to understand how it has come to be so dominant a politicaleconomic discourse. To start with, neoliberal economic theories represent an ideological project based on abstract concepts (e.g. rational expectations, utility maximization, free markets, et cetera) that assumes market efficiency and therefore underpins a re-conceptualization of 5
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the state’s role in the economy: that is, enforcing the ‘rule of law’ as opposed to owning and running businesses or welfare services (see MacLeavy, this volume). As highlighted above, this form of discourse has spread through global networks of neoliberal thinkers and (usually corporate) supporters that are positioned in specific sites around the globe; for example, London (Miller, this volume) and Washington (Birch and Tickell, this volume). The subsequent incorporation of neoliberal ideas into specific government policy more accurately reflects a political project allied to specific state-led strategies that promote neoliberalism through different processes characterized by privatization, liberalization, marketization, deregulation and monetarism. These strategies, however, differ in their political motivations and priorities, depending on where they are applied (Birch and Mykhnenko 2009). Thus, Brenner et al. (2010) argue that these stateled projects are also context-specific in that the implementation of neoliberalism is always embedded within and reworks existing ‘institutional landscapes’ through processes of neoliberalization; that is, neoliberalization does not represent a single homogenizing process, but leads to variations across different places, as is evident in many of the later chapters. It is therefore possible to identify different forms of neoliberalism alongside the differing impacts of neoliberalization not only in concrete historical and social, political and economic terms, but also geographically, since neoliberalism operates in multiple scales (Larner 2003). For example, neoliberalism is evident in local projects, national-state policies, and supranational institutions like the World Trade Organization (WTO) and the World Bank (see van Waeyenberge, this volume). Although there are differences in the form that neoliberalism takes and in the responses to it (see Chatterton; Routledge; Shaoul, this volume) – especially on a country by country basis (see Hinojosa and Bebbington, this volume) – this issue of variations in neoliberalism is an empirical question that needs to be teased out through careful research. Conceptually, however, it is possible to think about neoliberalism as a hegemonic political-economic project, as many scholars have done. In particular, Adam Tickell and Jamie Peck (2003: 166) argue that neoliberalism is a process best described as ‘the mobilization of state power in the contradictory extension and reproduction of market (-like) rule’, which can be split usefully into ‘roll-back’ and ‘roll-out’ phases. 6
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What this means is that it is too simplistic to assume that neoliberalism leads to the ‘hollowing out’ of the state because neoliberalism involves the shifting of state intervention to new forms of governance underpinned by a ‘logic of competitiveness’, including: ‘active’ and flexible labour policies; new commodification regimes such as intellectual property rights and carbon trading (see Tyfield; Lohmann this volume); fiscal austerity; and public spending on supply-side inputs (e.g. education, infrastructure, et cetera). What is evident, according to Peck and Tickell (2002), is a shift in emphasis over time. For example, Thatcherism and Reaganomics represent a ‘rolling-back’ of regulation, state ownership and welfare services during the 1980s, driven, in large part, by a monetarist preoccupation with inflation that encouraged different forms of privatization (Prasad 2006). This phase was motivated by ‘external’ pressures – that is, pressures not induced by neoliberalism itself – including the ‘structural crisis’ of the 1970s and the extension of neoliberalism to the Global South through the ‘Washington Consensus’ (Williamson 1990): this ‘consensus’ promoted ‘reforms’ in Southern countries in pursuit of trade income to offset debt obligations. A subsequent shift towards ‘roll-out’ neoliberalism, especially through marketization, is then evident in the 1990s as Northern countries have sought to contain the ‘internal’ contradictions inherent in the neoliberal project such as mass unemployment (Tickell and Peck 2003; see Jessop, this volume). In this latter phase, national political economies are recast as problematic in relation to the emerging global economy, leading to a rescaling of governance as sub-national partnerships are encouraged to deliver on nationally or, increasingly, supranationally set priorities and goals oriented around competitiveness (Peck 2001; van Apeldoorn 2008). What we end up with are ‘race-to-the-bottom’ or ‘beggar-thyneighbour’ strategies in which responsibility for the delivery of political priorities is shifted further and further downwards until what results is a new model of citizenship in which societal rights and responsibilities transform personal ‘deficiencies’ (such as unemployment) into ‘failures’ of the individual rather than society (see MacLeavy 2008). The encouragement of competition between individuals (and localities) for government or private sector resources provides one avenue through which the market state, already enrolled as a facilitator in the ‘re-regulation’ and extension of markets, fosters new individualistic subjects for market rule (Hall 2003; Cerny 7
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2008). Individuals are constructed as rational subjects – encouraged to compete in flexible labour markets that depend on entrepreneurship, life-long learning and transferable skills (that is, employability) – by shifting responsibility for social justice, wellbeing and health outcomes from the state to the individual (see MacLeavy, this volume). One particularly invidious example of how this is enacted is in the expansion of consumer credit – and hence debt – in Anglo-American countries, encouraged in large part by stagnation in real wages resulting from flexible labour markets and unemployment (Boyer 2000; Montgomerie 2007). Easy credit and increasing levels of debt have left countless households in ruin as a consequence of the current crisis. The responses of people fighting this individualization and marketization of responsibility are diverse, and the dramatic impacts that impoverishment and disempowerment have on individual health and achievement are in need of further study. In this book, several contributors address these issues directly by looking at the impact of alternative politics (see Shaoul, this volume) and alternative personal and community strategies (see Chatterton; Routledge, this volume) on people, countries and the world.
Varieties of Neoliberalization: Poor Results and Divergent Trajectories In the three decades since the election of the first ideologically committed neoliberal government in May 1979, neoliberalism has gone truly global, reaching every corner of the world and producing numerous variants (see Jessop, this volume). Indeed, the end of the Cold War and the collapse of Soviet power in 1989–91 even led Francis Fukuyama (1989) to declare that history had ended with an unqualified victory for free-enterprise capitalism and the total exhaustion of viable systemic alternatives to Western liberalism. Before the advent of the current financial-economic crisis in August 2007, the political ascendance and geographical spread of neoliberalism had been greatly aided by the maintenance of dogmatic and rhetorical purity. Whilst persistently advocating maximum scope for the free play of market forces in economy and society, neoliberal ideologues were able to specify their own recommendations (termed ‘policy reforms’) aimed at achieving a free market revolution (see Swain et al., this volume). 8
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In 1989, John Williamson (1993: 1334) designed what he described as a generally applicable ‘universal convergence programme’ comprising ‘the common core of wisdom embraced by all serious economists’. The proposed ten policy reforms included an imposition of a tight fiscal discipline (with virtually no public budget deficit allowed); an end to subsidies and re-direction of public expenditure on basic health, education and infrastructure; tax cuts; financial liberalization; free-floating exchange rates; trade liberalization with a unified low tariff; openness to foreign direct investment (FDI); privatization; deregulation; and secure private property rights. Williamson dubbed his list of reforms a Washington Consensus because ‘both the political Washington of Congress and senior members of the administration and the technocratic Washington of the international financial institutions, the economic agencies of the US government, the Federal Reserve Board, and the think tanks’ had reached by then an explicit agreement that ‘prudent macroeconomic policies, outward orientation, and free-market capitalism’ had to be urged on the rest of the world (Williamson 1990, 1993). The Washington Consensus heralded a new order when, according to a critic: Life used to be relatively simple for the peddlers of policy advice in the tropics. Observing the endless list of policy follies to which poor nations had succumbed, any well-trained and well-intentioned economist could feel justified in uttering the obvious truths of the profession: get your macro balances in order, take the state out of business, give markets free rein. ‘Stabilize, privatize, and liberalize’ became the mantra of a generation of technocrats who cut their teeth in the developing world and of the political leaders they counselled. (Rodrik 2006: 973)
The Washington Consensus had its operational memory rooted in Chile’s neoliberal reforms under General Pinochet in the 1970s. By the 1980s, the Washington Consensus reforms spread across Latin America in a series of ‘structural adjustment’ packages aimed at ensuring that Latin America’s massive foreign debt to the West would be fully repaid; some of the consequences of and responses to these reforms are addressed in the chapter by Hinojosa and Bebbington. Assuming that all problems with Latin American, Soviet and indeed non-Anglo-American economies stem from ‘pervasive’ government involvement and control over economic activity, prices and international trade, and from ‘extensive’ public ownership of productive assets, the fundamental solution prescribed by neoliberal 9
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policy advisers was that of macroeconomic stabilization and structural adjustment. With the collapse of the Berlin Wall, the stabilization programme first applied by Harvard economist Jeffrey Sachs in Bolivia in 1985 was redesigned and expanded by his team in Poland and Russia. This ‘shock therapy’ aimed at the wholesale transition of centrally planned societies towards market-based capitalism. Back in 1990, Milton Friedman (1990: 7) personally encouraged his followers in shock therapy by assuring them that all ‘the talk about “the enormous costs of moving to a free-market economy” is much too gloomy. There is no reason why total output cannot start expanding rapidly almost immediately after the totalitarian restrictions on people’s activities are removed.’ Whilst Latin American, East European and sub-Saharan countries were fast liberalizing their ‘emerging’ and ‘transition’ economies, they had also been forced to undergo a radical process of slimming down, shrinking and re-inventing the state (see Jessop, this volume). The World Bank’s 1996 policy manifesto From Plan to Market drew the contours of the neoliberal blueprint being peddled both in the tropics and near the Polar circle; the latter manifestations of World Bank policy are described in the chapter by van Waeyenberge. The Washington Consensus promised that the combination of stabilization, liberalization and privatization would bring ‘renewed growth’, and along with it prosperity, to the most remote corners of the globe by ‘the unleashing of markets – the basic enabling reform from which all the potential benefits of transition [to free-market capitalism] follow’ (World Bank 1996: 7). However, contrary to popular expectations, and despite the most far-reaching programme of deregulation and privatization in the world’s history, the 1990s and 2000s turned out to be lost decades for most developing and transition economies. As the authors of the Washington Consensus have had to confess, the Latin American decades have been punctuated by several crises (including the 1994 Mexican peso crisis and the 1999–2002 Argentine economic crisis), achieved disappointingly slow growth, and seen no improvement in the region’s highly unequal income distribution (Kuczynski and Williamson 2003). In the post-Soviet world, the ensuing ‘transformational depression’ lasted for six years on average across central and eastern Europe and the former Soviet Union, ranging from two years in Poland to ten years in Moldova and Ukraine. In terms of its scale, the deepest slump in output was suffered by Bosnia and 10
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Herzegovina (– 88 per cent), Georgia (– 75 per cent), Armenia (– 69 per cent), and Moldova (– 68 per cent). Only four countries (the Czech Republic, Uzbekistan, Poland and Slovenia) managed milder recessions, losing 15–20 per cent of GDP, whereas the scale of depression in the remaining economies in the region ranged between 30 and 60 per cent. The collapse of production also meant massive job losses and the deprivation this brings. Large proportions of the redundant labour force had to withdraw from economic activity altogether, either migrating abroad or relying on informal survival strategies at home. Unemployment levels reached double digits in most transition economies, peaking around 20 per cent in relatively successful Poland and Slovakia, and rising above 40 per cent in the areas affected by civil strife and political instability. All the evidence based upon the broader human development indicators, including life expectancy, infant mortality, demographic growth, income distribution, headcount poverty and educational attainment, suggest a very significant social cost to transition across the region (Mykhnenko 2009). In striking contrast with the radical purity of neoliberal ideology, the results and consequences of neoliberalization as a process have been rather messy and admittedly ‘unexpected’ for the main apologists of reform (World Bank 2005: xi). Moreover, the economic and spatial impact of neoliberalization was very uneven. The transformation of Western capitalism in the Global North, as well as various transitions to capitalism in the East and South, have generated a great divergence in outcomes between the different geographical blocs of old and newly emerging capitalist states, between different individual countries, and between urban and rural areas within those countries. In our previous work we illustrate how neoliberalism has produced variegated, hybrid and geographically specific political economies in which universal economic tenets and practices were married to national and regional concerns (Birch and Mykhnenko 2009). We show how neoliberalism – as a state-led project – produced national varieties of neoliberalism in which deregulation, privatization and trade liberalization were pursued for different political reasons, in different ways and to different extents (see also Jessop, this volume). In turn, the pathway that was undertaken by the Anglo-American liberal market-based states led to the abandonment of old industries and the creation of a ‘new economy’, based upon finance and business services, and greatly 11
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facilitated by information and communication technologies (see also Boyer 2000, Hancké et al. 2007; and Tyfield; Shaoul, this volume). Financialization – a process of financial deepening of the increasingly global capitalist economy – was set to become both the culmination and the beginning of the end for the neoliberal economic order.
Financialization and the New Neoliberal Order As the formerly successful, coordinated market economies of Germany and Japan were undergoing an acute crisis of accumulation, spending the 1990s in a series of attempts at upgrading the industrial base, their Anglo-American liberal market counterparts (for the distinction, see Hall and Soskice 2001; Amable 2003) had pursued finance as a new bedrock of competitive profit making. Yet this new ‘structured’ finance was different from the centuries-old practice of manipulating and managing money, as it involved the creation of complex debt instruments through ‘securitization’ (see Shaoul, this volume). Securitization was the key vehicle for the explosive expansion of the financial intermediation since the breakdown of the Bretton Woods system. It is described as the process of turning non-marketable, non-tradable financial assets into tradable securities: for instance, claims on debt (such as government bonds), claims on ownership (such as ordinary shares), or ‘derivatives’ – a wide rage of financial products whose value is derived from the actual or expected price of some underlying asset, which may be a commodity, a security, a currency, or indeed any economic variable. Used as a hedge to reduce risk or for speculation, derivatives can be exchange-traded as well as ‘over-the-counter’ (OTC) instruments, including futures contracts, forwards, options and swaps. Whilst the main market-traded derivatives are futures and options, the OTC trades are off-balance-sheet, specific and customer-tailored instruments (such as asset-backed securities, collateralized debt obligations or credit default swaps), involving seemingly esoteric practices such as the pooling of assets, the tranching of liabilities and the creation of ‘special purpose vehicles’ ostensibly to reduce risk (see Moles and Terry 1997). The expansion of structured finance has been facilitated by low interest rates policies pursued by the world’s major central banks, which encouraged excessive ‘leverage’ or gearing up the debt to originate and distribute more derivatives at the fastest possible pace (Mizen 2009). 12
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As early as 1988, the Anglo-American economies were leading the way in securitization as measured by the relative weight of capitalization of national security markets, with the UK and USA combined taking a 37 per cent share of the global securities market. Yet with financial deregulation spreading across the globe, national and systemic differences in openness of capital markets were eroded and various surveys of the world of finance carried out since then pointed to convergence as a long-term trend (Neal and Tilly 2003). At the peak of financialization in 2007, the ratio of global financial assets – the sum of the stock market capitalization, debt securities and bank assets – to global GDP reached 440 per cent. This ratio was even higher for the USA (445 per cent), Japan (547 per cent) and the European Union (581 per cent), jumping to 900 per cent in Ireland. Although the global openly traded financial assets were worth $241.1 trillion in 2007, the size of the ‘shadow’ banking system of OTC trade in derivates was even larger. Whilst the exchange-traded derivative financial instruments amounted in 2007 to $26.7 trillion, the respective notional figure for global shadowy OTC derivatives stood at $595.3 trillion or 11 times (!) the world’s annual output (authors’ own calculations, on the basis of IMF 2009: statistical appendix tables 3–6). The sheer volume and the range of various exotic financial investment products generated since the 1990s have led some critical observers to describe global finance capitalism as ‘an economic wonderland’ of illusionary, speculative ‘derivative castles built on sand’ (Cloke 2009). However, as Leyshon and Thrift (2007) point out, the basis of finance capitalism has not been this spectacular system of speculation but rather a ‘capitalization of almost everything’, as financial capitalism fed on the most mundane ‘asset streams’ and stable sources of income. Robin Blackburn (2008) provides further evidence that underneath the layer of speculative wizardry, financialization has indeed relied on the process of commodification of every aspect of human life and the life course – baby bonds, student loans, car loans, credit-card debt, health insurance, private pensions and, most importantly, residential mortgage loans (see also Lohmann, this volume). Focusing on mortgage capital, Saskia Sassen (2008) uncovers a whole new spatial frontier for global finance, which is now able through residential mortgage-backed securities to extract the smallest of resources that low- and moderateincome households in emerging as well as advanced market 13
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economies can command. Yet it is this extensive tapping into the everyday resources of the US’s poorest households which has eventually led to the beginning of the world’s worst financial crisis on record.
Conclusion: Collapse of the Global Neoliberal Economic Order? The hollowing out of manufacturing in the USA and other AngloAmerican economies, combined with declining or stagnant real wages, has resulted in the recomposition of corporate profits towards financial intermediation and to the growing reliance of these economies on low-priced imports, primarily from China (Harvey 2005; Dunford 2009). As the greater part of tax revenues in advanced capitalist economies originates in finance, the North American, European and other governments of all political colours were unable or unwilling to control the expansion of the financial sector. Yet the ever-increasing US trade deficit with the rest of the world, and particularly with China, combined with signs of the USA’s imperial overstretch in Iraq and Afghanistan, had an adverse impact on the strength of the dollar, threatening the financial sector’s profits abroad. In a frantic attempt to stabilize the dollar and belatedly cool financial speculation geared towards mortgagebased securities, around the mid-2000s the US Federal Reserve began to raise base interest rates. Between 2004 and 2006, US interest rates rose from 1 per cent to 5.35 per cent, triggering a slowdown in the US housing market; the UK’s central bank was even more aggressive in trying to restrict the money supply. As has been argued elsewhere, those steady increases in interest rates led to rising defaults among US holders of sub-prime mortgages in the last quarter of 2006 and early 2007. The US sub-prime mortgage difficulties triggered the credit crunch, the first phase of the crisis (August 2007–February 2008), resulting in the shutting down of about $24 trillion worth of credit lines. Growing insolvencies at overstretched financial intermediaries in France (BNP Paribas), the UK (Northern Rock), the US (New Century Financial, Countrywide, Dillon Reed, Citigroup, MBIA), Switzerland (UBS) and Germany (IKB) led the crisis to unfold further as it entered its second phase (March–October 2008), with the collapse and ‘rescue’ takeover of Bear Stearns, Wall Street’s fifth biggest bank. The third 14
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phase of the financial crisis, occurring from October 2008, began with the bankruptcy of Lehman Brothers and resulted in a fullblown global recession (Blackburn 2008; Gowan 2009; Mizen 2009). With the financial sector placed firmly at the heart of global financial capitalism, Western governments have been quick to abandon all the tenets of free and self-regulating markets, rushing to commit themselves to full financial support of financial institutions, opening the era of massive bail-outs and stimulus packages. By mid2009, the US government had committed $8.5 trillion to support its battered financial system, with $5.8 trillion earmarked for Federal Reserve lending, credit guarantees and asset purchase schemes; $2 trillion in other schemes; and $700 billion in the Troubled Asset Relief Programme, a new ‘public–private partnership’ aimed at buying ‘toxic’ assets from banks. It is worth noting that the US government’s commitment to the financial sector amounted to two-thirds of its GDP. The size of the UK rescue package for banks was $2.12 (£1.22) trillion, or 87 per cent of the country’s GDP, with £585 billion allocated to asset protection; £300 billion to bank credit guarantees; £185 billion to central bank loans; £94 billion to bailing out five banking institutions (RBS-Royal Bank of Scotland, Lloyds TSB, HBOS-Halifax Bank of Scotland, Northern Rock and Bradford & Bingley); £50 billion to the Bank of England corporate debt scheme; and £10 billion to a working capital fund for small businesses. In another striking move heralded by most financial commentators as ‘the end of the Thatcher era’, a host of governments from North and South pushed forward with massive Keynesian-style fiscal stimulus packages (Rachman 2009). As the world’s economy had slowed sharply in 2008 and was set to decline in 2009 by at least 1.3 per cent, thus entering the first truly global recession since the Second World War, governments of the world’s twenty largest states agreed to spend billions of dollars in tax relief and building projects to stabilize the decline and stimulate economic growth, with the US government pledging $937 billion; the UK $29 billion; Germany $103 billion; China $586 billion; and India $4 billion. A vast majority of developing, transition and even advanced capitalist countries, however, have been unable to either fund or borrow for their own much-needed bank bail-outs, corporate rescues and fiscal stimulus packages, with several countries having to go cap in hand to the IMF and EU monetary authorities (among them Iceland, Latvia, Hungary and Ukraine). 15
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A number of preliminary conclusions can be drawn from this crisis. The 2007–9 financial turmoil appears to be rather unique in at least four ways. First, geographically, it has broadened to include households, corporations and the banking sectors in both advanced and emerging capitalist countries. Second, this has been the largest crisis in terms of capital loss. According to a recent estimate by the IMF, subject to a number of assumptions, the write-downs on USoriginated assets to be endured by all holders since the outbreak of the crisis until 2010 could reach a total of around $4 trillion, twothirds of which would be incurred by banks (IMF 2009: xi). Third, the sub-prime credit crunch has led to the demise or restructuring of several giants of the corporate world, including Lehman Brothers, Bear Stearns, Royal Bank of Scotland, Lloyds TSB, Citigroup, AIG, Fannie Mae, Freddie Mac, Bank of America, Northern Rock, Bradford & Bingley, Halifax-Bank of Scotland, Merrill Lynch, and Alliance & Leicester (see Klimecki and Willmott 2009). As a consequence, the current financial crisis has highlighted a dramatic shift in banking’s centre of gravity, with potentially dramatic geopolitical repercussions. In 1999, the world’s largest financial institutions were dominated by Anglo-American banks; the world’s top twenty banks by market capitalization included eleven US-based institutions (with Citigroup, Bank of America and Fannie Mae in first, second and fifth positions respectively), four UK-based (with HSBC and Lloyds TSB as the world’s third and fourth largest), two Swiss, two Japanese and one Spanish. By contrast, in 2009 just a handful of the top twenty had their headquarters in the US or the UK. Amongst the top twenty banks, five were based in the People’s Republic of China (with the Industrial & Commercial Bank of China, China Construction Bank, and Bank of China holding the three top positions respectively); three were bailed-out US banks (JPMorgan Chase, Goldman Sachs and Wells Fargo); the rest included only one British bank (HSBC), two Brazilian, two Canadian, two Australian, one Japanese, one Spanish, one Swiss, one bailed-out French bank (BNP Paribas) and one bailed-out Italian bank (Unicredit) (Bernard et al. 2009). Finally, in addition to the return of geopolitics, the decline of the power of the Atlantic states and the dollar/Wall Street regime (Gowan 2009), the current crisis has undoubtedly severely damaged neoliberal ideology by revealing the intrinsic link between neoliberalism as a state/class project and global financial capitalism 16
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(Wong 2009). To some, the crisis response of the major Western governments has even embodied the natural progression of neoliberal market states into financial ‘activists’ – public entities which behave like activist shareholders in the market (Caprotti 2009). Whilst it is perhaps too early to understand the full ramifications of the collapse of neoliberal economic order, it is hard to resist reminding ourselves that the neoliberal consensus of twenty years ago claimed that ‘Leftwing believers in “Keynesian” stimulation via large budget deficits are almost an extinct species . . . an operational budget deficit in excess of around 1 to 2 per cent of GNP is prima facie evidence of policy failure’ (Williamson 1990). At the time of writing, when the governments in the Anglo-American world – especially in the UK, USA and Ireland – are set to reach budget deficits in the range of 11 to 13 per cent, and busy trying to fund a Keynesian stimulation programme, there can hardly be more glaring evidence of neoliberalism’s abject failure. As left-wing ideas are seemingly back in fashion, this book may contribute to the search for viable alternatives.
References Amable B. (2003) The Diversity of Modern Capitalism, Oxford University Press, Oxford. Bernard, S. et al. (2009) ‘The Decade of Global Banks’, The Financial Times, 22 March. Birch, K. and Mykhnenko, V. (2009) ‘Varieties of Neoliberalism? Restructuring in Large Industrially-Dependent Regions across Western and Eastern Europe’, Journal of Economic Geography, Vol. 9, pp. 355–80. Blackburn, R. (2008) ‘The Subprime Crisis’, New Left Review, No. 50, pp. 63–106. Blyth, M. (2002) Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century, Cambridge University Press, Cambridge. Boyer, R. (2000) ‘Is a Finance-Led Growth Regime a Viable Alternative to Fordism? A Preliminary Analysis’, Economy and Society, Vol. 29, pp. 111–45. Brenner, N., Peck, J. and Theodore, N. (2010) ‘Variegated Neoliberalization: Geographies, Modalities, Pathways’, Global Networks, Vol. 10, No. 2. Caprotti, F. (2009) ‘Financial Crisis, Activist States and (Missed) Opportunities’, Critical Perspectives on International Business, Vol. 5, pp. 78–84. Carroll, W. and Carson, C. (2006) ‘Neoliberalism, Capitalist Class Formation and the Global Network of Corporations and Policy Groups’, in Plehwe, D., Walpen, B. and Neunhöffer, G. (eds) Neoliberal Hegemony: a Global Critique, Routledge, London.
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Cerny, P. (2008) ‘Embedding Neoliberalism: the Evolution of a Hegemonic Paradigm’, Journal of International Trade and Diplomacy, Vol. 2, pp. 1–46. Cloke, J. (2009) ‘An Economic Wonderland: Derivative Castles Built on Sand’, Critical Perspectives on International Business, Vol. 5, pp. 107–19. Duménil, G. and Lévy, D. (2004) Capital Resurgent, Harvard University Press, London. Dunford, M. (2009) ‘Models of Development and the Financial and Environmental Crises’, paper presented at the School of Geography, March 2009 Workshop, University of Nottingham. Friedman, M. (1990) ‘Quotation of the Month: Milton Friedman’s View’, Transition: The Newsletter about the Reforming Economies, Vol. 1, Nos 4–5, pp. 6–7. Fukuyama, F. (1989) ‘The End of History’, The National Interest, No. 16, pp. 3–18. Gowan, P. (2009) ‘Editorial: Crisis in the Heartland. Consequences of the New Wall Street System’, New Left Review, Vol. 55, pp. 5–29. Hall, D. (2008) Economic Crisis and Public Services, PSIRU, University of Greenwich. Hall, P. A. and Soskice, D. (eds) (2001) Varieties of Capitalism: the Institutional Foundations of Comparative Advantage, Oxford University Press, Oxford. Hall, S. (2003) ‘New Labour’s Double-Shuffle’, Soundings, Vol. 24, pp. 10–24. Hancké, B., Rhodes, M. and Thatcher, M. (eds) (2007) Beyond Varieties of Capitalism: Conflict, Contradictions, and Complementarities in the European Economy, Oxford University Press, Oxford. Harvey, D. (2005) A Brief History of Neoliberalism, Oxford University Press, Oxford. —— (2006) ‘Neoliberalism as Creative Destruction’, Annals of the American Academy of Political and Social Science, Vol. 610, pp. 22–44. Hay, C. (2004) ‘Re-Stating Politics, Re-Politicising the State: Neo-liberalism, Economic Imperatives and the Rise of the Competition State’, The Political Quarterly, Vol. 75, pp. 38–50. Hutton, W. (1995) The State We’re In, Vintage, London. International Monetary Fund (IMF) (2009) Global Financial Stability Report: Responding to the Financial Crisis and Measuring Systemic Risks, IMF, Washington, DC. Klimecki, R. and Willmott, H. (2009) ‘From Demutualisation to Meltdown: a Tale of Two Wannabe Banks’, Critical Perspectives on International Business, Vol. 5, pp. 120–40. Kuczynski, P-P. and Williamson, J. (eds) (2003) After the Washington Consensus: Restarting Growth and Reform in Latin America, Peterson Institute for International Economics, Washington, DC. Larner, W. (2003) ‘Guest Editorial: Neoliberalism?’, Environment and Planning D, Vol. 21, pp. 509–12.
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Leyshon, A. and Thrift, N. (2007) ‘The Capitalization of Almost Everything: the Future of Finance and Capitalism’, Theory, Culture and Society, Vol. 24, pp. 97–115. MacLeavy, J. (2008) ‘Managing Diversity? ‘“Community Cohesion” and Its Limits in Neoliberal Urban Policy’, Geography Compass, Vol. 2, pp. 538–58. Mizen, P. (2009) ‘Making Sense of the Financial Crisis, 2007–2009’, paper presented at the School of Geography Workshop, March 2009, University of Nottingham. Moles, P. and Terry, N. (1997) The Handbook of International Financial Terms, Oxford University Press, Oxford. Montgomerie, J. (2007) ‘Giving Credit Where It’s Due: Public Policy and Household Indebtedness in the United States, the United Kingdom and Canada’, Policy and Society, Vol. 25, pp. 109–42. Mudge, S. (2008) ‘What Is Neo-liberalism?’, Socio-Economic Review, Vol. 6, pp. 703–31. Mykhnenko, V. (2009) ‘Transition Economies’ in Wankel, C. (ed.) Encyclopedia of Business in Today’s World, 4 vols, SAGE, Thousand Oaks, CA. Neal, L. and Tilly, R. (2003) ‘Capital Markets’, in Mokyr, J. (ed.) The Oxford Encyclopedia of Economic History, Oxford University Press, Oxford. Peck, J. (2001) ‘Neoliberalizing States: Thin Policies/Hard Outcomes’, Progress in Human Geography, Vol. 25, pp. 445–55. —— (2008) ‘Remaking Laissez-faire’, Progress in Human Geography, Vol. 32, pp. 3–43. Peck, J. and Theodore, N. (2007) ‘Variegated Capitalism’, Progress in Human Geography, Vol. 31, pp. 731–72. Peck, J. and Tickell, A. (2002) ‘Neoliberalizing Space’, Antipode, Vol. 34, pp. 380–404. Peet, R. (2007) Geography of Power: the Making of Global Economic Policy, Zed Books, London. Plehwe, D. and Walpen, B. (2006) ‘Between Network and Complex Organization: the Making of Neoliberal Knowledge and Hegemony’, in Plehwe, D., Walpen, B. and Neunhöffer, G. (eds) Neoliberal Hegemony: a Global Critique, Routledge, London. Prasad, M. (2006) The Politics of Free Markets, University of Chicago Press, Chicago, IL. Rachman, G. (2009) ‘The End of the Thatcher Era’, The Financial Times, 27 April. Rodrik, D. (2006) ‘Goodbye Washington Consensus, Hello Washington Confusion?’, Journal of Economic Literature, Vol. 44, pp. 973–87. Sassen, S. (2008) ‘Mortgage Capital and Its Particularities: a New Frontier for Global Finance’, Journal of International Affairs, Vol. 62, No. 1, pp. 187–212. Tickell, A. and Peck, J. (2003) ‘Making Global Rules: Globalization or
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Neoliberalization?’, in Peck, J. and Yeung, H. (eds) Remaking the Global Economy, Sage, London. Turner, R. (2007) ‘The “Rebirth of Liberalism”: the Origins of Neo-liberal Ideology’, Journal of Political Ideologies, Vol. 12, pp. 67–83. van Apeldoorn, B. (2008) ‘The Contradictions of “Embedded Neoliberalism” and Europe’s Multi-Level Legitimacy Crisis: the European Project and Its Limits’, in van Apeldoorn, B., Drahokoupil, J. and Horn, L. (eds) From Lisbon to Lisbon, Palgrave Macmillan, Houndmills. Watson, M. (2008) ‘Constituting Monetary Conservatives via the “Savings Habit”: New Labour and the British Housing Market Bubble’, Comparative European Politics, Vol.6, pp. 285–304. Williamson, J. (1990) ‘What Washington Means by Policy Reform’, in Williamson, J. (ed.) Latin American Adjustment: How Much Has Happened?, Institute for International Economics, Washington, DC. —— (1993) ‘Democracy and the “Washington Consensus”’, World Development, Vol. 21, pp. 1329–36. Wong, L. (2009) ‘The Crisis: a Return to Political Economy?’, Critical Perspectives on International Business, Vol. 5, pp. 56–77. World Bank (1996) World Development Report 1996: from Plan to Market, Oxford University Press, Oxford. —— (2005) Economic Growth in the 1990s: Learning from a Decade of Reform, World Bank, Washington, DC.
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1 How Neoliberalism Got Where It Is: Elite Planning, Corporate Lobbying and the Release of the Free Market DAVID MILLER
The argument of this chapter is that corporate lobbying organizations are at the forefront of organizing and pursuing capitalist class interests through the promotion of neoliberal agendas and the planning of neoliberal projects (see Birch and Mykhnenko, this volume). These organizations exist to plan and implement policy, sometimes for a wide range of ruling class fractions and sometimes for a much narrower ideological base, as a number of chapters in this book (for example, Birch and Tickell; Jessop) will later show. Either way, corporate lobbying has been at the centre of efforts to expand and globalize corporate power, to introduce and develop the ‘doctrine’ of neoliberalism according to which, as David Harvey (2005) has put it, ‘market exchange is an ethic in itself, capable of acting as a guide for all human action’. In this sense, neoliberalism is the ideology of the emergent transnational capitalist class which has planned and constructed an architecture of global governance in response to threats from national capital (Euroscepticism in the UK, for example), from neoconservatives (internationalist American exceptionalists, for example – see Diamond 1995) and from the Left. However, the planning and implementation of the global architecture of neoliberalism depended on the organization of interests. It was only possible to introduce neoliberal ideas in practice when enough members of the ruling class were either won over or had become indifferent or constrained enough to make opposition futile; it was only possible, in other words, by preparing the ground. This has been a long-term process, as will be outlined in this chapter, and has depended on a battle of ideas, certainly, but also on a battle to put certain ideas into practice, to win certain conflicts and to build concretely on these victories. It is certainly not the case that this was done in an abstract way, in total divorce from national and global
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economic conditions. But nor was it the case that the economic conditions of the mid-1970s inevitably produced neoliberalism. It depended on the existence of a relatively coherent if inchoate and evolving set of ideas, an emergent class ideology to which increasing fractions of the ruling class could be won over. If the neoliberals had to invent on the spot all the ideas and the concrete political victories they had won by the 1970s, and then practically build on them, they would have tried – but they would have been acting in (different) circumstances not of their choosing. As might be apparent from this brief discussion it is my argument that the question of ideas is important in historical development as discussed elsewhere in this book (by Birch and Tickell, for example). The concept of hegemony is useful here, though it is important to specify that the ‘ruling ideas’ referred to do not necessarily become those of subordinated classes. Rather I refer to hegemony as the process by which ruling class fractions are able to exert leadership over closely related fractions and to forge ruling class unity on particular questions, even if only fleetingly. Of course this unity need not be total and may fracture quickly, as arguably has been the case with the ruling class ‘realist’ opposition to the invasion of Iraq in 2003 and the peeling off of other elements of the ruling class when Iraq turned out not to be a cake walk. The other obvious way in which ruling class consensus is fractured is when ‘experience 1’ (as Edward Thompson called it) walks in ‘without knocking’ (Thompson 1978: 201). I refer of course to the financial crisis, which has forced the entire apparatus of bankers, financiers, economists, politicians, regulators, journalists and other ‘experts’ on such matters to hurriedly rearrange their analysis of global finance (see Shaoul, this volume). A series of splits quickly emerged to be followed by regrouping and ideological projects aimed at defending the castle of capitalism slightly further up the hill. All of this does not emerge spontaneously from the economic circumstances in which the capitalist class find themselves. They need to discuss and debate, to wheel and deal to come to a view on their response. All of this is accomplished in a myriad of social circles and institutional locations, from the golf course to the gentleman’s club, but is most obviously institutionalized in the elite policy planning organizations, the think tanks and the class-wide corporate lobby groups that both have distinct national characteristics – as I will show in relation to the UK – and cut across national borders in the 24
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extension of global corporate power. Sidney Blumenthal (2004: xix) notes in the introduction to The Rise of the Counter Establishment that his aim is to advance the argument that ‘ideas themselves have become a salient aspect of contemporary politics’. He also writes that at the heart of what he calls the ‘counter-establishment’ ‘is an intellectual elite . . . attached to the foundations and journals, think tanks and institutes’ (ibid.: xx).
Putting the Architecture in Place As we will see, the architecture for elite global policy planning was constructed by means of lobby groups, think tanks, research institutes, corporate-sponsored foundations and so on. International groupings emerged gradually over the course of the twentieth century, starting in 1920. In general, they developed in line with the three waves of business activism which can be identified in both the US and the UK in the twentieth century (Miller and Dinan 2008). Elite policy planning groups have a long pedigree. One of the earliest groups – set up in 1919 – was the Royal Institute for International Affairs (RIIA), based in London and often called Chatham House, the name of the building in which the Institute is housed. In the US the Council on Foreign Relations (CFR) – created in 1921 – performed a similar function. Both appear to have emerged from an organization called the Round Table, set up to pursue a worldwide ‘Anglo-Saxon brotherhood’ uniting the empire into one state. This project was associated with imperial propagandist Lionel Curtis and other prominent writers, administrators and politicians (Mackenzie 1986). Both the RIIA and the CFR remain key establishment organizations today. For example, the CFR is the central upperclass foreign policy think tank in the US, whilst the RIIA has around 1,500 individual members and 267 corporate members (RIIA, undated). These attempts in the UK and the USA (see Birch and Tickell, this volume), being largely successful at the national level, then opened up a window for the implementation of new structures of global governance. Such organizations, although set up in the early part of the twentieth century, remain important players in national and global decision making. Furthermore, the process of globalization was activated by the conscious and calculated lobbying and long-term policy planning carried out in organizations and 25
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networks like the Mont Pelerin Society (MPS), which aimed to win the ideological battle, and think tanks like the British Centre for Policy Studies and the Adam Smith Institute, along with the American Heritage Foundation and American Enterprise Institute, which aimed to put those ideas into practice (see Birch and Tickell, this volume). The MPS, itself an ideological backlash, began on the slopes of Mont Pelerin above Lake Geneva in Switzerland. It illustrates the international and global dimensions of elite planning and policy making. In the company of a ‘tiny band of economists, philosophers and historians’, the MPS was founded in 1947. As one of its British acolytes, Ralph (Lord) Harris, recalled, it had the ‘war aim’ of reversing ‘the tide of collectivism sweeping across Europe after 1945 from the Soviet Union westward to Britain already being converted into a socialist laboratory’ (Harris 1997). Their intent was the same as those who had met in Dean’s Yard in London in 1919 to found the first class-wide propaganda organization (National Propaganda), namely to undermine popular democracy in the corporate interest. Their intellectual bellwether, Friedrich von Hayek, declared: ‘We must make the building of a free society once more an intellectual adventure, a deed of courage’ (cited in Harris 1997). The strategy was not to convince the public, who in the view from Mont Pelerin were mere followers of their betters, but to convince society’s intellectuals, who were perceived to have been won over by socialism: ‘Once the more active part of the intellectuals have been converted to a set of beliefs, the process by which these become generally accepted is almost automatic and irresistible’ (cited in Harris 1997). The MPS sought to assemble at ‘agreeable’ venues around the world a ‘growing number of carefully vetted’ members to meet in ‘private conclave’ every year or two (Harris 1997). Like contemporary professional lobbyists, these shock troops in the battle for ideas ‘eschewed publicity’, preferring to work amongst the intellectuals and through sympathetic institutes and other influential back rooms. The result was a very wide range of think tanks across the world.
Elite Planning and the Rise of Thatcherism in Britain In the UK one of its early manifestations was the creation of the Institute for Economic Affairs (IEA) in 1955. The decision to refrain 26
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from overt propaganda or direct political action was taken at the first meeting of the MPS: The group does not aspire to conduct propaganda. It seeks to establish no meticulous and hampering orthodoxy, it aligns itself with no particular party. Its object is solely, by facilitating the exchange of views among minds inspired by certain ideals and broad conceptions held in common, to contribute to the preservation and improvement of the free society. (Hayek, cited in Cockett 1994: 116–17)
The influence of Mont Pelerin has been extremely significant. Within a generation their ideas had been adopted by right-wing political movements everywhere and after a further 10–15 years they had also successfully neutralized what was left of parties set up to represent the common interest. On her election in 1979 Margaret Thatcher elevated the head of the IEA to the House of Lords. ‘It was primarily your foundation work’, wrote Thatcher in a letter of thanks, ‘which enabled us to rebuild the philosophy upon which our Party succeeded in the past’ (quoted in Cockett 1994: 173). The IEA was the first of what would eventually become more than a hundred free market think tanks around the world. The IEA was set up by Anthony Fisher in 1955. He was a chicken farmer who had gone to the US and discovered battery farming. With the money he made introducing intensive chicken farming to the UK he intended to go into politics. However, after reading The Road to Serfdom and discovering that Hayek worked at the LSE, he promptly made contact. Hayek inducted Fisher into the Mont Pelerin Society and advised a different course. According to Fisher’s daughter, ‘Hayek said “Don’t go into politics. You have to alter public opinion. It will take a long time. You do it through the intellectuals”’ (BBC 2006). So Fisher set up the IEA and at a Conservative Party meeting in East Grinstead met Ralph Harris, who would run the new organization. Harris was joined by another economist, Arthur Seldon, and they began the task of countering social democracy. They gained valuable allies a decade later when William Rees Mogg, the newly appointed editor of The Times, asked Peter Jay, then a civil servant at the Treasury, to become a journalist. Jay was sent to Washington and there he came across the Chicago School of Mont Pelerin economists which included Milton Friedman. Jay was converted and The Times under Rees Mogg became a key propaganda outlet for market fundamentalism. But before the shift to the right came the events of 1968: the student 27
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uprising in France and the demonstrations against the Vietnam War in Britain. Revolution and change were in the air.
Post-1968 blues and the rise of Thatcher Even before the wave of protests in 1968, the lobby group Aims of Industry was lamenting that ‘capitalism in Britain has, for many years, been intellectually on the defensive’ (Ivens 1967: 7). In the aftermath of the student revolt of 1968 and the rise of radicalism in the UK and across the West, the established propaganda organizations of capital – such as the Economic League and Aims of Industry – were joined by other pro-corporate groups. This period was the genesis of the third wave of corporate political activism, and was mirrored in the US at almost exactly the same time. In Britain, the Institute for the Study of Conflict (ISC) was created in 1970 with money from, amongst others, the CIA and big business. Two years later Nigel Lawson, a former editor of The Spectator who would later become Chancellor of the Exchequer under Thatcher, penned a pamphlet focused on ‘Subversion in British Industry’. Lawson had been approached to write the pamphlet by Brian Crozier, the director of the Intelligence-supported ISC, who had been impressed by a Lawson piece in The Times which in Crozier’s view ‘showed he understood the situation’ (Crozier 1993: 106). They printed only 30 copies of the pamphlet as ‘the report was not for the wider public: the target audience was industry itself’ (ibid.). Previously, and with help from the Economic League and Aims of Industry, Crozier had managed to convert John Whitehorn of the CBI to the neoliberal cause. Whitehorn penned a memo appealing for more business support for the ISC and its collaborators, which also included extreme anti-democratic organizations like Common Cause Ltd and Industrial Research and Information Services Ltd (Ramsay 1996). During 1971 the President and Director General of the CBI had talks with a number of heads of companies who are worried about subversive influences in British Industry . . . they have also been in touch with a number of organizations which seek in their different ways to improve matters. . . . Their objectives and methods naturally vary; and we see no strong case to streamline them or bring them together more closely than is done by their present loose links and mutual cooperation. (Quoted in Lashmar and Oliver 1998: 166)
Appealing for the necessary funding from business, the memo noted that the ISC 28
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plans to take an increasing interest in the study of subversion at home, and has a research project on the drawing board on conflict in British industry to be carried out, if finance is forthcoming, through case studies of conflicts in the docks, shipbuilding, motor industry, and construction. (Ibid.)
Money was forthcoming and the ISC produced a special report on ‘sources of conflict in British Industry’, published just before the 1974 election. Naturally this was not presented as a report funded by business and it had its effect. Published with what Crozier describes as ‘unprecedented publicity’ in The Observer, the report was yet another attempt by corporate and intelligence interests to interfere with the democratic process (Crozier 1993: 108). The ISC’s partner in subverting democracy, Aims of Industry, was also active in the 1974 election campaign, spending £500,000 on anti-Labour advertising – including one advertisement with Stalin behind a smiling mask (Dorril and Ramsay 1991: 230). The ISC was joined by other radical right-wing organizations in quick succession, from the Centre for Policy Studies (1974) and the Freedom Association (1975) to the Adam Smith Institute (1976). The ferment of free market ideas increased as these networks expanded. At the centre of this intellectual assault was the Hayekian obsession with extending free markets and, by association, corporate power. The political activists involved came directly from the circles nurtured by Mont Pelerin.
Enter the Mad Monk: the Thatcherite victory Keith Joseph ‘would do more than any other politician to develop the ideas behind Thatcherism’; he was instrumental in setting up the Centre for Policy Studies in 1974 to accomplish this task. Unlike the IEA, the proposed centre was to be self-consciously political – as Joseph put it, ‘My aim was to convert the Tory party’ (quoted in Cockett 1994: 237). Joseph was joined at the CPS by John Hoskyns, a systems analyst, and Norman Strauss, a marketing executive for Unilever. Hoskyns spent over a year figuring out what was wrong with Britain and representing it all in diagrammatic form. The problem was that everything seemed to be caused by everything else. Nevertheless Joseph introduced Hoskyns and Strauss to Thatcher, whose interest prompted them to do more work on their model: ‘As they worked some of the things that Hoskyns had put in his diagram seemed to become more important than others. But one thing would come to 29
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dominate their thinking’ (BBC 2006). After all the scribbling it turned out that the trade unions were to blame and they had to be defeated. The intellectual battle for market fundamentalism began to pick up steam as the alleged threat from the trade unions and the Left persisted. The IEA sponsored a new think tank called the Social Affairs Unit (SAU), which was run by Digby Anderson, a far-right sociologist and Mont Pelerin member. Anderson had been encouraged by both Michael Ivens of Aims of Industry and Arthur Seldon of IEA in establishing the SAU. As Cockett notes (1994), the emergence of the SAU in 1976 marked the arrival of the last of the think tanks which were key to the promotion and ‘practical implementation’ of Thatcherite market fundamentalism, especially in the form of privatization and deregulation. The move towards the privatization of national assets and the deregulation of service provision in state institutions was not sparked by a simple decision at the centre of government. Privatization of the utilities was not mentioned in the 1979 Conservative manifesto (Thatcher 1993: 667–8) and was not really an issue in the 1983 election campaign (Wiltshire 1987). Deregulation was the objective of key currents in the Conservative Party and also of certain business interests who were in a position to take advantage of it. The lobbying campaign for deregulation of NHS services was by all accounts extremely effective and had already started by the time of the 1978 Conservative Party conference. Industry trade associations met with the Minister of Health in October 1979, only five months after the Conservatives’ election victory. However, alongside the promotion of specific Thatcherite policies, the new breed of think tanks, research institutes and their backers also directed their attention to subverting the Labour Party.
The threat of the Left: targeting the Labour Party By itself the victory of Thatcherism was not enough, since the Labour Party still presented a threat as far as the business classes were concerned. Unlike the US, where the Democratic Party had long since been pro-business, the British business lobby and their allies in the worlds of intelligence, government and the military foresaw a longer-term struggle. One aim was the transformation of British society so that business would be free to do what it wanted. Government would simply be a mechanism for allocation of resources 30
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to business. Even at this stage, however, few of them saw that government might become like a business. A second aim, on which US-based business and intelligence circles were especially keen, was to draw the sting of socialism in the Labour Party so that it was no threat to business interests. Both of these aims were largely accomplished in a remarkable period of political turmoil between 1979 and 1997. Neutering the Labour Party was arguably a world-historical accomplishment, undertaken not simply by business, but by the alliance it forged with government and intelligence agencies in the US and UK. A whole network of Atlanticist foundations, think tanks and front groups was at work in the trades unions, the media and academia to turn the left-leaning elite towards the US and away from social democracy, suspicion of big business, and opposition to US foreign policy. The Atlanticist tendency within Labour was not new. But the split in the party in the late 1970s, which culminated in the creation of the Social Democratic Party (SDP), was encouraged and exacerbated by US-linked organizations often connected with the CIA. The US funded social democrats because this was a means of ensuring that European governments ‘continued to allow American capital into their economies with a minimum of restrictions’ (Ramsay 2002: 33). But, for some sections of the movement for the restoration of corporate power, the Labour Party was simply not social-democratic enough. It was seen as in the grip of the Far Left, and indeed was said to be ‘thoroughly penetrated’ by the KGB, according to right-wing activists like Brian Crozier (1993: 147). Crozier ‘had long nursed the idea’ that the solution to the problem of a ‘subversive opposition’ which ‘might come back to power could only lie in the creation of a non-subversive alternative party of government’ (ibid.). The interest of corporate-funded think tanks and right-wing US foundations in an alternative to Labour was clear. But the history books neglect to mention much in the way of trans-Atlantic connections for the Gang of Four who split from the Labour Party to form the SDP, and their co-conspirators. They often miss out the wellknown links of Shirley Williams with the right-wing Ditchley Foundation, or those of Robert Maclennan, a founder of the SDP, with the Atlantic Council, a pro-NATO policy group. Indeed, all four leaders of the SDP had been career-long members of the 31
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American tendency in Labour. When the SDP merged with the Liberals to form Social and Liberal Democrats, ‘one of the authors of the proposed joint policy statement was seconded to the job by his employer [CSIS] a propagandizing Washington foreign policy think tank much used by successive American administrations in pursuit of its foreign policy goals’ (Easton 1996). More important are the connections of two of the other founders, Stephen Haseler, an academic at the City of London Polytechnic, who along with fellow lecturer Douglas Eden (a US national) formed the Social Democratic Alliance (SDA) and issued ‘a string of alarmist reports about the inroads being made into the Labour Party by the Left’ (Ramsay 2002: 35). Haseler had written a book condemning The Death of British Democracy in 1976. The SDA attracted the attention and the financial help ‘on a small scale’ of Brian Crozier, the Intelligence-connected spook and corporate activist. As he notes, the ‘true story of its prehistory has not . . . been told’ (Crozier 1993: 147). Crozier admits that he already knew both Haseler and Eden, the latter from early meetings of the extremist National Association for Freedom. The three met at Crozier’s office in the Institute for the Study of Conflict – hardly an auspicious meeting place for members of the Labour Party (ibid.: 147–8). Haseler later worked for the right-wing, corporate-funded Heritage Foundation and used Heritage money to set up the Institute for European Defence and Strategic Studies, intended to challenge CND in the 1980s (Ramsay 2002: 36). Once the SDP was formed, several Labour MPs on the right of the party who had decided to join the SDP voted for Michael Foot in the leadership contest against the more right-wing Denis Healey. Their votes ensured Foot’s victory and were intended as the death knell for the Labour Party. ‘It was very important’, one of them wrote, that they ‘destroyed’ the Labour Party (Neville Sandelson, quoted in Ramsay 1998: 92). The creation of the SDP not only split the anti-Tory vote at the 1983 election, but led to the defeat of the Labour Left in the local councils in the mid-1980s and, before that, the miners’ strike in 1984–5. Even after these victories, the Atlanticists feared that their job was not done. Crozier’s view was that the SDP project had been confounded by Roy Jenkins’s ‘unwillingness’ to ‘use the party for the purpose for which it had been created’ and play the role in history allotted to him by the machinations of Crozier, Eden and Haseler 32
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(Crozier 1993: 149). Instead of attempting to ‘split the Labour Party’, he tried to attract Tory votes. And so the problem of Labour – or rather the problem of popular democracy – remained on the agenda. In order to complete their project, the neoliberals needed to evacuate any meaningful content that democracy might have. They say this quite openly. Ralph Harris, reflecting on the history of the Mont Pelerin Society and the subsequent founding of the Institute of Economic Affairs, spells it out: ‘I now express our remaining war aim as being to deprive (misrepresentative) democracy of its unmerited halo’ (Harris 1997).
Global Elite Planning Such attacks on democracy are not limited to national politics. In fact, the last few decades have witnessed an increasing globalization of elite planning. Understanding how global capital has managed to exercise such power and influence requires an appreciation of the role of transnational business lobbies and policy planning groups. The most significant of these are the International Chamber of Commerce; the Bilderberg Group; the World Economic Forum; and the Trilateral Commission. All four are run by and for the biggest transnational corporations and often directly by their CEOs or other board members. Two of these groups, the Trilateral Commission and the Bilderberg Group, are shrouded in mystery and are a conspiracy theorist’s dream. But these are neither fictions nor are they entirely secret. The Bilderberg Group was reported in the New York Times as early as 1957, and in 1964 it issued a press statement at the conclusion of its meeting (Domhoff 1971: 302–3). All four represent policy planning, networking and co-ordinating groups that operate at the transnational level in the pursuit of a free market agenda.
International Chamber of Commerce (1920) The International Chamber of Commerce (ICC) was formed very early on, in 1920/1. Although it was headquartered in Paris, the main impetus for its foundation came from ‘the experience of the business men of the United States in building up their great National Chamber of Commerce’ (Keppel 1922: 189–210). At that time the ICC’s membership was made up of National Associations of Business, rather than direct company membership. It was one of 33
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the earliest lobby groups to campaign to harmonize rules for business internationally. For example, among the 21 resolutions unanimously adopted at the 1921 London congress of the ICC were opposition to ‘double taxation’ on international trade, ‘removal of obstacles to commerce’ and cooperation on standardization, urging the principle of ‘free export’, moderation in tariffs and ‘international protection of industrial property, including trade marks’ (Keppell 1922: 197–8), reflecting more recent concerns evident in the establishment of the WTO (see Tyfield, this volume). Today the ICC is at the forefront of corporate lobbying against regulation. It is the largest international lobby group representing pure corporate interests – as opposed to being a civil society body or a policy planning forum like the others noted below. It has some 7,000 members from over 130 countries. The ICC has a record of ‘massive lobby offensives’ to influence the WTO. Notably, the ICC starts from a basis of having the ‘closest links to the WTO secretariat’ through the interchange of personnel between GATT/WTO, multinational corporations and the ICC. The Director General of GATT during the Uruguay round, which led to the creation of the WTO, was Arthur Dunkel, who later became a WTO dispute panellist, a board member at Nestlé and the Chair of the ICC working group on international trade and investment, in which role he heads the ICC lobbying of the WTO (Balanya et al. 2003: 137–8). These close connections are replicated time and again.
Bilderberg (1957) The Bilderberg Group is one of the most secretive elite policy planning assemblies. It held its founding meeting in 1952 at the Bilderberg Hotel in Oosterbeek in the Netherlands, funded by both the CIA and the Dutch/British corporation Unilever. Bilderberg as a group has a more liberal history, being not simply a lobby group for global capital, but a policy planning and discussion group which also included political elites and even key representatives of organized labour (though union representation has declined in recent years) (Carroll and Carson 2003). Nevertheless it has been a venue for the exercise of soft power by most of the largest global corporations, including British American Tobacco, BP, Shell, Exxon, IBM, Rio Tinto, General Motors and others (Balanya et al. 2003: 145). Bilderberg is neither a prototypical world government nor an 34
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incidental discussion forum. Because of its more deliberative approach Bilderberg has managed to foster elite consensus. When consensus is reached the participants have ‘at their disposal powerful transnational and national instruments for bringing about’ their decisions (Thompson 1980: 157). Indeed their meetings have ‘helped to ensure that consensual policies were adopted by the transnational system of the West’. However, in recent years the group’s strategy has increasingly aligned with neoliberal reform agendas (ibid.). At the centre of the Bilderberg Group are the key networkers, many of whom are also active in the other global networks discussed here. Etienne Davignon, for example, was on the steering group in 1997. A former European Commission Vice-Chair, Davignon has also been linked to the Trilateral Commission and through Directorship of Société Générale de Belgique to the European Round Table of Industrialists (ERT). In fact, Davignon was present at the inaugural ERT meeting when he was an EU commissioner. Davignon has also been a director of BASF, Fina and Fortis, all politically active TNCs. A former delegate at Bilderberg conferences notes how these gettogethers relate to the other elite networking venues and events: Bilderberg is part of a global conversation that takes place each year at a string of conferences, and it does form the backdrop to policies that emerge later. There’s the World Economic Forum at Davos in February, the Bilderberg and G8 meetings in April/May, and the IMF/World Bank annual conference in September. A kind of international consensus emerges and is carried over from one meeting to the next. . . . This consensus becomes the background for G8 economic communiques; it becomes what informs the IMF when it imposes an adjustment programme on Indonesia; and it becomes what the President proposes to Congress. (Armstrong and McConnachie 1998, cited in Balanya et al. 2003: 146)
The former Labour Foreign Secretary, Denis Healey, writes in his memoirs how Bilderberg conferences were the most valuable of all the events that rising politicians on the moderate left were invited to attend (surpassing the CIA-funded Congress for Cultural Freedom) (Healey 1989: 195). The level of debate and the quality of the informal contacts made at Bilberberg were useful throughout a political career. Healey revealed to a journalist (it is rare for Bilderbergers to allow themselves to be quoted on the record about the organization) that: 35
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We make a point of getting along younger politicians who are obviously rising, to bring them together with financiers and industrialists who offer them wise words. It increases the chance of having a sensible global policy. (Ronson 2001: 299)
Another Bilderberg steering committee member revealed that those invited to the conferences are expected to ‘sing for their supper’. In 1975 Margaret Thatcher was embarrassed when this was pointed out to her over dinner. The next day ‘she suddenly stood up and launched into a three-minute Thatcher special . . . the room was stunned . . . as a result of that speech David Rockefeller and Henry Kissinger and the other Americans fell in love with her. They brought her over to America, took her around in limousines, and introduced her to everyone’ (ibid.: 297). The key difference between Bilderberg and the ICC is in the range of non-business invitees. These are generally globalizing bureaucrats, politicians and sometimes representatives of NGOs and trades unions, who can either be relied upon to agree or have potential for co-option into the neoliberal agenda. The presence of people with a past involvement in radical politics is an indication that these are people that the corporations can do business with, literally and metaphorically. For example, former Green Party activist Jonathon Porritt has attended.
World Economic Forum (1971) The World Economic Forum (WEF) was set up in 1971 and meets annually at Davos in Switzerland. The Davos event is much less secretive than Bilderberg meetings as well as being larger. The WEF announces that it includes ‘1,000 top business leaders, 250 political leaders, 250 foremost academic experts from every domain and some 250 media leaders [who] come together to shape the global agenda’ (quoted in Balanya et al. 2003: 148). The meeting aims to create a ‘unique atmosphere’ which facilitates ‘literally thousands of private discussions’. According to long-time Trilateral Commission participant and academic Samuel Huntington, ‘Davos people control virtually all international institutions, many of the world’s governments and the bulk of the world’s economic and military capabilities’ (cited in Drezner 2007). The WEF claims credit for launching the Uruguay round of GATT which culminated in the creation of the WTO, the most recent institution to join the International Monetary Fund (IMF) 36
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and World Bank as the institutions of global economic governance. Since 1999 growing numbers of protesters have turned up only to be repelled by Swiss riot police. In recent years the number of celebrities making an entrance as part of their ‘goodwill’ missions or to lobby the powerful has increased, with Davos playing host to Angelina Jolie, the film star, and the ubiquitous Bono of U2 in 2006.
Trilateral Commission (1973) The Trilateral Commission was launched in 1973 by an informal transnational planning body of ‘unprecedented standing and organizational and ideological sophistication’ led by members of the Bilderberg Group, including David Rockefeller and Zbigniew Brzezinski (van der Pijl 1989: 259). A first common task was demarcated, the dismantling of the democratic welfare states, which were judged to enhance the structural power of the working class, and thus to be incompatible with the long-term aims of capitalism. (Ibid.) This message has been at the centre of its pronouncements since 1973. In 1999, for example, it recommended that ‘Europe must become more competitive by deregulating labour markets and streamlining burdensome welfare systems’ (ibid.). This has been the strategy of the European Commission and the neoliberal governments of Europe since then. Key support for this agenda has come from the UK, along with Spain (under Aznar) and Italy (under Berlusconi). Latterly, from 2005, Angela Merkel joined the club of enthusiastic liberalizers and deregulators. The EU strategy is expressed in the Lisbon Agenda, issued at the conclusion of the EU intergovernmental summit in 2000. The strategic goal set by the Lisbon Summit was for the EU ‘to become the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion’ (CEC 2001). However, in order to achieve this goal, the strategy recommends the dismantling of the European social model embedded in different national welfare states. Conclusion: the Battle of Ideas The neoliberals understood the necessity of winning the battle of ideas but it was the Adam Smith Institute and associated groups 37
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which understood the vital importance of putting ideas into practice. In 1988 Madsen Pirie of the ASI wrote: The successes achieved by the new-style politics allowed for the rise of the attractive but erroneous view that the work of lonely scholars, their acolytes and their advocates had finally paid off. And brought results in its train. That these results had not come in the earlier administrations which attempted them was put down to a wrong climate or wrong personnel. In fact, it was wrong policies. It was the policy engineers, coming in the wake of the pure scientists of politics and economic theory, who made the machines which made events. The ideas had been sufficient to win the intellectual battle, but this was not enough. Men and women with spanners in their hands and grease on their fingers had first to devise the ways in which the ideas of pure theory could be turned into technical devices to alter reality. The idea at the core of micropolitics is that creative ingenuity is needed to apply to the practical world of interest group politics the concepts of free market theory. (Pirie 1988: 267)
This approach was certainly a contrast to that outlined by Keynes at the end of his great work The General Theory. He closed the book by noting that ‘I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas’ (Keynes 1936: 383). Hayek had specifically singled out this passage for praise in his opening address to the first Mont Pelerin meeting. Both economists differed, then, from the disciples of Mont Pelerin who thought that ideas alone were not enough. On this point Pirie was much closer to the practical ideas of Karl Marx who famously wrote in the German Ideology that: We do not set out from what men say, imagine, conceive, nor from what men as narrated, thought of, imagined, conceived, in order to arrive at men in the flesh. We set out from real active men, and on the basis of their real life process we demonstrate the development of the ideological reflexes and echoes of this life process. The phantoms formed in the human brain are also, necessarily, sublimates of their material life process, which is empirically verifiable and bound to material premises. Morality, religion, metaphysics, all the rest of ideology and their corresponding forms of consciousness thus no longer retain the semblance of independence. They have no history, no development; but men, developing their material production and their material intercourse, alter, along with this their real existence their thinking and the products of their thinking. Life is not determined by consciousness, but consciousness by life. (Marx and Engels 1976: 40–1)
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Perhaps strangely, Pirie and his colleagues at the ASI seemed to share with classical Marxism the idea that it is ideas in practical struggle that change things rather than ideas in the abstract. Certainly it was at the core of their mission to take forward the ideas outlined by the Mont Pelerin Society and its various offshoots (IEA, CPS, et cetera) and put them into practice. This they did to some effect. Of course this was hedged about with all sorts of contradictions and reversals. It should also be noted that the neoliberals, as we now call them, did not have a clear blueprint either for the path ahead or for the ultimate destination. They certainly wanted to ‘restore’ class power, as David Harvey (2005) puts it. Of course those who criticize Harvey for the use of the phrase, because of its implication that they had ‘lost’ class power, are right in the sense that social democracy still entailed class inequality and capitalist class power – in particular the specifically ‘capitalist’ state as Ralph Miliband (1973) put it in the 1970s. But it is correct to say that the impact of the neoliberal onslaught did deliberately undermine the sources of opposition – most notably in their attempts to destroy the trade union movement and the British Labour Party – and undermined the potential of ‘bourgeois democracy’ to return critics of the market. In this respect it is a restoration of power, taking back most of the gains made by the trade union movement and the forces of popular democracy, minimal though they might be argued to be. In addition, though, they made it their business to help both themselves and their class allies to become much wealthier both in absolute and relative terms. The role of ideas in all of this is pre-eminently in fostering ruling class consensus and unity, in brokering agreement and trade-offs. This is important as it allows seemingly far-flung allied fractions to sing from the same hymn sheet. But it also informs the lines taken further down the communication chains, when lobbyists and PR people work on the ideas to try to find ways to make them palatable to the rest of us. In this way the ideas of the ruling class are disseminated across the society. While they may not, and most often do not, command the consent of the governed – and certainly not their agreement – they are in reality the ‘ruling ideas’. It does require ‘an enormous engine of indoctrination’ (Miliband 1973) to manufacture, distribute and reproduce such ideas, but it does not require that everyone believes and accepts them, only that enough people are misled and comply, and not enough rebel. 39
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References Armstrong, A. and McConnachie, A. (1998) ‘The 1998 Bilderberg Meeting’, The Social Creditor, Official Journal of the Social Credit Secretariat ( July– August). Balanya, B., Doherty, A., Hoedeman, O., Ma’anit, A. and Wesselius, E. (2003) Europe Inc: Regional and Global Restructuring and the Rise of Corporate Power, Pluto Press, London. BBC (2006) Tory! Tory! Tory! Part 2, ‘The Road to Power’, BBC4, March. Blumenthal, S. (2008) The Rise of the Counter-Establishment: from Conservative Ideology to Political Power, second edition, Union Square Press, New York NY. Carroll, W. and Carson, C. (2003) ‘Forging a New Hegemony? The Role of Transnational Policy Groups in the Network and Discourses of Global Corporate Governance’, Journal of World Systems Research, Vol. 9, No. I (Winter), pp. 67–102. Cockett, R. (1994) Thinking the Unthinkable: Think Tanks and the Economic Counter Revolution, 1931–1983, Harper Collins, London. Commission of the European Communities (CEC) (2001) A Sustainable Europe for a Better World: a European Union Strategy for Sustainable Development, Brussels, 15 May 2001, COM (2001) 264 final (Commission’s proposal to the Gothenburg European Council), . Crozier, B. (1993) Free Agent: the Unseen War 1941–1991. The Autobiography of an International Activist, Harper Collins, London. Diamond, S. (1995) Roads to Dominion: Right Wing Movements and Political Power in the United States, Guilford Press, New York NY. Domhoff, G. W. (1971) The Higher Circles: the Governing Class in America, Vintage, New York NY. Dorril, S. and Ramsay, R. (1991) Smear! Wilson and the Secret State, Fourth Estate, London. Drezner, D. W. (2007) ‘Davos’ Downhill Slide’, LATimes, 21 January 2007, . Easton, T. (1996) ‘Who Were They Travelling With? Review of SDP: the Birth, Life and Death of the Social Democratic Party by Ivor Crewe and Anthony King, Oxford University Press, 1995’, Lobster, No. 31, June. Harris, R. (1997) ‘The plan to end planning – the founding of the Mont Pelerin Society’, National Review, 16 June, . Haseler, S. (1976) The Death of British Democracy, London: Prometheus Books. Healey, D. (1989) The Time of My Life, Penguin, London. Ivens, M. (1967) ‘Preface’ in Michael Ivens and Reginald Dunstan (eds) The Case for Capitalism, Michael Joseph in association with Aims of Industry, London.
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Keppel, F. (1922) ‘The International Chamber of Commerce’, in American Association for International Concilation, International Conciliation, pp. 189–210. Keynes, J. M. (1936) The General Theory of Employment, Interest and Money, Harcourt and Brace, New York NY. Lashmar, P. and Oliver, J. (1998) Britain’s Secret Propaganda War, 1948–1977, Sutton Publishing, Stroud, Gloucestershire. Mackenzie, J. (1986) Propaganda and Empire: the Manipulation of British Public Opinion 1880–1960, Manchester University Press, Manchester. Marx, K. and Engels, F. (1976) The German Ideology. In Collected Works, Lawrence and Wishart, London, Vol. 5, pp. 19–539. Miliband, R. (1973) The State in Capitalist Society, Quartet, London. Miller, D. and Dinan, W. (2008) A Century of Spin, Pluto, London. Nace, T. (2003) Gangs of America: the Rise of Corporate Power and the Disabling of Democracy, Berrett-Koehler Publishers, Inc., San Francisco CA. Pirie, M. (1988) Micropolitics: the Creation of Successful Policies, Wildwood House, London. Ramsay, R. (1996) ‘The Clandestine Caucus: Anti-Socialist Campaigns and Operations in the British Labour Movement since the War’, Lobster, Special Issue, . —— (1998) Prawn Cocktail Party: the Hidden Power behind New Labour, Vision, London. —— (2002) The Rise of New Labour, Pocket Essentials, Harpenden, Hertfordshire. Ronson, J. (2001) Them: Adventures with Extremists, Picador, London. Royal Institute of International Affairs (RIIA) (undated) ‘Background’, . Thatcher, M. (1993) The Downing Street Years, Harper Collins, London. Thompson, E. P. (1978) The Poverty of Theory: an Orrery of Errors, Merlin Press, London. Thompson, P. (1980) ‘Bilderberg and the West’, in Sklar, H. (ed.) Trilateralism: the Trilateral Commission and Elite Planning for World Management, South End Press, Boston MA. van der Pijl, K. (1989) ‘The International Level’, in Bottomore, T. and Brym, R. (eds) The Capitalist Class: an International Study, Harvester Wheatsheaf, London. Wiltshire, K. (1987) Privatisation: the British Experience, Longman Cheshire, Melbourne.
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Making Neoliberal Order in the United States KEAN BIRCH AND ADAM TICKELL
A recurrent theme of this book is that neoliberalism has received an enormous amount of attention and criticism recently as the dominant political-economic project of our era – and simultaneously dissected as a concept used to explain how for at least 30 years the ‘free’ market has driven policy making around the world. References to neoliberalism seem almost ubiquitous nowadays, while the term has been associated, broadly speaking, with a wide range of social meanings and connotations, economic projects and policies, political visions and so forth. This book’s introduction and later chapters by Jessop, Fine, MacLeavy, and Swain et al. refer to just some of these diverse aspects of neoliberalism, raising a number of critical questions about how we define the concept, how we identify its divergent and historically contingent characteristics, and how we understand its rise and evolution as the dominant economic order of the last few decades. Neoliberalism is often used loosely as a critical synonym for corporate globalization and other ‘bad stuff’ that has resulted from the supposedly unfettered triumph and global spread of free markets since the 1970s. However, considering that the extension of free markets is historically and politically contingent (Prasad 2006), it is necessary to explore the historical and political context of neoliberalism as an economic order in more detail. That is precisely what we seek to do in this chapter. There is clearly a danger here that underspecified conceptions of neoliberalism are invoked across an array of contexts (from American conservatism, say, to restructuring in Eastern Europe), leading to an extremely elastic usage of the term that loses purchase on its specific social, political and, as crucially, geographical manifestations (Larner 2003). Too often, neoliberalism seems to have a nebulous, atmospheric status –
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somehow floating above the heads of political agents and predetermining the structure and behaviour of their actions, the organizations they work in, and the institutional environment in which they operate. This runs the risk, as mentioned by Swain et al. later in this volume, of naturalizing neoliberalism as ‘out there’ and ready to be implemented, implying not only a universal reach, but also a monolithic notion of ‘natural’ (and somehow moral) order and political inevitability. In this chapter we want to call attention to some of the specificities of the American form(ation) of neoliberalism, which is often misconstrued as a paradigmatic or more pristine form of this globalizing phenomenon (Peck 2004). This means exposing some of the connections between the ascendant neoliberal order and the rise of the conservative movement in the United States over the past few decades. As mentioned, it is important to problematize the rather simplistic equation that neoliberalism equals conservatism. This said, it is evident that conservatism is deeply entwined with the notion of a neoliberal ‘common sense’ both explicitly and implicitly, especially in terms of the historical disjunctures with and crises in the political structures and state practices of Keynesianism-welfarism, which constitute conservatism’s legitimating narrative and corresponding political strength. As Jessop and MacLeavy outline in later chapters, this previous political-economic reality (Keynesianism) had been characterized, at least in some countries, as a form of Atlantic Fordism in which the underlying tensions between capital and labour were subsumed in a consensus model of growth that gradually broke down during the 1960s and 1970s. In the United States, the ascendancy of neoliberalism and the concurrent rise of the conservatism movement tore down this reality, yet the tensions and contradictions in this new order have largely strengthened rather than destabilized it. Thus Wendy Brown (2006) argues that despite these tensions between neoliberalism and conservatism in the USA, the former provided the manure – to steal a turn of phrase from Alvin Gouldner – from which the new conservative movement could bloom. Here the insertion of neoliberalism as the solution to the specific problems faced by the crumbling post-war order offered a ready-made, and even radical, political-economic agenda which could restore the moral power of state practices in conservative eyes. Our concern in this chapter, then, is to draw attention to the contingent relationship between neoliberalism and political context 43
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by focusing on the conservative movement in the United States. However, we do not want to fall into the trap of naturalizing neoliberalism as an expression of the new conservatism, or vice versa. Following the argument made by Larner (2005: 11) that we need to avoid the assumption ‘that there is a necessary relationship between the two’, we focus squarely on the relationship between neoliberalism and the conservative movement as a political project; in this way we wish to position neoliberalism within the broader reading of US politics rather than treating it as some background atmosphere or conceptual explanans. Thus the politics of neoliberalism is as much the problematic as is the neoliberalization of politics. In so doing we recognize that neoliberalism as we visualize it here is an abstraction, one that is realized in a multitude of different ways and through specific institutional formations, political projects, policy trajectories and so on (see Prasad 2006). It is a methodological fact of life that neoliberalism can only be encountered through such contingent, conjunctural and concrete formations: there are only hybrid manifestations of neoliberalism, it does not originate in a singular time or space, nor is there a pristine essential centre or starting point from which to theorize the political diffusion and development of the neoliberal project (Peck 2004). In order to uncover the structure of neoliberalism, this chapter draws on the findings of a project undertaken by Adam Tickell and Jamie Peck exploring policy elites and think tanks in the USA, part of a broader research project looking at the political and historical geographies of neoliberalism (see also Peck and Tickell 2007). Below we outline the rise of the ‘neoliberal-conservative’ movement in the USA, the influential positioning of neoliberalism in ‘centres of persuasion’ in the USA, and the political-economic hegemony that this has enabled, especially in informing and making a neoliberal-conservative order.
The Politics of Neoliberalism: the Rise of the Conservative Movement In undertaking the dissemination of neoliberal ideas that are designed to shape events and policies, neoliberal thinkers have always sought to enrol political and national-state actors (such as governments and policy makers) in their project, alongside internationalizing their ideas to extend particular political and legal regimes worldwide (as 44
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in the case of private property rights). According to Mudge (2008: 706), the ‘intellectual face’ of neoliberalism is tied intrinsically to a moral and political project ‘articulated in the language of economics’ that emphasizes the moral benefits of free markets as a necessary condition for free and democratic societies. In contrast to the laissez-faire perspective of nineteenth-century liberals so ably dissected by Karl Polanyi (2001 [1944]), the neoliberal project has thereby, and necessarily, sought explicitly to reconstitute state–market relations, what Tickell and Peck (2003: 166) call the ‘mobilization of state power in the contradictory extension and reproduction of market(-like) rule’. Thus neoliberalism is not necessarily based on the idea of less government or less politics; rather, neoliberalism is conceived in terms of different forms of state intervention and political engagement, across all scales. What this indicates is the necessary relationship between neoliberalism and political movements and, furthermore, the need to establish centres of political and intellectual persuasion to facilitate this ongoing interaction. Thinking about the political context in which neoliberalism arose in the United States means that it is necessary to consider the concurrent rise of the conservative movement and why neoliberalism and conservatism are often conflated. However, as with neoliberalism, the ambiguities and contradictions inherent in identifying a conservative movement entail a more nuanced appreciation of the political and moral diversity that has coalesced in modern American conservatism (see Hodgson 1996). In her history of the movement, Roads to Dominion, Diamond (1995) argues that there are three major streams running through the new conservative coalition, comprising anticommunism, traditionalism and (the closest neoliberal variant) libertarianism. Each of these right-wing groupings has different preoccupations, motivations and strategic goals, which raises the question of how this medley of intellectual strands has managed to forge such a powerful, let alone coherent, political movement. In outlining the differences between the strands of conservative thought, Diamond (1995) argues that the anticommunist faction was split between mass-level patriotism and a largely metropolitan, intellectual elite of Cold War Warriors concerned for the most part with US global hegemony and Soviet containment. The latter had their roots in Trotskyist internationalism, especially with people like Irving Kristol who helped found the journal The Public Interest in 45
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1965. Whilst the collapse of the Soviet bloc might have curtailed this strand of conservatism, we can see the anticommunism lineage in the more recent neoconservative Project for the New American Century and subsequent neoconservative dominance of foreign policy in the George W. Bush regime, with the likes of Richard Perle and Paul Wolfowitz taking a leading role in the pursuit of the invasion of Iraq in 2003, or the ‘endgame of globalization’ as Neil Smith (2006) puts it. In contrast to the global and military orientation of anticommunism and neoconservatism, the traditionalist faction of the conservative movement is most obviously aligned with Christian fundamentalism and the ‘New Right’ (Diamond 1995). These Cultural Warriors represent a clearly ‘moralistic’ – as opposed to militaristic – faction, concerned with the regulation of society and social norms through ‘moralized state power’ (Brown 2006: 697). What is striking is the distinct, and inward-looking, national and domestic concern with creating a ‘moral society’, illustrated by the continuing opposition by traditionalist conservatives to abortion, same-sex marriage and other ‘cultural’ issues that, as the journalist Thomas Frank argues, have been manipulated by conservative politicians to appease middle America (see Frank 2006, What’s the Matter with America?). The final faction comprises libertarians whose concern with liberty led to the valorization of free markets and opposition to state intervention, especially the redistribution of wealth (Diamond 1995). Gradually, however, this faction has shifted from an adherence to nineteenth-century laissez-faire towards modern-day neoliberal concern with the state-mobilized extension of market rule. This transformation of the libertarian faction resulted from an alliance with business and corporate interests more concerned with deregulation and lower taxes than with individual liberty (Rampton and Stauber 2004). Consequently this wing of the conservative movement has become highly concentrated in think tanks and research institutes funded by business and deeply embedded in policy-making circles as it seeks to peddle its wares in the ‘marketplace for ideas’ (Ricci 1993). These factions of the conservative movement do not by any means see eye-to-eye on all issues, nor can any faction be unequivocally associated with neoliberalism as a form of market-like rule. Whilst Godfrey Hodgson (2004: 37) suggests that it was the anticommunist 46
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faction centred on William Buckley and the National Review that managed to unite the religious and libertarian right by constructing an overlapping fear with external and internal ‘communist’ threats to the US, others have suggested the need for a more nuanced analysis, especially when factoring in neoliberalism. On the one hand, what the three conservative factions all shared was an antipathy towards state intervention except in specific domains: so, traditionalists seek the state enforcement of ‘morals’; libertarians seek state enforcement of private property and support for business interests; and anticommunists seek the state expansion of the military-industrial complex and US hegemony (Diamond 1995). Thus the complaint of ‘too much government’ and state intervention resolves itself into a concern with certain types of government and certain types of state intervention, rather than a problem with the state per se. On the other hand, however, this analysis does not explain how the state was transformed from a largely redistributive, Keynesian welfare system to an authoritarian neoliberal-conservative order. In order to understand this transformation it is important to turn our attention to the central role played by ideas – and not just interests – in the concurrent rise of neoliberalism and conservatism during the 1970s, their consolidation during the 1980s and their embedding in the mid-1990s (Peck and Tickell 2002). We are not suggesting that ideas are ephemeral; instead we would argue that they have a material basis in the specific political context and geographies in which they arise (such as neoliberal-conservative think tanks), in which they spread (such as elite policy circles), and, crucially, how they engender hegemonic discourses (linking market failure with government interference, for example, which therefore legitimates the usurpation of state power by conservatives). So in contrast to Hodgson’s (2004) claim above about the importance of anticommunism, we want to focus on how neoliberalism provided the conservative movement with the glue that could bind together the often disparate interests of the different conservative factions and thereby provide the impetus for the rise of neoliberalconservatism in the USA from the 1970s onwards. According to Brown (2006), neoliberal ideas and their intellectual proponents provided the means to break the link between political rights and citizenship and the idea of the common or public good. She argues that the specific governmental rationality of neoliberalism prepared 47
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the ground for modern conservatism’s anti-democratic project by de-politicizing social problems, converting them into ‘individual problems with market solutions’ (ibid.: 704). In this way and, as Lisa Duggan (2003) also argues, through the neoliberal valorization and establishment of the market as the central organizing institution in society – in itself an active achievement rather than a natural state of affairs – economic issues could be separated from political and cultural areas of life. In turn the political context of neoliberalism – its successive political-economic expansion under Reagan, Bush Senior and Bush Junior – has been dependent upon the political success of the conservative movement. Thus, in this context, we can say that neoliberalism is inextricably tied to the conservative movement, creating what we consider as a neoliberal-conservative order. We look at how this has been achieved in the rest of the chapter.
Making the Neoliberal-Conservative Order Analysing the political context of neoliberalism creates a number of non-trivial methodological challenges. There are, for example, multiple ways of approaching this empirically, including focusing on national transformations or case studies (see Miller, this volume); drawing insights from comparative studies (Hinojosa and Bebbington, this volume); studying specific institutions and policies (van Waeyenberge, this volume); and, researching new subjectivities, governmentalities and agencies (MacLeavy, this volume). We can learn something important from all of these approaches, whether it is the differences in particular national varieties of neoliberalism entailing specific state strategies (see Birch and Mykhnenko 2009) or the particular ideological, theoretical and political underpinnings of institutional change (see Blyth 2002). Here our empirical focus is on political and policy elites. This emphasis is informed by both pragmatic and theoretical concerns. On the one hand, pragmatically it allows us to conduct in-depth interviews with policy insiders that we know something about and people whom our age, professional status, ethnicity and gender allow us to relate to easily. Furthermore, following initial access to what are very tight elite circles, we have discovered that we can cover a lot of ground through referrals within the network. This enables us to have conversations concerning both policy specifics 48
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and broad intellectual and political currents with agents directly involved the process of neoliberalization in different ways and at different times. On the other hand, theoretically it enables wellinformed discussions of the formation of neoliberal-conservative projects and programmes – which were and are, of course, ‘made’ rather than found or rediscovered – often with some of the original architects or protagonists. These agents of neoliberal-conservatism can be afforded a degree of ethnographic complexity through this method, rather than invoking them as cardboard cutouts in some grand conspiracy story. Further, first-hand disclosures concerning the neoliberal ‘war of position’ are articulated by the actors themselves, allowing different narrations to be held up against other insider accounts, as well as those of external actors within the process.
‘Centres of persuasion’ Situating our analysis of neoliberal ‘centres of persuasion’ (such as think tanks) within an American political context enables us to identify the ‘essential’ and ‘necessary’ characteristics of the neoliberal project while, at the same time, having inescapably to confront the reality that every such project is by definition a hybrid structure, reflecting in a profound way the qualitatively different political histories, institutional cultures and constitutional settlements of different countries. Moreover, this means that it cannot be an either/or question about whether to focus on the essence or the hybrid: one must take account of both. What this enables us to do is focus on what the agents of neoliberal transformation actually do when they cluster in very close proximity to the state apparatus that they ostensibly abhor, as opposed to focusing on what their rhetoric might suggest they do. This ultimately allows us to get a sense of the local and transnational constitution of the ‘centres of persuasion’ like Washington DC and their distinctive, varied and diverse dynamics as agglomerations of policy-making elites. What is evident from the off is that neoliberalism has been actively promoted as an intellectual mission from its inception as a utopian vision in 1938 through a number of intellectual centres (see Birch and Mykhnenko, this volume). In spreading the word and convincing others, these centres of persuasion have been ably supported by conservative business interests, foundations and individuals in networks such as the Mont Pelerin Society (MPS) – established in 1947 – and ‘independent’ research organizations such 49
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the American Enterprise Institute (AEI), which was set up in 1943 but grew significantly during the 1970s (Ricci 1993: 160). However, as would be evident from the plethora of nationally and internationally based initiatives undertaken and promulgated by neoliberal intellectuals, neoliberalism was a composite, transnational construction from the start. However, no matter how cohesive and coherent neoliberalism may look now, its emergence and dissemination were not inevitable and it has never been a unilinear and singular project, even in the United States. If the work of Friedrich von Hayek represents a more European strand within what we now understand to be the neoliberal project (see Birch and Mykhnenko, this volume), the American strand was closely associated with his fellow MPS member Milton Friedman, who not only won the Bank of Sweden Prize two years after Hayek but also had a more visible public presence in his role as a Wall Street Journal editorial writer. The US and increasingly global audience for Friedman’s monetarist arguments subsequently expanded in the context of the 1970s oil crisis when inflation emerged as a key policy problem, although the extent to which monetarist ideas were successfully (and deliberately) built into policy making is debatable (Prasad 2006). The public and visible side of these neoliberal ideas was strengthened in the 1970s with the establishment of new centres of persuasion such as the Heritage Foundation. Heritage was set up in Washington DC in 1973 by Ed Feulner as a counterweight to the formidable array of ‘liberal’ policy institutions that had been constructed around the New Deal settlement. As a senior officer in a conservative think tank explained: But in 1973, if you go back, there were several things that kind of happened about the same time. . . . The Republican Study Committee was formed in the House of Representatives, which was the conservative group, and it was basically them sort of recognizing that they didn’t have the resources available to them that the majority did – and it was much more skewed in the 70s than it is today. It’s a little bit more balanced, I think, in how they divide up the resources. Not only did you not have, I mean you didn’t have committee staff, you didn’t have control of the agenda, it went all the way down the line. So I think they really felt, you know, beleaguered and they decided – and I’m not sure if it was Phil Crane or who exactly came up with the idea, whether it was Ed Feulner . . . but they should pool a little bit of their office resources to finance this operation and try to get a little bit ahead of the curve. I mean, at the time they said that they were just sort of catching
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the grenades and they felt like they needed to throw a few of them. (February 2005)
What is evident here is that the establishment of neoliberal centres of persuasion was deeply bound up with and embedded in the broader conservative movement. For example, the cross-fertilization of organizations and groups such as the Heritage Foundation, the Republican Study Committee and the American Legislative Exchange Council, all established in 1973, can be seen as a response to the perceived threat that neoliberals and a new breed of conservatives saw in the Democratic dominance of the policy agenda. Furthermore, this was a time when ‘real conservatives’ were beginning to break away from the then dominant pragmatist perspective that surrounded the Nixon administration and the Republican establishment. As with the earlier intellectual networks and power centres such as the MPS there were – and still are – at a superficial level organizational similarities between different neoliberal-conservative think tank communities in places like Washington DC and elsewhere (London, for example). However, it is also notable that the American think tank community is located within distinct state and class formations that set it apart from other places. The USA has an extraordinarily deep and complex think tank community characterized by several key features. First, there is an extensive functionalinstitutional division of labour within the think tank community, on the one hand, and between think tanks and political parties, on the other (Ricci 1993). For example, the initial orientation of the American Enterprise Institute (AEI) was ostensibly independent research rather than policy making, contrasting with the Heritage Foundation which was from the off – and still is – explicitly concerned with directly influencing policy makers (Beder 2006; Peet 2007). At the same time, US political parties are heavily reliant upon these think tanks and policy entrepreneurs for forming and developing their specific party policies, because the Republican and Democratic parties lack a centralized party structure on which they can draw instead (Ricci 1993). Second, the US neoliberal-conservative movement represents quite diverse political and ideological positions within the broad spectrum of conservative, free enterprise and small government ideologies that are held together by what one informant described as a ‘leave us alone coalition’. Third, the think tank community has a broad geographical reach, albeit characterized by a concerted clustering around various arms of the state 51
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reflecting the US constitutional settlement’s institutional and geographical division of powers. Finally, the financial resources that the US think tank community can draw on are considerable, especially from the business community and wealthy benefactors including the Sarah Scaife Foundation, John M. Olin Foundation, Koch Family Foundation and Joe Coors (Beder 2006). By way of contrast, the UK think tank community is smaller, sporadically influential and grafted onto a highly centralized state structure with little representation outside of London (Peck and Tickell 2007). The UK community is characterized by a relatively simple division of labour with an overwhelming focus on mediumrange policy making rather than the more long-term and direct-topublic efforts in the USA. There is also a narrower ideological spectrum in the UK, although the ascent of New Labour has led to an increase in purportedly centre-left think tanks (such as Demos, the Institute for Public Policy Research, the Smith Institute and Compass). Despite these differences between the two sides of the Atlantic, and in slightly more abstract terms, we can still see some similarities between the US and UK think tank communities. Furthermore there is a long history of familiar and far-reaching contact between these two geographical sites of neoliberal persuasion that stretches back to the 1950s and 1960s and continues today. In general both centres of persuasion are oriented towards cosmopolitan decision making and intellectual elites that are clustered around the state apparatus and provide active mediation, translation and ad hoc or post hoc rationalizations of specific neoliberal policy projects.
Political-economic hegemony After Gramsci, we can conceive of the neoliberal-conservative think tank communities in the USA described in the previous section along with the associated networks of policy elites and policy entrepreneurs as the organic intellectuals of the ascendant neoliberal order. Whilst Gramsci (1971) remarked that ‘all men are intellectuals’ he also pointed out that ‘not all men have in society the function of intellectuals’. By this he meant that intellectuals play important roles in capitalist social formations, particularly during periods of crisis when they are ‘deputized’ to provide the direction and mediumterm coherence needed by the dominant classes. Gramsci ascribes to intellectuals a role as ‘the thinking and organizing element of a 52
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particular fundamental-social class’, which means that they are ‘distinguished less by their profession’ and more ‘by their function in directing the ideas and aspirations of the class to which they organically belong’ (Introduction by Hoare and Smith in Gramsci 1971: 3). In relation to the US neoliberal-conservative movement centred in Washington DC, this means that the think tanks at the forefront of neoliberal-conservative proselytizing, funded by business and the ‘capitalist classes’, have provided and continue to provide the intellectual and institutional shell for the propagation of neoliberal and conservative organic intellectualism. As some have described them, they are in this sense ‘universities without students’ in which the making of ‘expertise’ and ‘experts’ is as important as the ideas that they actually produce (Ricci 1993). This is a special concern for the movement because of the perceived marginalization, if not outright exclusion, of conservatives from US university campuses as evident in initiatives such as Campus Watch. The proliferation of neoliberal and conservative think tanks since the mid-1970s created an alternative structure for conducting much of the preparatory work on a whole series of strategically significant projects (privatization of state-owned industries and pensions; the ‘reform’ of tax, tort and welfare policies; labour market re-regulation; trade liberalization, et cetera). These projects not only severely damaged the New Deal settlement and institutional remnants of the 1960s equity movements (civil rights, women’s liberation, and others), but also enable the ‘rhetorical separation of the economic from the political and cultural’, thereby destroying the economic rationale for the redistribution of power and resources (Duggan 2003: xiv). However, the political-economic dominance of a neoliberal vision does not mean that organic intellectuals lose their relevance – quite the contrary, as this interviewee explains: Most of the intellectual work has been done. Privatizing social security, individual savings accounts, school choice, tax reform – lower taxes, simpler taxes, tax income one time – deregulate telecommunications, power, all of this stuff has been thought out. Now all we’re having fights about, [is] who gets to go first. . . . There’s not a lot of work for public intellectuals to do, except to popularize what’s already been thought up, so, does there get to be another von Mises, or Friedman or whatever? . . . Adam Smith kind of thought it up and the Constitution wrote it down . . . we don’t need some new big idea.
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Bush’s list of things he’s trying to do is the list I gave him, it’s the Movement’s. . . . With the exception of the war, Bush’s agenda is the Movement’s agenda. That’s why we’ve supported him. Bush’s agenda is reform social security, school choice, cut taxes, support free trade, tort reform. Okay, we’ve just got to keep moving on that stuff. So basically, think tanks will have to do a lot of repetition and a lot of coming up with new arguments – you know, here’s a new crisis. (Director, conservative policy advocacy group, April 2004, emphasis added)
So we have to be absolutely clear in our analysis that neoliberal intellectuals do not simply fit into the political-economic process as the converters of pristine, theoretical ideas into concrete policy programmes; this view is deeply problematic since it assumes a unilinear process of advocacy and acceptance. Rather, as in the past, what happens now is that political legitimacy and governmental experimentation and think tank rationalizations proceed hand-in-hand through a dialectical process of mutual exchange and persuasion – as this senior staffer explains: Not that we can give them [politicians] orders; the only thing that we really have at our disposal is moral suasion, that’s it. . . . In politics what matters most of all is have you got money and can you deliver votes. We have neither. We have to rely just on nagging, pestering and telling them, ‘That’s the wrong thing to do; this is the right thing to do.’ Sometimes that works and sometimes it doesn’t, but that’s really where our power, such as it is, comes from. (April 2004)
Consequently these are not projects that are born solely in ivory tower contemplation; in many respects, the ‘practical’ side of the neoliberal project is framed within a narrative that is implicitly flexible yet is underpinned by a programmatic logic. As such, the Gramscian view that intellectuals are mediators in the process of social transformation and struggle retains its conceptual relevance. Think tanks and associated policy elites represent organic intellectuals that are, to use Hayek’s felicitous phrase, ‘second-hand dealers in ideas’ helping to translate neoliberalconservative precepts into feasible policy proposals, often working in close conjunction with state policy makers while, at the same time, seeking to influence the general climate in which elite policy formation is undertaken. Neoliberal-conservative intellectuals are thus not concerned explicitly with engendering a mass movement as such; instead the mediation of ideas occurs in a very close physical 54
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and political proximity to elite policy makers, as this senior economist from a US think tank explains: It would depend on each issue, but certainly in terms of what I do on tax policy, if I could just control who was in ten positions in this town I could declare victory, or if I couldn’t declare victory at least I’d know that bad things wouldn’t happen. So it really is – there’s a very narrow group of key people and those are the ones you focus the most on, because it’s desperately important for them to understand and to get things right; then you could have hundreds – or even thousands, depending on how wide your outer circle – of other people that are helpful to educate them, influence them and so on and so forth. But if you don’t have the core people in the centre – the Treasury Department, the White House, the Tax Rate Committee, the Leadership and Congress – if you don’t have people in those positions who understand what the right thing to do is, then you’re in real trouble. (Washington DC, April 2004)
Although think tanks and policy entrepreneurs have a profoundly symbiotic relationship with the political class, they are often disdainful – even distrustful – of politicians themselves, operating as a kind of intellectual conscience, while seeking to keep medium- and longterm objectives in view. For example, while politicians declare victories all the time, the demeanour of the intellectuals within the neoliberal-conservative think tank community is typically sceptical, restless and somewhat pessimistic: What you’re doing is you’re trying to fence off what is acceptable policy from politicians who spend maybe 5 per cent of their day thinking about policy. Some of them come to office with strongly held ideas, and they might know a lot, but the average politician is just a politician. They’re mostly in it because they just have personal ambition, they happen to be a good speaker, or charismatic but they don’t have any. . . . There’s nothing more there. They’re not venal necessarily, though some of them might be. (Senior economist, conservative think tank, Washington DC, April 2004)
As intellectual strategists in an endless war of position, these activists always have one eye on the political horizon, concerned that the enemy is not only the ‘other team’ but also the pragmatists and moderates within their own neoliberal-conservative movement. Amongst these neoliberal cadres in the USA, special contempt is reserved for socially moderate and pragmatic Republicans and freespending Congressional leaders. Overall what we find is that there is a mixture of opportunism, reaction and tactical behaviour, 55
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blended with a strong sense of strategic direction exemplified by this senior staffer: You have to get a gift from your enemies. Jimmy Carter created Ronald Reagan. Bill Clinton, with the Democratic majority in Congress, created the conditions for a Republican landslide in 1994. Once the enemies, so to speak, create the conditions, it’s then the job of groups like Heritage and CATO and AEI and others, along with various and sundry fellow travellers on the Hill and elsewhere, it’s then our job to sort of channel that discontent in a productive way. So, leading up to the 1980 election, it wasn’t just that we were putting together the Mandate book, because that’s almost like upping the horses out of the barn and you want to show the horse galloping in a certain direction. . . . We’re saying, ‘These are the banks of the river. The river is going to that sea, which is a wonderful place to be. We don’t want the river to go over its banks and wander off in that direction.’ (April 2004)
Conclusion The neoliberal-conservative movement, along with its organic intellectuals represented by the think tanks and policy entrepreneurs pushing free market ideas and policies, has been ascendant for nearly three decades, something which US conservatives, when pressed, will occasionally concede. However, whilst they admit that things may have flowed in their direction for some time, they still emphasize that the risks of the river bursting its banks are ever present – in the form of the Iraq War, healthcare reform, social security and so on – which means that the think tank community spends a great deal of time fretting about these risks, while seeking to keep in focus its own strategic objectives. More recent events, particularly the financial crisis starting in 2007 and election of Barack Obama in 2008, have meant that the neoliberal-conservative movement has been pushed onto the back foot. This is not to suggest that neoliberal ideas are suddenly off the agenda since they remain deeply embedded (see Peck et al. 2009), but rather that the recent faux-Keynesian interventions in the economy to prop up failing financial institutions have made very visible the contradictory tensions in the neoliberal-conservative movement that were once hidden by the separation of the economic from the political and cultural. It is increasingly evident that both the market model propagated by neoliberal intellectuals and the 56
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relationship between the conservative political movement and neoliberal projects has left a large proportion of American citizens financially and, therefore, socially insecure. Thus it is no longer obvious that neoliberal ideas will be able to obfuscate the relationship between economic and political domains as they once did (Duggan 2003; Brown 2006). However, what remains on offer from the neoliberal-conservative order is, of course, the utopian vision of a free market society in which a minimalist state functions only to secure individual liberty and the law of contract. Such utopian visions retain their strength because, even though they are by definition manifestly unattainable, they nevertheless provide a strong sense of strategic direction. The extent to which this vision and strategic direction are threatened by the current economic crisis, exposing the fractures in the neoliberalconservative order, must remain an open question. What may ensure these fissures widen further is the ongoing critique of neoclassical economics and the failure of mainstream economists to predict, alleviate or respond to the collapse of global financial markets (see Fine, this volume). Furthermore, the need for government support of collapsing banks, financial institutions and private enterprise weakens the minimalist state arguments put forward by neoliberal think tanks over the last thirty years and more. At the same time the idea of spreading liberty through property has been dealt a severe blow by the sub-prime mortgage crisis and the erosion of the ‘wealth effect’ that this entails (see Brenner 2002). Nevertheless, the neoliberal-conservative movement has always been at its most dogged when faced with a new political enemy; this reactionary instinct is all too obvious in the current opposition to Obama’s healthcare plans, which illustrates the extent to which the neoliberal-conservative movement is still alive and kicking, even if it has lost the dominance it held all too recently.
Acknowledgements We would like to thank Jamie Peck and Vlad Mykhnenko for their comments on an earlier draft of this chapter.
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References Beder, S. (2006) Suiting Themselves: How Corporations Drive the Global Agenda, Earthscan, London. Birch, K. and Mykhnenko, V. (2009) ‘Varieties of Neoliberalism? Restructuring in Large Industrially-Dependent Regions across Western and Eastern Europe’, Journal of Economic Geography, Vol. 9, pp. 355–80. Blyth, M. (2002) Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century, Cambridge University Press, Cambridge. Brenner, R. (2002) The Boom and the Bubble: the US in the World Economy, Verso, London. Brown, W. (2006) ‘American Nightmare: Neoliberalism, Neoconservatism, and De-Democratization’, Political Theory, Vol. 34, No. 6, pp. 690–714. Diamond, S. (1995) Roads to Dominion: Right-wing Movements and Political Power in the United States, Guildford Press, London. Duggan, L. (2003) The Twilight of Equality: Neoliberalism, Cultural Politics, and the Attack on Democracy, Beacon Press, Boston MA. Frank, T. (2006) What’s the Matter with America? The Resistible Rise of the American Right, Vintage Books, London. Gramsci, A. (1971) Selections from the Prison Notebooks of Antonio Gramsci, trans. and ed. Q. Hoare and G. N. Smith, Lawrence and Wishart, New York NY. Hodgson, G. (1996) The World Turned Right Side Up: A History of the Conservative Ascendancy in America, Houghton Mifflin, Boston MA. —— (2004) More Equal than Others: America from Nixon to the New Century, Princeton University Press, Princeton NJ. Larner, W. (2003) ‘Guest Editorial: Neoliberalism?’, Environment and Planning D, Vol. 21, pp. 509–12. —— (2005) ‘Neoliberalism in (Regional) Theory and Practice’, Geographical Research: Journal of the Institute of Australian Geographers, Vol. 43, No. 1, pp. 9–18. Mudge, S. (2008) ‘What Is Neo-Liberalism?’, Socio-Economic Review Vol. 6, No. 4, pp. 703–31. Peck, J. (2004) ‘Geography and Public Policy: Constructions of Neoliberalism’, Progress in Human Geography, Vol. 28, pp. 392–405. —— (2008) ‘Remaking Laissez-Faire’, Progress in Human Geography, Vol. 32, pp. 3–43. Peck, J. and Tickell, A. (2002) ‘Neoliberalizing Space’, Antipode, Vol. 34, pp. 380–404. —— (2007) ‘Conceptualizing Neoliberalism, Thinking Thatcherism’, in Leitner, H., Peck, J. and Sheppard, E. (eds) Contesting Neoliberalism: Urban Frontiers, Guildford Press, London. Peck, J., Theodore, N. and Brenner, N. (2009) ‘Postneoliberalism and Its Malcontents’, Antipode, Vol. 41, pp. 1236–58.
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Peet, R. (2007) Geography of Power: the Making of Global Economic Policy, Zed Books, London. Polanyi, K. (2001 [1994]) The Great Transformation, Beacon Press, Boston MA. Prasad, M. (2006) The Politics of Free Markets: the Rise of Neoliberal Economic Policies in Britain, France, Germany and the United States, University of Chicago Press, Chicago IL. Rampton, S. and Stauber, J. (2004) Banana Republicans: How the Right Wing is Turning America into a One-Party State, Robinson, London. Ricci, D. (1993) The Transformation of American Politics: the New Washington and the Rise of Think Tanks, Yale University Press, New Haven CT. Smith, N. (2006) ‘The Endgame of Globalization’, Political Geography, Vol. 25, pp. 1–14. Tickell, A. and Peck, J. (2003) ‘Making Global Rules: Globalization or Neoliberalization?’, in Peck, J. and Yeung, H. (eds) Remaking the Global Economy, Sage, London.
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Neoliberalism, Intellectual Property and the Global Knowledge Economy DAVID TYFIELD
In other chapters (those by Birch and Mykhnenko; Jessop; Lohmann; and Shaoul), we see that neoliberalism has radically restructured the global economy. This chapter focuses on one key aspect of this process, namely the striking rise to prominence of global intellectual property rights (IPRs), particularly the Trade-Related Aspects of Intellectual Property Rights agreement(s) (TRIPs) of the World Trade Organization (WTO). TRIPs, which came into effect on 1 January 1995, is one of the most important neoliberal developments in global economic regulation. Not only does it bring together key neoliberal designs regarding both globalization and the construction of a knowledge-based economy (KBE), it is also a singular historical event, representing the construction of public international law by, and in the exclusive interests of, a tiny handful of transnational corporations (TNCs). Furthermore, this exceptional coup of international economic regulation was achieved against broad-based and concerted opposition. As such, understanding TRIPs – what it is, how it came to be signed, whom it benefits and how – offers a unique opening to understanding the broader historical project of neoliberalism outlined by Birch and Tickell amongst other contributors to this book. It also, therefore, opens up an important perspective regarding the current crisis, in particular by following developments within the life sciences, which have been particularly important but not obvious players in neoliberalism.
Neoliberalism and the Primitive Accumulation of Knowledge Production Neoliberalism emerged as the dominant political force in the Global North around 1980, in the context of the crisis of the Keynesian
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welfare/warfare state model of capitalism (see Birch and Mykhnenko; Jessop, this volume). Two points must be noted in order to understand the central role of IPRs in the neoliberal project, relating to the two aspects of neoliberalism as both a political project to restructure the global economy and a political ideology providing a unifying vision for disparate political interests. First, regarding the global economic restructuring, we must first consider the nature of the political economic crisis from which neoliberalism emerged triumphant. A capitalist economy must expand continually if it is not to collapse, a consequence of the dynamics of self-interested investment upon which it depends. The dynamics of a capitalist economy and the production of profit must both be understood as being dependent upon the spread and intensity of capital in any given society. Only in this way can we explain how the apparent exchange of equivalents can produce a profit – a surplus of monetary value at the level of the economy as a whole (Fine and Saad-Filho 2004). ‘Capital’ here refers to a social relation, namely that of waged labour employed in the production of commodities to be sold for a profit. The ever-increasing penetration of the capital relation into a society is only possible given politicaleconomic settlements (established through political struggle) that create a social possibility space for capital’s expansion by excluding and displacing its costs to other spaces (such as the Global South) and times (that is, the future) (Jessop 2000). Periods of ‘normal’ growth are merely those in which political acceptance for a given round of capital penetration into society has already been broadly established through prior struggle. Yet, conversely, the inexorable growth of a capitalist economy entails that it must, in time, come to push at these very political boundaries that have protected it, with a crisis of profitability that elicits capitalist political efforts to expand these boundaries yet deeper into social life. This includes the private appropriation of resources previously held in common so that these can be exploited for profit, a process called ‘primitive accumulation’ (Marx 1999; Arrighi 1994; Harvey 2003) that Lohmann illustrates in relation to carbon trading in the next chapter. Finance plays a crucial role in this process (see Shaoul, this volume). For example, since the 1970s crisis of industrial profitability, investment has been redirected increasingly to the financial sector, which promised higher profits. The resultant ‘financializa61
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tion’ of the economy concentrates both economic and political power in the hands of finance, allowing it both to enforce the radical restructuring of the economy in order to return industries to profitability (in the face of labour unrest) and to change economic regulation in order to incubate new industries and opportunities for profit. Which social spheres are targeted for the further expansion of capital is clearly a contingent matter of what seems most promising at the time, particularly to this newly dominant financial sector (see Lohmann, this volume). It is also a matter of political power as regards what sectors of the society could be forced to accept marketization, conditioned by the existing penetration of capital. In the case of the neoliberal project, the opportunities for expansion of capital were two-fold (cf. Jessop, this volume, on time-space distantiation and compression). First, and most obviously, capitalist relations of production could spread extensively to societies as yet not fully integrated into the global capitalist market, as per globalization. Second, however, the intensity of the capital relation in societies whose economic relations were already dominated by capital could also increase through subsuming further social practices. It is this latter process in particular that may be summarized under the heading of the KBE regarding the marketization of knowledge production. This can be seen in two different ways. First, with the maturity of existing technologically advanced industries, capital tends to search out new investment possibilities, as revealed by the contemporaneous progress of both science and technology. These new technologies afford manipulation of material reality in novel ways in order to create profitable commodities and thus open up an entirely new sphere of social reality into which capital can expand (Arrighi 2005: 35–7). The two novel technologies of greatest significance in the neoliberal age have clearly been information and communication technologies (ICTs) and biotechnology. ICTs are obviously related to a knowledge economy, allowing for the significant growth of labour that is dependent on information manipulation and technical knowledge, as well as facilitating global production networks and ‘flexible’ production processes. Biotech has yet to penetrate the economy to the same extent, but it is also implicated because it is exceptional in the level of scientific sophistication it presupposes as a factor directly involved in the innovation of new products. 62
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Second, the Keynesian period had already also seen the expansion of capital relations not only into industry but also into the ‘culture industries’ (Adorno 2000), with oligopolies controlling all major cultural outputs. The intensification of capital in these societies thus had to extend into spheres of social life, held in common to date, even more removed from the daily material reproduction of society. Expansion into the relations of production of knowledge has obvious complementarities with other tendencies of the growth of the economy. The connection between neoliberalism and the KBE, however, goes beyond this. For, third, neoliberalism as an ideology also has particular conceptual resonance with the drive to privatize and marketize the creation of scientific knowledge (Mirowski 2008). Neoliberal ideology, following Hayek, is based on the analysis of the market not merely as the most efficient coordination mechanism for economic activity. Rather it is this because it is also the best mechanism for the optimal societal aggregation of the limited information of individual market participants, while maximizing human (negative) liberty. The market is thus not merely an economic phenomenon but also, and primarily, an epistemic one, necessarily trumping the decisionmaking capabilities of government, that is, decisions based on the (similarly) limited information available to the individuals in positions of authority. A central concept of neoliberal political ideology is thus the ‘marketplace of ideas’ as Miller and Birch and Tickell demonstrate in the preceding chapters. The phrase has two interrelated connotations. On the one hand, it signifies that the primary virtues of the market are epistemic and that the knowledgeable governance of society should be left to the market. On the other, it also privileges a conception of science, and indeed society, in which ideas should compete with each other in a proper market. In these two respects, then, neoliberalism has been centrally concerned with the marketization of the production of knowledge on a global (or ‘universal’) scale. For functioning capitalist commodity markets to be possible, however, private property rights must first be instituted in that resource – that is, IPRs for markets of knowledge. In the present case, all these various trends converged in the ‘globalized construction of knowledge scarcity’ (May 2006: 53) that is the TRIPs agreement.
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What is TRIPs? Effects and Significance TRIPs is one of the founding treaties of the WTO, following the post-war General Agreement on Tariffs and Trade (GATT). It establishes for the first time globally harmonized minimum standards for IPRs. TRIPs thus institutes major changes in IPR laws, especially in developing countries, but three stand out:1 1 A world-wide harmonization and strengthening of IPRs, which can be enforced through the powerful machinery of the WTO (Preamble, Article 7);2 2 The compulsory extension of the scope of prima facie patentability to all commercially exploitable products and processes (Article 27). This changes common practice amongst developing countries to exclude from patentability pharmaceutical, medicinal or food products in particular; and 3 The compulsory extension of patentability to all micro-organisms and all ‘non-biological and micro-biological processes’ ‘for the production of plants or animals’ (Article 27(3)). The latter, therefore, includes all genetically modified plants and animals. The effects of these changes are legion – though we may note immediately a clear focus upon the life sciences where they are most controversial – and have been judged to be overwhelmingly negative by numerous commentators. A non-exhaustive list includes the following. First, by imposing patents on medicines necessary for treatment of diseases affecting large sections of the developing world, such as AIDS or tuberculosis, costs of these drugs are inflated beyond the financial means of most patients (Drahos and Mayne 2002). Second, by setting up IPR regimes in developing countries with rich resources of biodiversity, ‘bioprospecting’ (or ‘biopiracy’, depending upon your perspective) is encouraged, in which private enterprises from the Global North appropriate common resources of the Global South. This process is particularly facilitated by genetic engineering techniques, which allow even insignificant genetic modification of these plants to be patented (Drahos and Braithwaite 2002; Shiva 1998, 2001). Third, Northern businesses also exploit the traditional medicinal knowledge as pointers for 64
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further research, and can patent the resulting knowledge (Dutfield 2003; Shiva 1998). Fourth, through the substitution of traditional crops and farming methods by patented, genetically modified crops, issues of social displacement and food security for billions of the world’s peasantry arise (Shiva 1998, 2001). Last, but by no means least, the economic case for TRIPs is strikingly absent. First, as regards its effects on economic growth, there is almost unanimity in the economic literature that TRIPs shifts the balance of economic gains significantly in favour of developed economies, particularly the United States, and away from developing countries (at least in the ‘short term’), thus exacerbating global inequalities in economic development.3 Indeed, one widely respected, and generally proTRIPs, analysis concludes that ‘blind faith’ is the only basis for the rest of the world outside the United States to accept TRIPs (Maskus 2000: 190). Even within the developed economies, including the US, the case for TRIPs was both spectacularly weak and dependent upon forging from scratch a conceptual connection between IPRs and free global trade. As regards the latter issue, this involved a wholesale redefinition of the nature and purpose of patents. Patents are (temporary) monopoly rights regarding the exploitation of various ‘intellectual’ resources. As such, they have traditionally been treated as directly opposed to free and open markets. Portraying patents as a central issue for the global opening of trade was thus an extraordinary conceptual sleight of hand. Furthermore, patents have generally been legitimated as necessary incentives for individuals to engage in the risky and uncertain process of technological invention. Conversely, the argument for TRIPs was that scientific research would not be developed into profitable commodities without patents – a concern with innovation rather than invention. This opens the economic case for TRIPs to the objection that IPRs are a relatively unimportant mechanism for the translation of scientific research into innovation in the vast majority of industries (Mansfield 1986). Furthermore, literature on this empirical claim – which was still ‘emergent’ in 2003, some 10–15 years after the TRIPs negotiations (Cohen and Merrill 2003: 3) – shows that there are few ‘robust conclusions’ for patent policy regarding its connection to innovation (Jaffe 2000: 531, 554) and that, if anything, strengthening patents has had distinctly negative effects on innovation in the US (Jaffe and Lerner 2006). 65
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TRIPs thus effects momentous and contested changes to global trade rules in the absence of any credible economic case. Yet amazingly ‘probably less (sic) than 50 people were responsible for TRIPs’ (Drahos and Braithwaite 2002: 10, quoting a senior US trade negotiator). Furthermore, these people were representatives of private businesses, mostly based in the US, with significant interests in IPRs, not politicians or national trade diplomats who actually signed the agreement. Thus ‘in effect, twelve corporations made public law for the world’ (Sell 1999: 171). These companies together formed the Intellectual Property Committee (IPC) in March 1986 to coordinate their political lobbying for TRIPs. Regarding patents, the American pharmaceutical TNCs (henceforth ‘Big Pharma’) dominated, particularly Pfizer, while for copyright it was the IT and recording industries, particularly IBM. These companies stood to profit enormously from TRIPs; and, indeed, the economic rationale for TRIPs (though not its justification) is only apparent for these agents. The IPC’s control of the US Trade Representative (USTR) was almost total. For instance, the IPC drafted memos that were then circulated as government policy. Furthermore, while those behind TRIPs managed to get ‘95 per cent’ of what they were after (Drahos and Braithwaite 2002, quoting the Chairman of the IPC), this was also in the face of striking opposition, particularly from the large developing countries, India and Brazil, that stood to lose out significantly. Yet eventually this opposition was neutralized, not least through the deployment of threats from the USTR that these countries would be subject to American penalties and tariffs for their ‘restrictive’ trade practices. In these circumstances, the only alternative was a multilateral agreement that could at least provide a forum for some arbitration of these disputes. It is clear, therefore, that TRIPs represents the deployment of exceptional political power. Yet this cannot be explained purely in terms of strong corporate interests getting their will, as comparison with parallel neoliberal measures of global regulation reveals. The negotiations for global rules on financial investment (the TradeRelated Investment Measures agreement, TRIMs) and on trade in services (General Agreement on Trade in Service, GATS) were both much less successful for their corporate protagonists, despite having significant backing from powerful industrial and financial sectors (Sell 2003). 66
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The US Life Sciences Patent Coalition How, then, did US Big Pharma come to assume such dominance over national trade policy, which in turn had unique political leverage on the global stage, so as to implement a global law in its exclusive interest? Unpicking this history provides important insights into neoliberalism. In particular, this analysis reveals the centrality of TRIPs to neoliberalism and the structural enablement upon which the signing of TRIPs depended. It thus identifies the life sciences as crucial players in the development of neoliberalism as a concrete political project; players that will, in turn, be important in its current crisis and what emerges from it. First, in 1979/80 there was a reversal in the global balance of power towards the US and away from the Global South, which had been growing in influence through the 1970s. This turnaround was primarily due to a shift in the balance of class forces within the Global North, towards the political dominance of finance capital – in other words, financialization, as described above and elsewhere in this book (by Shaoul, for example). In particular, the 1979/80 hike in interest rates by the Federal Reserve following the dollar crisis triggered by the Iranian Revolution ended nearly a decade of cheap credit to developing countries, which suddenly found themselves under debt bondage to Wall Street, and signalled a new era in policy in which the demands of finance would be paramount. With the collapse of the Soviet Union in the late 1980s, American power grew yet further (its triumph greeted by now famously premature declarations of the ‘end of history’), and it was in these circumstances that developing country resistance to TRIPs was finally squashed in 1989. As such, the effectively unassailable power of the US at this particular historical conjuncture can only be understood in the context of the political-economic structural enablement of the crisis of Keynesianism and the emergence of a financialized neoliberalism (see Jessop; Shaoul, this volume). But how did one industry come to have such influence over US national trade policy? To understand this process, we must look not only at Big Pharma’s success regarding TRIPs but also regarding its steady accumulation of power within the US itself, including domestic patent reform. This latter process, however, is a history that incorporates not just Big Pharma but also two other key sectors: the emergent biotechnology firms and the life science departments 67
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of (leading) US universities. During the early 1980s, these three sectors found themselves converging into a broad-based and singleissue political coalition in favour of domestic patent reform (Tyfield 2008). As this coalition grew in political influence, it acted as a springboard and background for the further efforts of Big Pharma regarding global patents. Indeed, through its domestic connection with biotech and life science research, not least in the minds of Washington policy makers across both major parties, Big Pharma could plausibly cast itself as a uniquely important national asset – and one besieged by weak international patent rights. The importance of this connection cannot be underestimated. Big Pharma was not alone in the late 1970s in facing problems of profitability. Political demands from this industry for stronger patents could easily have been rejected by a generally pro-free-trade Congress as the protectionist demands of a mature, if not declining, industry (cf. Republican objections to the current bail-out of the automotive sector). Yet the pharmaceutical industry’s demands were met with unparalleled and bipartisan support (Slaughter and Rhoades 2002) because Big Pharma could depict them as the demands also of the ‘technology of the future’ (biotech), which would resolve the current crisis of profitability, and a crucial national asset (molecular biology research). Let us briefly consider how these three sectors converged into a pro-patent coalition. First, in the late 1970s Big Pharma was, like most industries at the time, facing a significant profitability crisis. This was due in part to ever-increasing R&D costs – not only a result of a dwindling pipeline for new products but also increasing regulatory costs following the thalidomide scandal – and in part to growing competition within the industry, including from generic drug manufacturers from developing countries. The recouping of R&D investment in the pharmaceutical industry, however, is unique in its dependence upon patents. In particular, drugs are often relatively straightforward and inexpensive to reverse engineer, meaning that trade secrets and know-how are not always effective in preserving monopoly innovation rents, while much of the huge R&D expense is spent on regulatory trials that yield no easily appropriable advantage. While it remains unclear whether Big Pharma needs strong patents to be financially viable, their attraction is plain. It follows that the pharmaceutical industry in particular was the most likely industry to lobby hard for stronger 68
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patents. Furthermore, as regards TRIPs, the growing R&D expenses also meant that costs could only be recouped through international sales, which would need commensurate international patent coverage. Note, however, that the United States market remains overwhelmingly dominant (at 68 per cent of global pharmaceutical revenues of Big Pharma in 2005) while developing countries are less than 10 per cent, focused in Latin American, Eastern Europe and the Asian newly industrializing economies (PhRMA 2005). Second, ‘biotech’ refers primarily to the biological applications that involve genetic manipulation. Such work follows from a number of scientific breakthroughs in recombinant DNA (rDNA) techniques in the 1970s. This work was not carried out with commercial applications in mind but in the context of the contemporaneous economic crisis and the historical experience of the economic impacts of previous breakthroughs in such fields as organic chemistry and electromagnetism. These scientific results were quickly latched upon as the obvious ‘next step’ by financiers. Patents, and patent reform, were seen to be crucial for this fledgling industry. Biotech is exceptional in the direct involvement of basic science in commercial applications. Such science, as abstract knowledge relatively disembodied from technical know-how, is relatively easily appropriated by competition. Biotechnology start-ups have R&D expenditures commonly as high as 50 per cent of sales, so that such threats of imitation jeopardize the whole business plan (Dutfield 2003: 153). The added security of patents over trade secrets was thus enormously attractive to biotech start-ups, matching Big Pharma’s interests. For patenting to be possible in biotech, however, two particular changes in US law seemed to be necessary. First, it was unclear that biological materials were patentable at all, given restrictions on patenting scientific discovery rather than invention. Second, given the location of this biotechnological research in university departments, the illegality of the patenting, and hence private appropriation, of the results of publicly funded basic science research was a major problem.4 This leads to the university molecular biology research groups where this basic science was being conducted. By the late 1970s, the budgets of American universities were under considerable strain, like Keynesian welfare spending more generally. Purely from the perspective of seeking to continue existing research projects, therefore, American universities found themselves compelled ‘to compete 69
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increasingly for external dollars that were tied to market-related research’ (Slaughter and Leslie 1997: 8). Biotechnology was unsurprisingly the focus of this move, given the striking scientific breakthroughs of the period. Furthermore, the percentage of federal research funds devoted to the life sciences was large and growing, so biological research was plausibly presented as a national competitive asset ripe for commercial exploitation. Amongst biology faculties, while there were mixed reactions regarding the embrace of commerce, there was widespread acknowledgement of the possibilities of funding their research in this way. Furthermore, we have seen how patents were (seen to be) a crucial factor for this to be possible in biotech. Indeed, as Kenney notes (1986: 257), it was the universities who had most interest in patent reforms as trade secrets were unavailable to them, not themselves being businesses. There was thus a clear prima facie compatibility of interests regarding domestic patent reform from these three parties: Big Pharma, biotech, and universities. Yet this alone does not explain how overwhelming bipartisan political support was forthcoming for the reforms demanded, if only because this discounts the high degree of controversy that accompanied (and in some cases, still besets) these changes in each case. For instance, regarding biotechnology, in the late 1970s rDNA experiments generated a great deal of public concern, and legislation regarding their strict regulation was being negotiated by parliamentary committees (in both the US and the UK) with the full expectation of uncomplicated passage into law. Similarly, the increasing penetration of commercial interests into academia continues to elicit grave anxiety regarding the effects on the open circulation and criticism of results, the direction of research agendas and the more generalized public trust in science. Yet in each case, these objections were suddenly swept aside in 1979/80. For instance, all legislative discussion of regulation for rDNA experiments simply evaporated between 1978 and 1982 (Wright 1994). Similarly, while moves to allow university patents in the 1970s were completely unsuccessful and rapidly defeated, in 1980 the Bayh-Dole Act, allowing just such patenting, was passed by an overwhelming bipartisan majority – with biotechnological pharmaceuticals the primary argument behind the legislation. Indeed, 1979/80 is a clear watershed for the fortunes of all three players. First, as regards Big Pharma, the profitability of the industry 70
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took off from 1980, rising to make it the single most profitable industry in the US economy by the turn of the century. In the midst of a downturn in 2003, the ten Big Pharma firms in the Fortune 500 list of largest US companies accumulated a profit that exceeded the aggregated profits of all the other 490 companies combined. Second, regarding biotech, the public listing of a biotech company, Genentech, on the New York Stock Exchange in 1980 was not only the first such listing, but also one of the most successful ever, with the fastest rise in the history of the New York market. Yet biotech was still a fundamentally risky technology and Genentech itself was far from profitability. Similarly, the legal framework for biotech was transformed from 1980, not only through the BayhDole Act, but also case law confirming the patentability of biotechnological commodities (Diamond vs. Chakrabarty), the creation of a specialist patent court in 1982 that has made US law much more pro-patent, and a series of laws supporting the university-industry complex of biotechnology (Slaughter and Rhoades 2002). Finally, following these legal changes, university patenting has ballooned since 1980, with particularly striking growth in the life sciences. Patents granted to universities more than doubled in 1979–84, and again in 1984–9 and 1989–97 (Mowery et al. 2001), and these have been disproportionately concentrated in biological classes represented in 49.5 per cent of all university patents in the early 2000s (Owen-Smith and Powell 2003). At Columbia and Stanford universities, both major protagonists and beneficiaries of the changes, by 1995 biomedical patents accounted for more than 80 per cent of their substantial licensing revenues (Mowery et al. 2001: 107). In short, therefore, the privatization through strong patents of such biological research suddenly became an acceptable change, if not an urgent priority, at exactly the time of the neoliberal counterrevolution. For it was the structural demands of the global capitalist political economy – with the US at its centre, so that these demands were most effective there – for a new round of capital expansion that enabled the formation of this coalition. Financialization after 1980 gave political power to finance capital and its favoured investments, the most important being biotech, to amend economic regulation to its advantage. Without this changed context, given that the initial demands of each party were prima facie weak and greatly contested, the patent coalition’s demands were unlikely even to stumble to success, let alone stride through virtually unopposed. Simply by pur71
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suing its own disparate interests, however, the US life sciences patent coalition has been a crucial agent in the history of neoliberalism and a key player in neoliberal processes of primitive accumulation, creating a global IP regime that especially covered the life sciences, the industries for which such IPRs are most controversial. In short, TRIPs has almost nothing to do with innovation (which is itself usually uncritically valued positively) and its implementation simply cannot be understood if it is treated as such. In fact, strong patents undermine the development of innovation capacity in most developing countries and, indeed, even in the United States itself. Rather, TRIPs is a legislative measure to enforce the primitive accumulation of knowledge production on a global scale.
Conclusion: Post-TRIPs Developments and the Current Crisis The recent history of the political efforts to create a globalized, neoliberal knowledge-based (bio-)economy does not conclude, unfortunately, with the signing of TRIPs in 1994. This has been something of a surprise to many of the developing countries who finally submitted to signing TRIPs, for while they viewed it as the uppermost limit of their efforts to harmonize global IPRs, those behind the agreement saw it instead as merely the first step. TRIPs sets only minimum IP standards, leaves open to the discretion of national governments the actual form of many intellectual property laws, and includes a number of provisions that provide limited flexibility for developing countries. For instance, compulsory licensing of drugs for national health emergencies is permitted. Almost as soon as TRIPs was signed, therefore, moves were being made to start a new round of negotiations both to strengthen IPRs and to remove the flexibilities of the TRIPs agreement; so-called ‘TRIPs-plus’ provisions (Sell 2007). However, growing outrage across the world about the effects of TRIPs on access to essential drugs in developing countries had altered the political debate. The first significant alteration to TRIPs was thus the 2001 Doha Declaration, which confirmed that TRIPs could not be used to prevent the tackling of public health emergencies – a move, thus, in the opposite direction to TRIPs-plus. Instead, therefore, TRIPs-plus efforts have been pursued not through the WTO but WIPO (World Intellectual Property Organization) and bilateral trade agreements, mostly between the US or 72
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the EU and developing countries. As regards the latter, TRIPs-plus (and even US-plus) intellectual property provisions have been imposed upon various developing countries (especially in the Middle East and Latin America) through trade agreements, especially free trade agreements and bilateral investment treaties. The goal for such negotiations is explicitly the global harmonization of IP law at the highest possible standard. Regarding WIPO, this global harmonization is pursued through the provision of ‘objective’ technical assistance to developing countries trying to establish effective intellectual property regulators. The education, technical assistance and even socialization of these fledgling bureaucracies that is provided by Geneva-based WIPO necessarily instils a model of intellectual property that both highlights the supposed benefits of IP, to the complete neglect of its downsides, and does so in a way that reflects the benefits of IP to a developed economy (Drahos 2007). Furthermore, given the vastly superior information-handling capacity of Global North patent agencies, most developing countries simply copy their decisions, as they have come to trust them during their training. The drive towards the global privatization of knowledge production through globally harmonized IPRs has thus continued apace to date, reflecting the continued neoliberal dominance. But just as the coup of TRIPs was dependent upon the rise of neoliberalism and the backing of biotech by finance capital, one may also expect that the current crisis of finance and neoliberalism will also have significant repercussions for the future trajectory of international IPR negotiations and biotech, and vice versa. The following trends in particular suggest great changes are likely. First, regarding biotech, the widespread dependence of firms in this sector upon the backing and confidence of finance, particularly venture capital, will almost certainly entail that the financial crisis will have significantly negative effects for many biotech firms. Many, if not most, biotech firms have remained viable throughout the past 30 years only because of continued financial support, often in the face of continued disappointment with no imminent prospect of achieving profitability. With the bursting of the financial bubble upon which these companies have depended, they too are most likely to fail. Whether this completely undermines the promissory imaginary of the knowledge-based economy is clearly unforeseeable, but it is certainly not inconceivable. 73
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Second, regarding TRIPs-plus global harmonization, with the collapse of the American economy and its significant geopolitical weakening (as in Iraq and Afghanistan), the primary agent behind such moves has been much diminished. The EU too must be acknowledged as a major protagonist of TRIPs-plus, but it is in no better shape. Furthermore, the stalemate of the current WTO round, clear moves towards national industrial and financial protectionism across the developed world, and the growing global power of the so-called BRICs (Brazil, Russia, India and China), most of which are themselves opposed to stronger harmonized IPRs, all suggest that the chances of such a multilateral TRIPs-plus agreement are now slim indeed. Finally, climate change is also generating heated demands from developing countries, particularly China and India, for concerted technology transfer that could involve a significant weakening of global IPRs. The prospects for the globalized KBE have thus been dramatically diminished by the current crisis. In particular, the balance of power seems to be in the process of a seismic shift away from finance capital, hence undermining the ongoing primitive accumulation of global knowledge production upon which the broader neoliberal project depends. Whatever happens, the fortunes of neoliberalism will be observable to a large extent in the transformations that take place within the life sciences.
Acknowledgements This chapter draws on a previous published article: Tyfield, D. (2008) ‘Enabling TRIPs: the Pharma-Biotech-University Patent Coalition’, Review of International Political Economy, Vol. 15, No. 4, pp. 535–66. Any overlaps in this chapter are reprinted with permission of the publisher (Taylor and Francis Ltd, http://www.tandf.co.uk/journals).
Notes 1 For an in-depth discussion of the provisions of TRIPs, see Blakeney (1996) and May (2000: Chapter 3). 2 This is achieved through the ‘national treatment’ and ‘most favoured nation’ clauses, which respectively ensure the equal treatment of all cosignatories as for domestic businesses and for trading partners with the best access to the domestic market. 3 For example, Drahos and Braithwaite (2002), Maskus (2000), May (2000), May and Sell (2006: 185 et seq.).
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4 In fact, such patenting was not completely prohibited, but was allowed only after a laborious administrative process in which special approval was granted to patent (Slaughter and Rhoades 2002: 85).
References Adorno, T. (2000) ‘Culture Industry Reconsidered’, in O’Connor, B. (ed.) The Adorno Reader, Blackwell, Oxford and Malden MA. Arrighi, G. (1994) The Long Twentieth Century, Verso, London. —— (2005) ‘Hegemony Unravelling – 1’, New Left Review, Vol. 32, pp. 23– 82. Blakeney, M. (1996) Trade Related Aspects of Intellectual Property Rights: a Concise Guide to the TRIPs Agreement, Sweet and Maxwell, London. Cohen, W. and Merrill, S. (eds) (2003) Patents in the Knowledge-Based Economy, National Academy Press, Washington DC. Drahos, P. (2007) ‘“Trust Me”: Patent Offices in Developing Countries’, Working Paper, Centre for Governance of Knowledge and Development, Australia National University, Canberra. Drahos, P. and Braithwaite, J. (2002) Information Feudalism: Who Owns the Knowledge Economy? Earthscan, London. Drahos, P. and Mayne, R. (eds) (2002), Global Intellectual Property Rights: Knowledge, Access and Development, Palgrave Macmillan, Basingstoke. Dutfield, G. (2003) Intellectual Property Rights and the Life Science Industries: a Twentieth Century History, Ashgate, Aldershot. Fine, B. and Saad-Filho, A. (2004) Marx’s Capital (fourth edition), Pluto Press, London and Sterling VA. Harvey, D. (2003) The New Imperialism, Oxford University Press, Oxford. Jaffe, A. (2000) ‘The US Patent System in Transition: Policy Innovation and the Innovation Process’, Research Policy, Vol. 29, pp. 531–57. Jaffe, A. and Lerner, J. (2006) Innovation and Its Discontents, Princeton University Press, Princeton NJ. Jessop, B. (2000) ‘The Crisis of the National Spatio-Temporal Fix and the Tendential Ecological Dominance of Globalizing Capitalism’, International Journal of Urban and Regional Research, Vol. 24, pp. 323–60. Kenney, M. (1986) Biotechnology: the University-Industrial Complex, Yale University Press, London and New Haven CT. Mansfield, E. (1986) ‘Patents and Innovation: an Empirical Study’, Management Science, Vol. 32, pp. 173–81. Marx, K. (1999) Capital, abridged by D. McLellan, Oxford University Press, Oxford. Maskus, K. (2000) Intellectual Property Rights in the Global Economy, Institute for International Economics, Washington DC. May, C. (2000) A Global Political Economy of Intellectual Property Rights, Routledge, London.
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—— (2006) ‘The Denial of History: Reification, Intellectual Property Rights and the Lessons of the Past’, Capital and Class, Vol. 88, pp. 33–56. May, C. and Sell, S. (2006) Intellectual Property Rights: a Critical History, Lynne Rienner Publishers, Boulder CO and London. Mirowski, P. (2008) ‘The Viridiana Jones Chronicles’, Knowledge Rules SSRC Blogs, . Mowery, D., Nelson, R., Sampat, B. and Ziedonis, A. (2001) ‘The Growth of Patenting and Licensing by US Universities: an Assessment of the Effects of the Bayh-Dole act of 1980’, Research Policy, Vol. 30, pp. 99–119. Owen-Smith, J. and Powell, W. (2003) ‘The Expanding Role of University Patenting in the Life Sciences: Assessing the Importance of Experience and Connectivity’, Research Policy, Vol. 32, pp. 1695–1711. Pharmaceutical Research and Manufacturers of America (PhRMA) (2005) Pharmaceutical Industry Profile 2005, PhRMA, Washington DC. Sell, S. (1999) ‘Multinational Corporations as Agents of Change: the Globalization of Intellectual Property Rights’, in Cutler, A. C., Haufler, V. and Porter, T. (eds) Private Authority and International Affairs, SUNY Press, Albany NY. —— (2003) Private Power, Public Law: the Globalization of Intellectual Property Rights, Cambridge University Press, Cambridge. —— (2007) ‘TRIPs-plus Free Trade Agreements and Access to Medicines’, Liverpool Law Review, Vol. 28, pp. 41–75. Shiva, V. (1998) Biopiracy: the Plunder of Nature and Knowledge, Green Books, Dartington. —— (2001) Protect or Plunder: Understanding Intellectual Property Rights, Zed Books, London. Slaughter, S. and Leslie, S. (1997) Academic Capitalism: Politics, Policies and the Entrepreneurial University, Johns Hopkins University Press, Baltimore MD and London. Slaughter, S. and Rhoades, G. (2002) ‘The Emergence of a Competitiveness Research and Development Policy Coalition and the Commercialization of Academic Science and Technology’, in Mirowski, P. and Sent, E.-M. (eds) Science Bought and Sold, Chicago University Press, Chicago IL. Tyfield, D. (2008) ‘Enabling TRIPs: The Pharma-Biotech-University Patent Coalition’, Review of International Political Economy, Vol. 15, pp. 535–66. Wright, S. (1994) Molecular Politics: Developing American and British Regulatory Policy for Genetic Engineering, 1972–1982, University of Chicago Press, Chicago IL.
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Neoliberalism and the Calculable World: the Rise of Carbon Trading LARRY LOHMANN
Neoliberalism can be a vague, even incoherent concept when it becomes entangled in the false dichotomies between market and state that are habitually thrown up by its adherents, as noted in the introduction to this book and a number of other chapters. It is often said, for example, that neoliberalism promotes free markets and reins in the state; yet, as Karl Polanyi (2001 [1944]) pointed out long ago, laissez faire itself is an interventionist state project (‘laissez faire was planned; planning was not’) (see also MacLeavy, this volume). It is said, too, that neoliberalism looks to economic growth rather than the state to solve many social problems; yet the quantifiable entity called ‘the economy’ was created in the twentieth century largely by reorganizing and redistributing knowledge and embedding new practices of description and calculation in governmental practice, and can at no point be sharply marked off from official coercion, state corruption and ‘non-economic’ institutions (Mitchell 2002; see Swain et al., this volume). Similarly, the neoliberal attempt to simulate efficient market outcomes by deploying cost–benefit analysis in policy making depends on calculation and regulation undertaken by the state (Lohmann 2009). Nowhere is the state/market dichotomy more misleading than in the analysis of one of the last, most ambitious manifestations of neoliberalism – the carbon markets that began to emerge in the 1990s as the main international policy response to climate change. While carbon markets are typically defended using neoliberal rhetoric – ‘What is the best way to tackle climate change? If we have a global carbon price, the market sorts it out’ (Scott 2008: 25); ‘Carbon trading is seen as a market-based alternative to either direct taxation or a “command and control” approach’ (Milner 2007: 13) – the commodity in which the biggest carbon markets trade owes its very
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existence to government fiat and regulation. In tracing the causes of the havoc carbon markets are in the process of creating and abetting, it is useful to look beyond the misleading market/state, choice/coercion, efficiency/inefficiency dualisms commonly used to justify them. This chapter focuses instead on the power dynamics implicated in abstraction, commensuration and commodification as the features of the neoliberal approach to climate change that will most repay study, in a similar fashion to Tyfield’s analysis of the knowledge-based economy in the previous chapter. In so doing, I hope to provide an introduction to one of neoliberalism’s potentially greatest class projects: the attempt to privatize the climate itself.
What is Carbon Trading? First proposed in the 1960s, pollution trading was developed by US economists and derivatives traders in the 1970s and 1980s and underwent a series of failed policy experiments in that country before becoming the centrepiece of the US Acid Rain Programme in the 1990s at a time of deregulatory fervour. In 1997, the Bill Clinton regime successfully pressed for the Kyoto Protocol to become a set of carbon trading instruments (Al Gore, who carried the US ultimatum to Kyoto, later became a carbon market actor himself). In the 2000s Europe picked up the initiative to become the host of what is today the world’s largest carbon market, the EU Emissions Trading Scheme (EU ETS) – although under Barack Obama the US may soon take over that position. Carbon markets now trade over US$100 billion yearly, and are projected to rival the financial derivatives market, currently the world’s largest, within a decade. Pioneered by figures such as Richard Sandor of the Chicago Board of Trade and Ken Newcombe, who relinquished leadership of the World Bank’s carbon funds to become a carbon trader at firms such as Goldman Sachs, carbon markets have recently become a magnet for hedge funds, banks, energy traders and other speculators. Carbon trading treats the safeguarding of climatic stability, or the earth’s capacity to regulate its climate, as a measurable commodity. After being granted or auctioned off to private firms or other polluters, the commodity can then be allocated ‘cost-effectively’ via market mechanisms. Obviously, the commoditized capacity in question was never produced for sale. Rather than being consumed, 78
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it is continually re-used. Although difficult to define or even locate, the capacity forms part of the background ‘infrastructure’ for human survival. Framing it as a commodity, moreover, involves complex contradictions and blowbacks (Lohmann 2009). Current efforts to assemble carbon markets are likely, when carried beyond a certain point, to engender systemic crises. The earth’s climate-regulating capacity is thus a quintessential Polanyian ‘fictitious commodity’. Accordingly, illuminating comparisons and contrasts can be drawn with Polanyi’s original ‘fictitious commodities’ of land, labour and money, as well as with other candidates for ‘fictitious commodity’ status that have been proposed since, including knowledge, health, genes and uncertainty (see Tyfield; Jessop, this volume). The attempt to build a climate commodity proceeds in several steps (see Box 4.1). First, the goal of maintaining the earth’s capacity
Box 4.1 Carbon Market Construction in Brief Step 1 The goal of overcoming fossil fuel dependence by entrenching a new historical pathway is changed into the goal of placing progressive numerical limits on emissions (cap) → Step 2 A large pool of ‘equivalent’ emissions reductions is created through regulatory means by abstracting from place, technology, history and gas, making a liquid market and various ‘efficiencies’ possible (cap and trade) → Step 3 Further tradeable emissions reductions ‘equivalents’ are invented through special compensatory projects, usually in regions not covered by any cap, for additional corporate cost savings, and added to the commodity pool for enhanced liquidity and further ‘efficiencies’ (offsets) → Step 4 Project bundling, securitization, financial regulation, rating agencies, ‘programmatic CDM’ et cetera add new layers of obscurity and complexity. 79
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to regulate its climate is conceptualized in terms of numerical greenhouse gas emissions reduction targets. Governments determine – currently more on explicitly political rather than climatological grounds – how much of the world’s physical, chemical and biological ability to regulate its own climate should be enclosed, ‘propertized’, privatized and made scarce. They then give it out (or, sometimes, sell it) to large polluters, before ‘letting the market decide’ on its final distribution (Lohmann 2005; Lohmann 2006). Making climate benefits and disbenefits into quantifiable ‘things’ opens them up to the possibility of exchange. For example, once climate benefit is identified with emissions reductions, an emissions cut in one place becomes climatically ‘equivalent’ to, and thus exchangeable with, a cut of the same magnitude elsewhere. An emissions cut owing to one technology becomes climatically equivalent to an emissions cut that relies on another. An emissions cut that is part of a package that brings about one set of social effects becomes climatically equivalent to a cut associated with another set of social effects. Where emissions permit banking is allowed, an emissions cut at one time becomes climatically equivalent to a cut achieved at another. Once all these identities are established, it becomes possible for a market to select for the emissions reductions (and, ipso facto, the climate benefits) that can be achieved most cheaply. At first glance, these equivalences may seem uncontroversial. Market proponents tend to repeat, with the air of someone airing a tautology, that (for example) ‘a carbon dioxide molecule released in Samarkand has the same climatic effect as one released in Sandusky’. A moment’s reflection will show, however, that, in producing such equivalences, carbon traders are already drifting away from the climate problem. That problem consists mainly of the challenge of initiating a new historical pathway that leads away from dependence on fossil fuels, which are by far the major contributor to humancaused climate change. Once taken out of the ground and burned, coal, oil and gas add to the carbon burden cycling between the atmosphere and the oceans, soil, rock and vegetation. This transfer is, for human purposes, irreversible: once mined and burned, fossil carbon cannot be locked away safely underground again in the form of new deposits of coal, oil or gas, or in the form of carbonate rock, for millions of years. The transfer is also unsustainable: there is simply not enough ‘space’ in above-ground biological and geological 80
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systems to park safely the huge mass of carbon that is coming out of the ground without carbon dioxide building up catastrophically in the air and the seas. As biologist Tim Flannery (2005: 8) puts it, ‘There is so much carbon buried in the world’s coal seams [alone] that, should it find its way back to the surface, it would make the planet hostile to life as we know it.’ Most unmined coal, oil and gas, in other words, is going to have to stay in the ground. Accordingly, industrialized societies, currently ‘locked in’ (Unruh 2000) to fossil fuels, need instead to ‘lock in’ non-fossil energy, transport, agricultural and consumption regimes within at most a few decades. Because this shift is structural, the first steps need to be undertaken immediately to minimize future dangers and costs. It follows that short-term actions can be assessed for their climatic effectiveness only by determining the part they play in a longer-term shift away from reliance on fossil fuels. For example, the choice of technology used in making a short-term billion-tonne emissions cut will make a large difference to long-term climatic outcomes. If the technology is one that reinforces overall societal addiction to fossil fuels, it will be more climatically damaging than one which contributes toward a pathway that keeps most remaining fossil fuels in the ground. Similarly, a billion-tonne reduction in one place may have social effects which have a different impact on long-term fossil fuel use (and thus on future reductions) than a supposedly ‘identical’ billion-tonne reduction in another place. Workable climate solutions, in short, are embedded in future history. A commodity approach, by contrast, abstracts from where, how, when and by whom the cuts are made, disembedding climate solutions from history and technology and re-embedding them in neoclassical economic theory, trade treaties, property law, risk management and so forth. For example, carbon trading gives equal weight, on the one hand, to emissions-reduction technologies that are likely to result in unquantifiable but important ‘spillovers’ (Frischmann and Lemley 2006) leading to radically lessened longterm dependence on fossil fuels, and, on the other hand, to technologies lacking such effects – as long as both achieve the same numerical emissions reduction over the short term in a particular locality. While carbon trading encourages ingenuity in inventing measurable ‘equivalences’ between emissions of different types in different places, it does not select for innovations that can initiate or sustain a historical trajectory away from fossil fuels (the effectiveness 81
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of which is less easy to measure). Indeed, once the carbon commodity has been defined, merely to weigh different long-range social and technological trajectories or evaluate and ‘backcast’ from distant goals is to threaten the efficiency imperative. A commodity approach also functions to detach the global warming problem from climatological uncertainties and indeterminacies. This is because the sum of fungible greenhouse gas pollution rights that governments create and distribute for purposes of trade are implied to approach, in principle if not in practice, an economically optimal, ‘climatically safe’ level of overall greenhouse gas pollution. As work by the Harvard economist Martin Weitzman and others suggests, this move engenders a degraded conception of the climate problem: the commensuration process inherent in multiequation, computerized integrated assessment models that aggregate economic growth with simple climate dynamics heightens systemic hazards by ‘presenting a cost–benefit estimate for what is inherently a fat-tailed situation with potentially unlimited downside exposure as if it is accurate and objective’ (Weitzman 2009: 18).
Disembedding and Re-embedding: a Second Stage The disembedding/re-embedding process inherent in carbon trading then ramifies and proliferates through a succession of further acts of commensuration and abstraction. After the state creates a divisible, tradeable commodity whose ‘efficient’ allocation in the form of pollution rights can become a coherent, ‘apolitical’ programme for action (‘cap and trade’), its status as asset, grant, or financial instrument is engineered to fit various accounting standards (MacKenzie 2009). Grants of pollution rights are made to industrialized countries (under the Kyoto Protocol) or private firms or other polluters (under the EU ETS), according to their existing pollution levels. Under pressure from industrial lobbying efforts and measurement difficulties, these grants are often more generous than the polluters need to cover their existing level of emissions. Corporations receiving EU ETS grants are then allowed to pass on to their customers the nominal market cost of the asset they have received for free (auctioning may become more common in the future, but so far has not been widespread). In this way, the bulk of the earth’s carbon-cycling capacity is in effect made into property and distributed to the industrialized North, and in particular to the heaviest corporate polluters. 82
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A second class of measurable, climate-benefit units called ‘offsets’ is then developed to be pooled together with ‘reductions’ for further ‘efficiency’ gains. These offsets are manufactured by special projects requiring special expertise, most located in the Global South, that are claimed to result in less greenhouse gases accumulating in the atmosphere than would be the case in the absence of carbon finance, such as tree plantations (which are supposed to absorb carbon dioxide emissions) or fuel switches, wind farms and hydroelectric dams (which are argued to reduce or displace fossil energy). Schemes for generating still more saleable greenhouse gas pollution licences – including projects involving agrofuels, biochar, nuclear energy, forest conservation and the capture, liquefaction and storage of carbon dioxide from coal-fired power plants – are also under consideration. Such ‘project-based’ credits, no matter what their origin, are designed to be fungible with the emissions allowances created and distributed by governments in the industrialized North. Indeed, in an act of commensuration-by-fiat, the Kyoto Protocol stipulated in Articles 3 and 12 that these offset credits are emissions reductions, thus legislating into existence a new, abstract, non-situated, omnibus category of reductions/offsets. It thus helped open a niche for a new corps of specialists and consultants – analogous to the ‘quants’ who helped develop advanced financial derivatives – to seek profits working out the needed commensuration procedures. Such ‘carbon quants’ produce calculations claiming, for example, that reducing carbon emissions from a power plant in Britain is ‘the same as’ building a wind farm in India or Brazil because the wind farm displaces fossil fuel use. Since the carbon dioxide resulting from fossil fuel combustion is only one of many greenhouse gases, it is possible to create still more equivalences, making possible yet further supposed ‘efficiencies’ in attaining any particular cap. In the 1990s, the Intergovernmental Panel on Climate Change (IPCC) devised a new abstraction called ‘global warming potential’ that commensurates an entire basket of climate-forcing gases according to how they compare to carbon dioxide in their climate impact. That ultimately enabled corporations to arrange to make spectacular savings in meeting emissions targets under the EU Emissions Trading Scheme. Instead of cutting its own carbon dioxide emissions, for example, the German-based generating firm RWE could plan on investing in United Nationscertified ‘offset’ projects destroying small amounts of nitrous oxide (a 83
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greenhouse gas stipulated to be 298 times more powerful than carbon dioxide over a 100-year time horizon) at factories in Egypt and South Korea and even smaller amounts of HFC-23 (a climateforcing gas with a ‘global warming potential’ set at 14,800 times that of carbon dioxide over a 100-year horizon) at chemical plants in China (Lancaster 2007; Forster et al. 2007). RWE could also explore the possibility of buying carbon credits from projects that would capture and burn methane (yet another greenhouse gas stipulated to be more harmful than carbon dioxide, especially over the short term) from landfills and coal mines in China and Russia. Commensurating all these gases was hard work, since they vary in their effects along many different axes and time scales. In one reflection of the uncertainties and disputes involved, in 2007 the IPCC increased the 100-year factor for HFC-23 by over 23 per cent, enabling at a keystroke the production of millions of tonnes more carbon credits. Using offsets to achieve increased liquidity and efficiency distances carbon markets from the global warming problem not only because it ignores the importance of achieving a transition away from fossil fuels, but also because it tends to suppress, in a classand culturally biased way, concrete practices likely to play a significant part in those solutions. Carbon offset accounting necessarily frames the political question of what would have happened without carbon projects as a matter of expert prediction in a deterministic system, while at the same time framing (usually wealthy) project proponents non-deterministically, as free decision makers whose initiatives are capable of changing ‘business as usual’. Activists in Minas Gerais, Brazil called attention to this contradiction early on when they contested an attempt by a local charcoal and pig iron company, Plantar, to get carbon credits for the environmentally destructive eucalyptus plantations it had established on seized land: ‘The argument that producing pig iron from charcoal is less bad than producing it from coal is a sinister strategy. . . . What we really need are investments in clean energies that at the same time contribute to the cultural, social and economic well-being of local populations’ (FASE 2003). After insisting that ‘the claim that without carbon credits Plantar . . . would have switched to coal as an energy source is absurd’, the activists went on to characterize the accounting procedure as a ‘threat’: ‘It is comparable to loggers demanding money, otherwise they will cut down trees’ (Suptitz et al. 2004: 2). Typically, offset income supports conventional developments that 84
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harm local low-carbon livelihoods and sources of agricultural knowledge while at the same time doing little if anything for local transitions to a non-fossil society. In the mountainous river valleys of Uttaranchal, India, for example, scores of dam projects in line to be part-financed through selling carbon credits to Northern industry are damaging local low-carbon irrigation systems. In China, 763 hydroelectric dams have applied or are planning to apply to the United Nations to be allowed to sell more than 300 million tonnes of carbon dioxide pollution rights to Northern industry through the Kyoto Protocol’s Clean Development Mechanism, yet they do not replace fossil-fuelled generation, but merely supplement it, and were arguably going to be built anyway (McDonald et al. 2009). In November 2008, the US Government Accountability Office warned that such carbon projects can allow industries in the North ‘to increase their emissions without a corresponding reduction in a developing country’ (USGAO 2009: 13). Nigeria’s oil-extraction zone offers another good example of carbon markets’ tendency to encourage private corporations and technical experts to expend ingenuity on inventing novel, geographically far-flung market ‘equivalents’ for emissions reductions rather than finding ways to implement a structural shift away from fossil fuels. For 50 years, energy companies operating in the Niger Delta have burned off the great bulk of the methane they find in underground oil reservoirs. Although methane is a valuable fuel, it is cheaper for corporations such as Shell and Chevron simply to flare it on site than to use it in power plants or re-inject it underground. As a result, local people are subjected to continuous noise, light and heat, acid rain, retarded crop yields, corroded roofs, and respiratory and skin diseases (Osuji and Avwiri 2005). Although flaring is prohibited by law in Nigeria (in 2005 the Nigerian Federal High Court confirmed that gas flaring was illegal and a gross violation of human rights), oil companies have so far contented themselves with paying penalties for non-compliance. In this context, one focus of local and international environmental activism is simply to insist on the rule of law. The Clean Development Mechanism, however, takes breaches of the law in Nigeria as the ‘baseline’ for carbon accounting. The Italian oil corporation EniAgip, for example, plans to buy some 1.5 million tonnes per year of cheap carbon dioxide equivalent pollution rights from a project at an oil-gas installation at Kwale that was registered with the UN in 85
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November 2006 (UNEP 2009). Eni-Agip and its validator, the Norwegian consultant DNV, claim that the project will be reducing emissions by putting gas which would otherwise be flared to productive use (although it is difficult to verify whether the gas in question will come from oil wells or dedicated gas extraction operations also present in the region, whose production is not flared). The core of the calculation is that whilst the Nigerian Federal High Court recently judged that gas flaring is illegal, it is difficult to envisage a situation where wholesale changes in practice in venting or flaring, or cessation of oil production in order to eliminate flaring will be forthcoming in the near term. (DNV 2004: 11)
Accordingly, the project creates a new incentive for the Nigerian authorities to replace legal sanctions with prices and the rule of law with markets for environmental services. It would be difficult to imagine a purer expression of neoliberal doctrines. Isaac Osuoka, the joint coordinator of the Gulf of Guinea Citizens Network, believes that ‘carbon trading reflects one of the worst forms of neoliberal fanaticism and attempts at re-legitimating corporate rule experienced in the past decades’ (Osuoka 2009: 16). Current proposals to allow industrialized countries and their corporations to compensate for continued fossil fuel use by pressing millions of hectares of land in the Global South into service as biotic carbon stores or dumps further highlight carbon offsets’ tendency toward regressive redistribution. In one proposed scheme, REDD (Reducing Emissions from Deforestation and Degradation), billions of dollars would be invested in acquiring and preserving carbon in the world’s native forests, which would then be traded for permission to continue greenhouse gas pollution elsewhere. Land grabs have already begun in central Africa, Indonesia and Papua New Guinea in order to feed the expected need for forested land of the US’s proposed carbon trading system under the WaxmanMarkey Act. State forestry departments, conservation organizations, local authorities, indigenous communities or logging or plantation companies would serve as onsite security staff for this global carbon warehouse. REDD advocates include ex-World Bank chief economist Nicholas Stern, who sees it, tonne for tonne, as one of the cheapest ways of keeping carbon dioxide molecules out of the atmosphere; Wall Street firms such as Merrill Lynch (now owned by Bank of America), which see high potential in trading such new 86
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‘carbon assets’; the Food and Agriculture Organization, which welcomes it as an opportunity to expand its political role; and, often in the forefront, carbon consultants, forest scientists, technicians and master planners with careers in forest conservation, who are working on the ground in countries such as Indonesia to secure local authorities’ consent to the schemes. The large sums of money potentially on offer have split indigenous peoples’ movements, some of whom see REDD as an opportunity for advancement, others of whom see it as an enclosure movement; and environmentalists, who divide between large, Washington-based proponents such as Conservation International and The Nature Conservancy and less wellfunded opponents who see REDD as disempowering forest peoples in favour of acquisitive corporations and state agencies (Griffiths 2008) (see the chapter in this volume by Hinojosa and Bebbington for other examples of tensions in civil society movements). Although its role and political nature are often misunderstood by traders and activists alike, commensuration is again central to this struggle: for trading to be possible, emissions arising from the combustion of fossil carbon must be made quantitatively comparable with tree carbon. This becomes an endless task due to the different roles played by fossil and biotic carbon in the climate system, as well as uncertainties and unpredictabilities in forest carbon absorption, which are being exacerbated by global warming itself (Philips et al. 2009; Lindroth et al. 2009).
Finance and Securitization A final step in the carbon markets’ abstraction from the climate problem comes with securitization, which Shaoul discusses more generally in a later chapter. Financial market actors have always been prominent in the carbon trade and today dominate the buyers’ side of the credit market. Among the financial institutions that have set up desks to speculate in carbon permits are Deutsche Bank, Morgan Stanley, Barclays Capital, Rabobank, BNP Paribas Fortis, Sumitomo, Kommunalkredit, and Cantor Fitzgerald. JP Morgan Chase has snapped up the carbon offset firm Climate Care; Credit Suisse has acquired a stake in the troubled carbon consultancy and accumulator EcoSecurities; and Goldman Sachs has announced plans to buy Constellation Energy’s carbon trading business. By 2008 there were about 80 carbon investment funds set up to finance 87
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offset projects or buy carbon credits, most oriented more towards speculation than towards helping companies comply with regulated carbon caps. Trading companies are also active, including Vitol, a major energy-market speculator, and while ENRON, an early enthusiast for the Kyoto Protocol carbon market, is no longer in business, some of the firm’s ex-staff have moved into the carbon sector. Before the financial crash, even certain industrial companies, such as Arcelor Mittal (the world’s largest steelmaker), opened departments specifically to seek profits in the carbon trade, just as companies such as General Electric opened finance divisions in the 1990s (Cleantech 2008; see Shaoul, this volume). As with financial derivatives, a host of specialized new institutions have also been set up that deal in the commodity, with names like Sindicatum Carbon Capital, NatSource Asset Management, New Carbon Finance, Carbon Capital Markets, Trading Emissions plc, South Pole Carbon Asset Management, Noble Carbon, and so forth. One of the tasks of such firms is to bundle together various types of small offset projects for buyers. With increased investment, securitization is likely to follow. Already in November 2008, Credit Suisse announced a securitized carbon deal that would bundle together carbon credits from 25 offset projects at various stages of UN approval, sourced from three countries and five project developers. The bank then split these assets into three tranches, allegedly representing different risk levels, before marketing them to investors. In this way, products which already had only the most tenuous relation to the climate problem they were designed to tackle, and had been further disconnected from underlying values through a cascade of contested commensuration processes, were transformed through yet further disaggregation and reassembly. Evaluation of such securities, whether by credit rating agencies or regulators, is certain to be even more challenging, and even less amenable to modelling, than was the evaluation of the mortgagebacked securities that played such an important part in the onset of the financial crisis. If carbon permit products are ‘toxic’ to climate change mitigation policy, they may prove to be no less so to financial stability, given the projected trillion-dollar scale of the market. The dangers of what Friends of the Earth analyst Michelle Chan calls ‘sub-prime carbon’ are obvious (Chan 2009). In so far as it is aimed merely at improving carbon market 88
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practice rather than at fossil fuel use, and relies on a theory–practice dualism, regulation tends to become yet another moment in the neoliberal disembedding/re-embedding process, adding further layers of attempted calculation to an unstable structure and further concealing the problematic nature of the underlying abstractions. A case in point is the continuing attempt of the Clean Development Mechanism’s Executive Board and government regulators in various countries to tackle the riddle of ‘additionality’ in offset markets (that is, how to prove that a project goes beyond business as usual), to which, as carbon trader Mark Trexler noted years ago, there is no correct answer (Trexler 2006). Constantly manufacturing and reaffirming the notion that offset projects’ shortcomings are due either to imperfect methodology or incorrect implementation, ten years of regulatory effort have only further skewed the political economy of the offset markets in favour of corporations locked into fossil fuel use, since it is only they who have the resources necessary for navigating the regulatory mazes that the additionality debate has made ever more intricate. Ironically, of course, this is an effect which, logically speaking, should itself enter into calculations of carbon saved and lost – one more example of the ‘moving horizon’ characteristic of the market-environmentalist project of ‘internalizing externalities’. The recent establishment of a private carbon rating agency, as well as proposals for ‘programmatic’ and ‘sectoral’ carbon credits, which would help sidestep impossible ‘additionality’ requirements, reflect a continuing commitment to ‘better calculation’ in the face of irresolvable tensions between the needs for highvolume, predictable carbon credit output and for market credibility.
Conclusion Like the neoclassical shibboleths (the efficient markets hypothesis, rational expectations and the like) that have so picturesquely come to grief during the financial crisis (see Fine, this volume), the carbon credit prices flashing on electronic screens in trading rooms on Wall Street or in the City of London reflect a complex political movement to reorganize and redistribute knowledge and power. Spelling out another notable chapter in the political history of commensuration (Espeland and Stevens 1998), they form a part of one of neoliberalism’s last and greatest class projects: the attempt to appropriate the climate itself. Carbon trading thus takes its place 89
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alongside other movements of recent decades that have invented new possibilities of accumulation through the creation of fresh objects of calculation and the intensified commodification of some of the more hidden aspects of the infrastructure of human existence. Examples include attempts to expand credit by mathematizing and privatizing an unprecedented variety of uncertainties through derivatives markets (Lohmann, forthcoming; see Birch and Mykhnenko; Shaoul, this volume), to privatize creativity through global intellectual property rights (Frischmann and Lemley 2006), and to transform health, health care and even biological species into measurable, tradeable commodities (see Tyfield, this volume). All these efforts to appropriate involve abstraction and commensuration as part of wider processes involving deregulation, banking and land law, treaty negotiation, structural adjustment, police work, mapping, resource seizures, export subsidies and so on. This abstraction and commensuration can never be completed any more than politics or the evolution of a language can be completed. As Mitchell (2002) observes, internalizing all externalities would make exchange impossible. Ideals of calculability, continually being developed and undermined in the course of attempts to carpenter together new structures of property and trade, are part of conflicted processes that can generate both profits and crisis. The largely unchecked pursuit of liquidity in risk markets, furthered by the achievements of quants, led in the end to a financial stampede for the exits and a drying up of liquidity, and may eventually do the same in the carbon markets. An unrestrained quest to ‘internalize’ the benefits of innovation leads in the end to the sapping of innovative forces and resources (Frischmann and Lemley 2006). Cost–benefit analysis’s attempt to isolate an uncontroversial basis for social choice in the calculation of individual preferences itself generates heightened controversy. Headlong attempts to implement ‘market solutions’ for global warming end up exacerbating the climate crisis as well as social dislocations of diverse kinds and wide geographical reach. The troubled trajectory of such initiatives hints at the continuing relevance of earlier traditions of crisis analysis: Polanyi’s (2001 [1944]) observation that the complete commodification of land would result in the ‘demolition of society’; Marx’s descriptions of the ‘contradictions’ of capitalism; Keynes’s warning about finance’s ‘fetish of liquidity’ that ‘there is no such thing as liquidity of investment for the community as a whole’ (Keynes 2008 [1936]). Yet, as 90
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this chapter’s sketch of carbon trading has suggested, analytical space must also be made for newer concepts such as Michel Callon’s ‘overflows’ (Callon 1998), Timothy Mitchell’s (2002) treatment of the theory/practice divide as a mode of modern power, and science studies scholars’ emphasis on non-human agents, whether the recalcitrant rainforest trees now being pressed into service as carbon stores or the ‘black swans’ and ‘monsters’ of non-linearity now routinely referred to by both financial analysts and climatologists. Study of the arcane particularities of manifestations of neoliberalism such as carbon trading can both inform and transform analyses of contemporary politics generally. As Lydgate famously observed in Middlemarch, there must be a ‘systole and diastole in all inquiry’ aimed at ‘continually expanding and shrinking between the whole human horizon and the horizon of an object-glass’. The unfolding disaster of carbon trading prefigures the disintegration of the picture of a thoroughly calculable world to which neoliberalism clings more stubbornly than any state socialist project of the past. The important question is how this disintegration is to be effected politically. What sort of alliances can be fashioned among, for example, grassroots resisters of offset projects in the South, environmental justice movements battling fossil fuel extraction and pollution, and a Northern public frustrated at the largesse being lavished by their governments and the United Nations on the creation of yet another dysfunctional speculative market? The answers are not yet clear, but here as elsewhere the fall of neoliberalism will be something to be achieved through patient movement building and a long series of political struggles, not something automatically given by the mechanics of yet another crisis.
References Callon, M. (1998) ‘An Essay on Framing and Overflowing: Economic Externalities Revisited by Sociology’, in Callon, M. (ed.), The Laws of the Markets, Blackwell, Oxford, pp. 244–69. Chan, M. (2009) Subprime Carbon? Rethinking the World’s Largest New Derivatives Market, Friends of the Earth, Washington, March. Cleantech Investor (2008) ‘ArcelorMittal Clean Technology Venture Capital and Carbon Fund’, Cleantech Magazine, September. Det Norske Veritas (DNV) (2004) ‘Clean Development Mechanism Project Design Document Form for Recovery of Associated Gas that Would Otherwise be Flared at Kwale Oil-Gas Processing Plant, Nigeria’,
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. Espeland, W. and Stevens, M. L. (1998) ‘Commensuration as a Social Process, Annual Review of Sociology, Vol. 24, pp. 312–43. FASE et al. (2003) ‘Open Letter to Executives and Investors in the Prototype Carbon Fund’, Espirito Santo, Brazil, 23 May. Flannery, T. (2005) ‘Monstrous Carbuncle’, London Review of Books, Vol. 27, No. 1, 6 January. Forster, P., Ramaswamy V. et al. (2007) ‘Changes in Atmospheric Constituents and in Radiative Forcing’, in Intergovernmental Panel on Climate Change, Working Group 1, ‘IPCC Fourth Assessment Report’, Cambridge University Press, Cambridge. Frischmann, B. and Lemley, M. (2006) ‘Spillovers’, Columbia Law Review, Vol. 107, No. 1, pp. 257–301, . Griffiths, T. (2008) Seeing ‘REDD’? Forests, Climate Change Mitigation and the Rights of Indigenous Peoples and Local Communities. Update for Poznan (UNFCCC COP 14). Forest Peoples’ Programme, Moreton-on-Marsh, 3 December. Keynes, J. M. (2008 [1936]) ‘Speculation, Cyclicality and the Euthanasia of the Rentier’, in Erturk, I. Froud, J. et al. (eds) Financialization at Work: Key Texts and Commentary, Routledge, London. Lancaster, R. (2007) ‘Mitigating Circumstances’, Trading Carbon, December. Lindroth A. et al. (2009) ‘Storms Can Cause Europe-Wide Reduction in Forest Carbon Sink’, Global Change Biology, Vol. 15, No. 2, pp. 346–55. Lohmann, L. (2005) ‘Marketing and Making Carbon Dumps: Commodification, Calculation and Counterfactuals in Climate Change Mitigation’, Science as Culture, Vol. 14, No. 3, pp. 203–35. —— (2006) Carbon Trading: a Critical Conversation on Climate Change, Privatization and Power, Dag Hammarskjold Foundation, Uppsala. —— (2009) ‘Toward a Different Debate in Environmental Accounting: the Cases of Carbon and Cost-Benefit’, Accounting, Organizations and Society, Vol. 34, Nos 3–4, pp. 499–534. —— (forthcoming) ‘Uncertainty Markets and Carbon Markets: Variations on Polanyian Themes’. MacKenzie, D. (2009) ‘Making Things the Same: Gases, Emission Rights and the Politics of Carbon Markets’, Accounting, Organizations and Society, Vol. 34, Nos 3–4, pp. 440–55. McDonald, J., Hanley, C. and McGroarty, P. (2009) ‘China Dams Reveal Flaws in Climate-Change Weapon’, Associated Press, 29 January. Milner, M. (2007) ‘Global Carbon Trading Market Triples to $30b’, The Guardian, 3 May, . Mitchell, T. (2002) Rule of Experts: Egypt, Technopolitics, Modernity, University of California Press, Berkeley CA.
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Osuji, L. C. and Avwiri, G. O. (2005) ‘Flared Gases and Other Pollutants Associated with Air Quality in Industrial Areas of Nigeria: an Overview’, Chemistry and Biodiversity, Vol. 2, No. 10, pp. 1277–89. Osuoka, I. (2009) ‘Paying the Polluter? The Relegation of Local Community Concerns in “Carbon Credit” Proposals of Oil Corporations in Nigeria’, MS, April. Philips O. L. et al. (2009) ‘Drought Sensitivity of the Amazon Rainforest’, Science, Vol. 323, No. 5919, pp. 1344–7. Polanyi, K. (2001 [1944]) The Great Transformation, Beacon, Boston MA. Scott, M. (2008) ‘Market Meltdown? Carbon Trading Is Just Warming Up’, Independent on Sunday Business, 27 July, . Suptitz, A. P. L. et al. (2004) ‘Open Letter to the Clean Development Mechanism Executive Board’, Minas Gerais, Brazil, 7 June. Trexler, M. (2006) ‘A Statistically Driven Approach to Offset-Based GHG Additionality Determinations: What Can We Learn?’, Sustainable Development, Law and Policy, Vol. 6, No. 2, pp. 30–40. United Nations Environment Programme (UNEP) Risoe Centre (2009) ‘CDM Pipeline’, UNEP, Risoe, Denmark, . United States General Accounting Office (GAO) (2009) ‘Climate Change: Observations on the Potential Role of Carbon Offsets in Climate Change Regulation’, GAO, GAO-09-456T, Washington DC, 5 March. Unruh, G. C. (2000) ‘Understanding Carbon Lock-In’, Energy Policy, Vol. 28, No. 12, pp. 817–30. Weitzman, M. (2009) ‘On Modeling and Interpreting the Economics of Catastrophic Climate Change’, The Review of Economics and Statistics, Vol. 91, No. 1, pp. 1–19, .
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Tightening the Web: the World Bank and Enforced Policy Reform ELISA VAN WAEYENBERGE
A neoliberal perspective came to dominate the analytical and policy agenda on international development during the 1980s. It displaced a brief focus on poverty reduction which had emerged during the 1970s and which had combined with a general appraisal of the need for the state to intervene to correct market imperfections. The World Bank played a crucial role in the promulgation of the neoliberal order in the Global South, and the rise of policy-based lending – through such instruments as Structural Adjustment Loans (SALs) – abetted this new trend. By the mid- to late 1990s, however, the Bank faced mounting criticism of the policies promoted through its adjustment packages. It sought to deflect some of this through a discursive shift, away from the Washington Consensus and towards comprehensive development with a more holistic approach. Development was, again, to be understood as a transformation of society requiring a broader approach than was offered through the Washington Consensus. This reflected an attempt to propel the analysis beyond a bias towards stabilization and price incentives, now to include such phenomena as persistent market failures and the importance of non-market institutions (see van Waeyenberge 2006; Fine 2009; also Swain et al., this volume). Further, the principle of conditionality that underlay the structural adjustment era seemed itself in need of adjustment. Conditionality was redefined, away from the traditional model based on finance in return for the promise of policy reform and towards a new form where the disbursement of funds became conditional on what had already been achieved in terms of policy reform (‘selectivity’ or performance-based aid). This shift combined with the Bank’s celebration of its self-assigned knowledge role in development. This chapter seeks to examine the implications of these changes
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for the ways in which the Bank regulates the policy space in lowincome aid-recipient countries. It subjects ‘selectivity’ as the new practice of conditionality to close scrutiny, and exposes a stringent contradiction between the Bank’s projected move forward, at least at the rhetorical level, from the Washington Consensus and the persistent promotion of a set of neoliberal practices in its operational dealings with low-income countries. The chapter reveals how through ‘selectivity’ and the exercise of the Bank’s knowledge role, a tight yet less visible web of control, characterized by a continuing neoliberal bias, has continued to frame policy making in low-income countries. This is despite the ubiquitous and oft-reiterated commitment to ‘ownership’ and ‘partnership’ principles. Further, the chapter assesses whether the initial response by the World Bank to the current financial and economic crisis could possibly hint at a substantial change of course, away from the basic tenets of the neoliberal paradigm.
From Structural Adjustment to Performance-Based Aid The stature and position of the World Bank in development became significantly amplified during the 1980s as the organization’s involvement in SALs rapidly expanded. With SALs, the Bank provided programme instead of project finance in return for the promise, or on the condition of, a set of policy reforms. These policy reforms typically embodied what came to be known as the Washington Consensus and, in essence, sought to eliminate all obstacles to a ‘perfect market’ as the presumed optimal path to efficiency and growth (see Birch and Mykhnenko, this volume). Yet as the share of policy-based lending in total World Bank lending had increased from 7 per cent in 1980 to 26 per cent by the end of the 1980s, criticism of ‘adjustment’ started to mount. Concern regarding adjustment’s pernicious economic and social consequences was expressed by a broad range of actors, including United Nations agencies, civil society, academia, and increasingly, the Bank’s second largest shareholder, Japan. A number of problematic issues were raised, including the negative effect on investment rates; the ambiguous effects on the external account; declining real wages; falling public provisioning; et cetera. The Bank itself was faced by the declining performance of its loans portfolio, with the percentage of satisfactory adjustment lending operations in its own evaluations falling to just over 60 per cent by the end of the 1980s. 95
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Nevertheless, the Bank was not willing to admit that fundamental failures characterized its programmes as projected catalysts for growth and poverty reduction. By the mid-1990s, after more than fifteen years of experience with adjustment lending and much debate inside and outside the Bank, the notion emerged within the institution, evident in its 1994 report on Africa (World Bank 1994), that adjustment had promoted ‘sound’ policies, but had not necessarily produced very strong results in terms of growth or poverty reduction. For the Bank, implementation problems had caused inadequate economic performance, and local ‘ownership’ of its reform programme became a perceived precondition for success. Following this, the ambition to exercise greater selectivity in the allocation of aid gained currency. Instead of imposing conditions to be achieved in response to the receipt of loans, loans became conditional on what was achieved beforehand. Under PerformanceBased Allocations (PBA) of aid, the conditionality accompanying the aid flow no longer reflected the flow of reforms, but the state of the policy and institutional environment. Donors would set conditions that identified environments judged beneficial for growth and development, and aid would be allocated accordingly. The idea of making loans conditional on what was already achieved in terms of policy/institutional reform combined with an emphasis on a more advisory role for donors. A country not yet characterized by an ‘appropriate’ environment would become a recipient of ‘aid skills’ or advice rather than of aid money. The Bank’s flagship report on aid, Assessing Aid (World Bank 1998a: 4), explained: ‘Aid can nurture reform in even the most distorted environments – but it requires patience and a focus on ideas, not money.’ As such, aid assumed a dual role: the provision of loans and grants, or financial aid, for countries with ‘appropriate’ policy environments, while non-lending services, or non-financial aid, would be used strategically to support the emergence of sound policies and good governance in ‘poor’ policy environments. The ‘pedagogical’ role of the donor community and of the World Bank, in particular, received a special emphasis. This tallied well with an issue we return to below: an increasingly formal emphasis on the Bank as a ‘knowledge bank’ – a notion enthusiastically promoted by James Wolfensohn, then World Bank president. 96
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Inside Performance-Based Aid (PBA) The World Bank’s PBA (or ‘selective’ allocation) system proceeds on the basis of the Country Policy and Institutional Assessment (CPIA).1 The latter is a World Bank staff assessment which measures a country’s performance on a set of macroeconomic, structural, social and governance criteria. The CPIA score feeds into an allocation formula for World Bank aid that is sixteen times more sensitive to
Box 5.1: CPIA Criteria A. Economic Management 1. Macroeconomic Management 2. Fiscal Policy 3. Debt Policy B. Structural Policies 4. Trade 5. Financial Sector 6. Business Regulatory Environment C. Policies for Social Inclusion 7. Gender Equality 8. Equity of Public Resource Use 9. Building Human Resources 10. Social Protection and Labour 11. Policies and Institutions for Environmental Sustainability D. Public Sector Management and Institutions 12. Property Rights and Rule-Based Governance 13. Quality of Budgetary and Financial Management 14. Efficiency of Revenue Mobilization 15. Quality of Public Administration 16. Transparency, Accountability and Corruption in the Public Sector Source: World Bank (2006).
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changes in policy/institutional variables than to changes in income per capita (as a proxy for poverty).2 As a result, the quality of institutions and policies of a country, measured against a uniform ideal model captured in the CPIA matrix, strongly prevails over needsbased criteria. The CPIA currently consists of 16 criteria, which are rated on a scale of 1 to 6 by World Bank staff (see Box 5.1). The criteria are compiled in four clusters and the average of these four clusters constitutes the CPIA score. The CPIA questionnaire that is used by staff to attribute scores carries specific instructions (‘narrative guidelines’) for each rating level (1 to 6) of each criterion. Since 2000, the annual CPIA questionnaires have been in the public domain and, since 2005, the annual CPIA scores are disclosed for IDA-eligible countries. While the official reason for disclosure, initially only of the CPIA method and, later on, also of its scores, has been the World Bank’s aspiration to operate in a more transparent way, it also indicates a continuing attempt by the Bank to strengthen its function as a ‘norm setter’ in the broader development community (see also Herman 2004). In this manner, the World Bank has successfully promoted its PBA system across the donor community. Both the African Development Fund and the Asian Development Fund use a very similar, but independently estimated CPIA, and the allocation processes of Dutch and British aid formally draw on the Bank’s CPIA scores. In addition, the Debt Sustainability Framework, the framework newly formulated by the International Financial Institutions (IFIs) and also used by other creditors and fora such as the Paris Club, has the CPIA at its core in determining debt distress thresholds (see Oddone 2005). Further, in an attempt to marry the CPIA-steered selectivity framework to the recognition of the importance of ‘ownership’ for the developmental effectiveness of aid programmes, the World Bank, together with the IMF, introduced a new ‘negotiation’ framework in 1999, the Poverty Reduction Strategy Paper (PRSP). The PRSP allegedly provides a ‘country-owned’ policy framework for poverty reduction and seeks to facilitate coordination between various donors. Drafting a PRSP, however, pre-conditions access to the concessionary resources of the IMF through its Poverty Reduction and Growth Facility (PRGF) and to the aid programme of the World Bank, as well as eligibility for further debt relief. Once 98
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completed, the PRSP is reviewed jointly by World Bank and IMF staff, who advise their respective Executive Boards on whether the PRSP is a sufficient basis for concessional lending and/or debt relief. The process of producing a PRSP is to be repeated every three years and PRSPs are currently on the agenda of just over sixty lowincome countries. A substantial literature exists critically assessing the PRSP exercise. It conveys a broad consensus denouncing the insufficient depth and breadth of the participatory process in the PRS initiative and its ambiguous repercussions for ownership. A concomitant lack of diversity in the policies encapsulated in the various PRSPs has been denounced and the striking recurrence of policy imperatives such as trade liberalization, privatization, investment deregulation and fiscal stringency has been observed (WDM 2005). The PRS process appears more as a mechanism, or framework, through which anti-poverty efforts in national policy processes across low-income countries can be streamlined, rather than as a genuinely country-owned framework of engagement between debtor and creditor countries. Indeed, the PRS process seems to have provided an opportune conduit for the donors’ and, in particular, the World Bank’s knowledge agenda, as the PRS process implies a far-reaching ‘capacity-building’ enterprise that targets various segments of society (including the executive branch of government, Parliament, regional and municipal governments, and civil society organizations) and permits the IFIs to assume an important role (see IDA/IMF 2002: 22). The CPIA plays a special role in this ‘streamlining’ exercise, conditioning the scope for alternative development and poverty reduction strategies, as it is expected that the implementation of PRSP policies will be reflected in the country’s CPIA ratings (IDA 2002). This reveals an implicit assumption that PRSP policies are necessarily in line with the imperatives embedded in the CPIA. Moreover, in World Bank practice, the CPIA serves as a filter between a country’s PRSP and its operational translation into specific aid strategies (see World Bank 2005: 23).
Beyond the Washington Consensus in World Bank Aid Policies? According to World Bank staff, the CPIA criteria include ‘a wide range of what is generally accepted as important for development’ 99
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(Gelb et al. 2004: 19). However, closer scrutiny of the criteria constituting the CPIA reveals how the assessment’s matrix imposes an ahistorical policy and institutional straitjacket on poor countries, and removes the possibility for the exercise of strategic discretion in the design of development policies. The economic core of the CPIA builds on familiar neoliberal precepts in line with the Washington Consensus (low inflation; budget surplus; no restrictions on trade and capital flows; et cetera). These economic imperatives are augmented with a set of social and governance concerns (see Box 5.1). Yet the ‘social’ and the ‘institutional’ are added onto the ‘economic’ without reflection upon the social and institutional dimensions of the latter. In line with orthodox understandings of the economics discipline, the social and/or institutional remain in the margin of the economic, and are addressed ex-post or separately through recourse to specific institutions/policies (e.g. targeting, safety nets, ‘governance’ measures). The ‘economic’ agenda promoted through the CPIA is, nevertheless, intrinsically ‘social’ as well as ‘institutional’. This has a number of contradictory implications. The social criteria rated in the CPIA, apart from being added ex-post, are constrained, and often negatively affected, by the economic imperatives defended in the economic core of the CPIA questionnaire. For instance, the various specifications of good policy in the area of building human resources or social protection sit awkwardly with the stringent fiscal and monetary order embodied in the economic management cluster. The reality of the trade-offs between these different imperatives is ill-appreciated in the design of the questionnaire. The social remains subordinate to the economic imperatives of ‘stability’, ‘balance’, and private (and foreign) sector promotion. Further, the relationship to development or growth (and thus aid productivity) of the governance issues incorporated in the CPIA is ill-understood. Governance was added onto the World Bank’s agenda in the late 1980s and evolved into a fully-fledged agenda item over the next decade. The Bank has sought to restrict itself to the ‘economic’ dimensions of governance. In practical terms, and as is reflected in the CPIA governance cluster, this has implied an emphasis on public sector management; accountability; transparency and information; the legal framework for development (including the establishment and protection of private property 100
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rights); participation in programme and project design; and control of corruption and military expenditure (World Bank 2006). The Bank’s promotion of these governance features rests on a particular model of the role of the state. However, in as much as the underlying model of the state is ill-suited to the context of developing countries, its derivative governance prescriptions will be misguided. The view of the role of the state with which the World Bank’s governance agenda tallies is comprehensively depicted in the 1997 World Development Report, The State in a Changing World (World Bank 1997). The interventions ascribed to the state in this report are, in principle, more extensive than projected under the state– market antagonism much associated with the Washington Consensus, with a broader appreciation of the incidence of market failure as the ‘perfect markets’ paradigm of the Washington Consensus is replaced by an ‘imperfect markets’ paradigm (Stiglitz 1989). It acknowledges that markets fail more persistently than previously recognized, and that this is especially relevant for the context of developing economies. The state becomes a necessary element (‘partner’) for the adequate functioning of the market economy (Stiglitz 1989). Yet, in practice, a set of institutional arrangements are prescribed, drawing on what are called ‘inter-sectoral partnerships’ between the state, private profit and non-profit sectors, and these project a persistent bias against direct state presence or strategic interventions on behalf of the state in the economy (see Fine 2001). Both the state model and its derivative governance arrangements, as embodied in the CPIA, are ill-suited for the transformations that development entails. The policy/institutional imperatives embedded in the CPIA matrix do not correspond to the empirical reality of development. They at most describe what certain advanced economies could look like.3 They emerge as a technocratic and ahistorical attempt to deal with complex underlying political-economic processes. The implications of specific governance arrangements for growth crucially depend on the particular constellation of politicaleconomic forces within both the state and the society (and embedded in the relationships between these); other factors include the state of development and the nature of the country’s international relations. More generally, the policies promoted or imposed through the CPIA exercise eliminate the possibility for strategic interventions through which specific sectors of the economy can be promoted – 101
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despite the repeatedly emphasized importance of such interventions to the success of the now-developed countries and the East Asian ‘miracle’ economies.4 The CPIA essentially embodies a set of predetermined neoliberal norms augmented with apparent social and governance concerns. On this evidence, World Bank aid practices seem little affected by its purported move forward from the Washington Consensus. Yet, in 2004, a revealing change was made to the questionnaire that is used by World Bank staff when attributing a country’s CPIA score. While the familiar neoliberal bias prevailed in the questionnaires steering successive CPIA assessments, a set of specific policy imperatives disappeared from the narrative guidelines of the 2004 questionnaire. These touched upon issues pertaining to the financial sector, capital account liberalization and the treatment of foreign investment. In the questionnaires that were used by staff to attribute a CPIA score before 2004, the imperative of an open capital account was explicitly integrated in the CPIA criteria. Further, a whole set of specific policy prescriptions regarding the financial sector prevailed, including restrictions on guided credit allocations, state ownership in the financial sector, capital controls, and the differential treatment of foreign and domestic financial institutions. Since the 2004 CPIA exercise, however, these specific policy prescriptions no longer recur. While the preference for market-determined interest rates persists, the explicit prohibition of directed credit and the imperative of ‘national treatment’ of foreign investment disappeared from the questionnaire’s narrative guidelines. Further, the explicit restrictions on state ownership in the financial sector have been removed from the questionnaire. This has been replaced by a preoccupation with Basle Core Principles (BCPs) for effective banking supervision (World Bank 2004: 15).5 This is remarkable. The meaning of such change, however, needs to be critically assessed. Indeed, closer scrutiny of the later CPIA questionnaires reveals how the CPIA rating process has increasingly come to depend on a host of ‘diagnostic reports’, which assess a country’s policy environment in a specific area (finance, foreign investment regulations, labour, et cetera) and are intended to guide staff’s judgement of a country’s policies and institutions. Inspection of the content of these reports reveals the persistence of the specific biases that, at first sight, seemed to have disappeared from the CPIA 102
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– including those in favour of capital account convertibility and national treatment for foreign investors, and against state ownership in the financial sector. Thus, while explicit incorporation of a set of possibly more contentious imperatives disappeared from the CPIA narrative guidelines, they have become lodged within the various reports that staff rely on when determining a score for a country’s policy and institutional environment. The original (neoliberal) economic and financial imperatives persist in steering staff assessments of a country’s policy and institutional environment through the CPIA procedure, but now do so in a more surreptitious way.6 This draws attention to the importance of the World Bank’s analytical clout – in particular through its applied country and sector work – to assure the continued and further adoption of a specific policy agenda (liberalization) in specific country contexts, and links to the way in which the Bank understands its self-proclaimed ‘knowledge’ role.
Tightening the Web: the World Bank and Knowledge I have illustrated above how the World Bank has sought to strengthen the link between aid disbursements and the state of a country’s policy and institutional environment. The particular assessment tool that steers these selective aid allocations, the CPIA, embodies a persistent neoliberal bias. Further, the CPIA has been subjected to a set of subtle changes where particular policy imperatives – easily perceived as more contentious – no longer explicitly appear on the CPIA questionnaire. These remain, nevertheless, embedded in the assessment exercise, now through reference to a set of diagnostic reports. These reports are often produced under World Bank patronage and perpetuate the original neoliberal economic and financial imperatives. This shift, through which specific diagnostic reports acquire particular importance for the pursuit of certain parts of the Bank agenda, has something more to reveal regarding a change in the nature of Bank engagement with aid-recipient countries. The diagnostic reports drawn upon during the CPIA scoring exercise are part of a broader ‘knowledge exercise’ by the World Bank. During the late 1990s, the Bank sought increasingly to emphasize its role as a ‘knowledge’ provider. This was most 103
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emblematically stated in the formal ‘knowledge bank’ declaration by former Bank president James Wolfensohn (1996). While the transfer of knowledge had always been a dimension of the World Bank’s role, the more so as it became leader of the aid regime when policybased lending expanded rapidly during the 1980s, the knowledge emphasis has sought to broaden the scope and raise the profile of this function. In its ‘knowledge bank’ declarations, the Bank portrays itself as a ‘clearing-house for knowledge about development’, a corporate ‘memory bank’ of best practices, and a collector and disseminator of the best development knowledge from outside organizations (World Bank 1998b: 140). For the World Bank, the creation and dissemination of knowledge appear as an international public good characterized by under-provision (Stigtliz 1999a; Squire 2000). It is argued that the supply of such a public good will be deficient without active public support, and this gives rise to a crucial role for the Bank (Gilbert et al. 1999; Stiglitz 1999b; Squire 2000; Stern and Ferreira 1997; World Bank 1998a, 1998b). Former World Bank chief economist Joe Stiglitz (1999b: 590, my emphasis) elucidated: The accumulation, processing, and dissemination of knowledge in development, as well as working more broadly to close the knowledge gap, is the special responsibility of the World Bank. The two activities of the Bank are complementary. Knowledge, particularly knowledge about the institutions and policies that make market economies work better, leads to higher returns and better allocation of capital. . . . The World Bank has a role to play in providing such advice that extends beyond the public-good nature of knowledge. It is, and is widely perceived to be, an honest broker.
In such an account, the World Bank is characterized by economies of scale and scope in policy or development knowledge and, concomitantly, has a unique capacity to analyse, codify and disseminate development experience around the world. For the Bank, ‘knowledge’ about development appears as a ‘scientific’ matter, objective and value-neutral. The socio-historical, political and economic context in which knowledge comes about and is put to use is blatantly disregarded (see Mehta 1999). This combines with the glaring absence of a critical reflection on how the Bank is governed, including its shareholder realities or relationship to the financial markets, and implications thereof for norms of ‘scientific’ acceptability (see Broad 2006; Wade 1996). 104
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However, the World Bank occupies a privileged role in the world of development knowledge. The scale of its knowledge activities surpasses those of any university department or research institution working on development by all measures.7 And, even though the research undertaken by the World Bank spans a range of topics, it is dominated by economics, with the predilection of the latter for quantitative analysis and formal modelling bestowing the discipline generally, and World Bank research in particular, with a semblance of scientific rigour to the detriment of more specific, historically and socially grounded analysis – despite the post-Washington Consensus (see Fine 2002). A more thorough analysis of this ‘zombieconomics’ can be found elsewhere in this book (Fine, this volume). Further, the World Bank’s emphasis on a knowledge mission needs to be assessed in the context of the realities of knowledge creation in developing countries, where a set of factors have severely affected domestic capacity for policy analysis. There has been a sustained erosion and undermining of state capacity for policy analysis in developing countries that have been engaged in farreaching structural adjustment exercises (see Mkandawire 2002). This has been the result of a number of factors, including fiscal stringency imposed upon states, a heavy reliance on expatriate technical staff by donor agencies, and the particular way in which ‘ownership’ has been understood by donors, where, in the words of Mkandawire (2002: 155), ‘“capacity-building” exercises had more the character of cloning than the production of people with critical analytical skills’. This has been compounded by a sustained erosion of the university sector as a centre of expertise/knowledge in many lowincome countries (see King 2001). A complex set of factors have contributed to such a state of affairs, some of which relate to donor policies. In the context of the latter, the 1980s and most of the 1990s were marked by an emphasis on support for primary education and a comparative neglect of higher education. The effect of the shift away from higher education was particularly severe in sub-Saharan Africa, where World Bank support for higher education plunged dramatically in the 1980s. This effect was worsened by donors’ support for a consultancy culture, where think tanks rather than universities tended to be favoured as sites of policy analysis. The knowledge discourse, nevertheless, has led to the reemergence of higher education on the donor agenda (see Mundy 105
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2002; King and McGrath 2004). This has happened, however, against the backdrop of the rapid privatization and internationalization of the market in education and policy services – developments in which the World Bank has played an important role (IFC 2001; Salmi 2002). As a result, national institutions in developing countries are likely to be faced with increasingly intense competition from foreign providers (Bennell and Pearce 1998: 24; King 2001). This could have further implications for in-country capacity to conceptualize the policy space independently or in accordance with the specific characteristics of the country.
Conclusion This chapter has sought to reveal how there has been a shift in the way in which the World Bank interacts with low-income aid recipients. This has implied a move from ex-ante to ex-post conditionality and, within the practice of the latter, from the explicit pursuit of specific policy imperatives to the more embedded promotion of these imperatives through increased reliance on the Bank’s ‘diagnostic’ capacity. The imperatives characteristic of the Washington Consensus remain entrenched in World Bank aid practices, even if in a less visible manner. This subtle change may serve to contain the contradiction resulting from the conjunction of its discursive shifts, as through the post-Washington Consensus, and the persistence of a set of neoliberal economic and financial imperatives at the heart of its practices. These shifts tie into the World Bank’s broader attempt to promote its knowledge stature, most recently through the proliferation of a set of specific knowledge initiatives. Throughout this effort, the Bank’s knowledge is understood as a public good reflecting its purported comparative advantage of scale and scope in capturing and disseminating best practices of development – rather than being contextualized and understood within the contours of the Bank’s political economy, mapping specific power relations. Various analytical outputs of the Bank serve to inform local understanding of the scope for policy and institutional reform. As a result of these trends, a logistical aid framework operates which seeks to guarantee the further adoption of the World Bank’s neoliberal reform agenda. This framework intrinsically implies, to borrow Soederberg’s (2004) expression, ‘an intricate web of 106
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surveillance and discipline’ that aims to spin ‘common-sense values’ across and within national spaces. It remains, however, to be seen whether and, if so, to what extent the current financial and economic crisis will alter the neoliberal imperatives that the World Bank pursues, especially in those countries where it maintains significant leverage. This will require specific attention to the practices of the Bank, such as its aid allocation mechanism and related conditionalities, rather than paying too much heed to further rhetorical shifts that are likely to occur. Since the onset of the current economic and financial crises the role of the World Bank has been significantly strengthened, with a sudden and sharp increase in its lending (and borrowing). Whether this reinvigoration of its financial and lending capacity will be accompanied by substantial changes in preferred policy reforms, particularly in the context of those low-income countries where the Bank retains substantial policy leverage, is still unclear. Initial signs, however, do not point towards any radical departures. First, there is no indication that it may be moving towards a repudiation of the CPIA as the mechanism on the basis of which it rations aid flows, with virtually no discussion of the CPIA within the Bank – as opposed, for instance, to the explicit call from the ‘Stiglitz Commission’ for its repudiation in the wake of the crisis (UN 2009). Second, a ‘mental dichotomy’ (Ocampo 2009) seems to have emerged, according to which counter-cyclical policies are promoted in the Global North, while the Bank remains generally hostile to such a direction in the Global South. Third, the Bank remains strongly committed to ‘knowledge’ as a strategic direction, with no indication of a more critical appraisal of its own knowledge role. Finally, the nature of the involvement of the World Bank Group, which includes its private sector affiliates, in response to the crisis indicates a strong and continuing commitment to the private (which is often foreign) sector as lead engine of growth. This remains understood broadly along lines associated with the neoliberal paradigm and its continuing (and often exclusive) emphasis on property rights, contract enforcement, conservative macro-management and the superiority of incentives provided through the market mechanism. Plus ça change . . . .
Notes 1 The World Bank provides finance to developing countries on nearmarket terms through the so-called ‘hard window’ of the International Bank of Reconstruction and Development (IBRD) and, to poorer and
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2
3 4 5
6 7
non-creditworthy countries, on concessional terms through the ‘soft window’ of the International Development Association (IDA). The PBA system only applies to funds allocated through the IDA. See IDA (2005: 51) for the full formula and exceptions to the allocation rule. The Poverty Reduction Growth Facility was created by the IMF in 1999 as follow-up instrument to the Enhanced Structural Adjustment Facility (ESAF), with an ambition to highlight explicitly the new anti-poverty imperative. The PRGF would try to induce policies that would focus both on economic growth and poverty reduction and that would, as a result of better national ownership, be implemented more consistently. The World Bank added its own programmatic lending instrument, the Poverty Reduction Strategy Credit (PRSC), in 2001. Blend countries that do not seek PRGF arrangements do not have to produce a PRSP in order to have access to IDA resources. For the full list see . See Chang (2002, Chapter 3). See the well-known contributions by Chang (2002); Wade (1990); and Amsden (1989). The BCPs provide a set of international standards of ‘best practice’ defined by the Bank for International Settlements. See Soederberg (2003) on how the introduction of the BCPs in developing countries serves as a vehicle to overhaul existing banking supervision. See van Waeyenberge (2009) for a more elaborate account. Research at the Bank takes place both in its operational and research departments. Together the resources available across these two amount to over US$180 million. Further, the World Bank Institute engages in a massive ‘client learning programme’, with the number of trainees amounting to 110,000 in 2005, up from 7,000 in 1996.
References Amsden, A. (1989) Asia’s Next Giant: South Korea and Late Industrialization, Oxford University Press, New York NY. Bennel, P. and Pearce, T. (1998) ‘The Internationalisation of Higher Education: Exporting Education to Developing and Transitional Economies’, Institute of Development Studies Working Paper 74, University of Sussex. Broad, R. (2006) ‘Research, Knowledge, and the Art of “Paradigm Maintenance”: the World Bank’s Development Economics Vice-Presidency’, Review of International Political Economy, Vol. 13, No. 3, pp. 387–419. Chang, H-J. (2002) Kicking Away the Ladder: Development Strategy in Historical Perspective, Anthem Press, London. Fine, B. (2001) ‘Neither the Washington nor the Post-Washington Con-
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sensus: an Introduction’, in Fine, B., Lapavitsas, C. and Pincus, J. (eds) Development Policy in the Twenty-first Century: Beyond the Post-Washington Consensus, Routledge, London. —— (2002) ‘Economic Imperialism and the NDE as Kuhnian Paradigm Shift?’, World Development, Vol. 30, pp. 2057–70. —— (2009) ‘Development as Zombieconomics in the Age of Neoliberalism’, Third World Quarterly, Vol. 30, No. 5, pp. 885–904. Gelb, A., Ngo, B. and Ye, X. (2004) ‘Implementing Performance-Based Aid in Africa: the Country Policy and Institutional Assessment’, World Bank Africa Region Working Paper Series, No. 77. Gilbert, C., Powell, A. and Vines, D. (1999) ‘Positioning the World Bank’, Economic Journal, Vol. 109, No. 459, pp. 598–633. Herman, B. (2004) ‘How Well Do Measurements of an Enabling Domestic Environment for Development Stand Up?’, UNCTAD XVIII Technical Group, Meeting of the Group of 24, . IDA (2002) ‘Additions to IDA Resources: Thirteenth Replenishment. Supporting Poverty Reduction Strategies’, . —— (2005) ‘Additions to IDA Resources: Fourteenth Replenishment. Working Together to Achieve the Millennium Development Goals, Report from the Executive Directors of the IDA to the Board of Governors’,
IDA/IMF (2002) ‘Poverty Reduction Strategy Papers – Progress in Implementation, Prepared by the Staffs of the World Bank and the IMF’, 11 September. IFC (2001) Investing in Private Education. IFC’s Strategic Directions, World Bank, Washington DC. King, K. (2001) ‘“Knowledge Agencies”: Making the Globalisation of Development Knowledge Work for the North and the South?’, in Gmelin, W. et al. (eds) Development Knowledge, National Research and International Cooperation, Centre of African Studies, Edinburgh. King, K. and McGrath, S. (2004) Knowledge for Development: Comparing British, Japanese, Swedish and World Bank Aid, Zed Books, London. Mehta, L. (1999) ‘From Darkness to Light? Critical Reflections on the World Development Report 1998/99’, Journal of Development Studies, Vol. 36, No. 1, pp. 151–61. Mkandawire, T. (2002) ‘Incentives, Governance and Capacity Development in Africa’, in UNDP, Capacity Development: New Solutions for Old Problems, UNDP, New York NY. Mundy, K. (2002) ‘Retrospect and Prospect: Education in a Reforming Bank’, International Journal of Educational Development, Vol. 22, No. 5, pp. 483–508.
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Ocampo, J. A. (2009) ‘The Economic Crisis and the Developing World: What Next? Interview with Robert Wade and Jose Antonio Ocampo’, Challenge, Vol. 52, No. 1, pp. 27–39. Oddone, F. (2005) ‘Still Missing the Point: Unpacking the New World Bank/IMF Debt Sustainability Framework’, EURODAD, September 2005. Salmi, J. (2002) Reconstructing Knowledge Societies, World Bank, Washington DC. Soederberg, S. (2003) ‘The Promotion of “Anglo-American” Corporate Governance in the South: Who Benefits from the New International Standard?’, Third World Quarterly, Vol. 24, No. 1, pp. 7–27. —— (2004) The Politics of the New International Financial Architecture: Reimposing Neoliberal Domination in the Global South, Zed Books, London. Squire, L. (2000) ‘The World Bank and Development Research’, in Vines, D. and Gilbert, C. (eds) The World Bank: Structure and Policies, Cambridge University Press, Cambridge. Stern, N. and Ferreira, F. (1997) ‘The World Bank as “Intellectual Actor”’, in Kapur, D., Lewis, J. and Webb, R. (eds) The World Bank: Its First Half Century. Volume 2: Perspectives, Brookings Institution, Washington DC. Stiglitz, J. (1989) ‘Markets, Market Failures and Development’, American Economic Review, Vol. 79, No. 2, pp. 197–202. —— (1999a) ‘Knowledge as a Global Public Good’, in Kaul, I. et al. (eds) Global Public Goods, Oxford University Press, Oxford. —— (1999b) ‘The World Bank at the Millennium’, Economic Journal, Vol. 109, No. 459, pp. 577–97. United Nations (UN) (2009) ‘Report of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System’, United Nations Conference on the World Financial and Economic Crisis and Its Impact on Development, New York, 24–26 June. van Waeyenberge, E. (2006) ‘From Washington to Post-Washington Consensus: Illusions of Development’, in Jomo, K. S. and Fine, B. (eds) The New Development Economics: After the Washington Consensus, Tulika Books, New Delhi. —— (2009) ‘Selectivity at Work: Country Policy and Institutional Assessments at the World Bank’, European Journal of Development Research, Vol. 21. Wade, R. (1990) Governing the Market, Princeton University Press, Princeton NJ. —— (1996) ‘Japan, the World Bank, and the Art of Paradigm Maintenance: the East Asian Miracle in Political Perspective’, New Left Review, Vol. 217, pp. 3–37. Wolfensohn, J. (1996) ‘People and Development’, Annual Meetings Address, World Bank, Washington DC. World Bank (1994) Adjustment in Africa: Reforms, Results and the Road Ahead, World Bank, Washington DC.
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—— (1997) World Development Report. The State in a Changing World, Oxford University Press for the World Bank, New York NY. —— (1998a) Assessing Aid. What Works, What Doesn’t and Why, University Press for the World Bank, New York NY. —— (1998b) World Development Report 1998/9. Knowledge for Development, Oxford University Press, New York NY. —— (2004) ‘Country Policy and Institutional Assessment. 2004 Assessment Questionnaire, Operations Policy and Country Services’, 6 December,
—— (2005) ‘Results Focus in Country Assistance Strategies: a Stocktaking of Results-Based CASs, Operations Policy and Country Services’, World Bank, July. —— (2006) ‘Country Policy and Institutional Assessment. 2006 Assessment Questionnaire, Operations Policy and Country Services’, 8 September. World Development Movement (WDM) (2005) Denying Democracy: How the IMF and World Bank Take Power from People, World Development Movement, London.
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The Corruption Industry and Transition: Neoliberalizing Post-Soviet Space? ADAM SWAIN, VLAD MYKHNENKO AND SHAUN FRENCH
The behemoth of neoliberalism has figured prominently in accounts of post-Soviet economic development in Eastern Europe and the former Soviet Union. The ‘shock therapy’ and the ‘big bang’ which accompanied the disintegration of the Soviet system in the late 1980s and early 1990s are commonly identified as ‘neoliberal’ (see Birch and Mykhnenko; Jessop, this volume). It has been argued that neoliberalism was imposed on post-Soviet countries by hegemonic international financial institutions (IFIs) such as the IMF and the World Bank (Gowan 1995). This was refuted by some who maintained that if anything neoliberalism had been voluntarily adopted by indigenous elites (Lloyd 1996). More recently others have argued that the emergence of consolidated neoliberal states is due either to the extension of the transnational capitalist class to include postSoviet countries (Shields 2003) or to alliances between domestic and transnational class interests (Drahokoupil 2008). However, the relationship between neoliberalism and post-Soviet transition is puzzling. Whilst many have argued transition was a neoliberal Trojan horse, others have challenged the notion that liberal market economies have emerged in the region (Mykhnenko 2007). Some have regarded Russia as an archetypal neoliberal country, at least during the 1990s (Job 2001; Nesvetailova 2005), whilst others have suggested it is more akin to political or even state capitalism (Hanson and Teague 2007). At the heart of this debate lies ambiguity surrounding the very concept of neoliberalism itself and especially its relationship to alternative market-orientated movements. Whilst few scholars have completely jettisoned the neoliberal discourse there have been attempts to destabilize the relationship between neoliberalism and transition. The role of transnational networks of academic (Bockmann and
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Eyal 2002) and professional (Swain 2007) economists in producing and promoting neoliberal ideas has been highlighted. It has also been argued that individuals and households inevitably negotiate neoliberal reform, thereby ‘domesticating’ and articulating it with non-neoliberal and even non-capitalist practices (Smith 2006; Smith and Rochovská 2007). Moreover in the circumstances of a weak state and a regionally or nationally rooted alternative marketorientated movement, it is possible to resist externally inspired, stateimposed neoliberal projects (Swain 2006; Sher 2008). This chapter draws on recent work which questions the conceptual coherence of neoliberalism in academic debate and its usefulness in promoting political activism and progressive change to consider what it means to say that post-Soviet countries are neoliberal. Our intention is to identify and destabilize the mechanisms which render neoliberalism ‘true’. The concept of neoliberalism is underpinned by a universalist notion of the economy which is nowhere realized in a pure form, resulting in studies which focus on whether neoliberalism as a normative project is more or less realized (in a more or less pure form) and on the mechanisms through which this is achieved. Our contention is that the assemblage and calculative devices which produce and promote the notion of ‘corruption’ are one of the most powerful mechanisms underpinning attempts to realize neoliberalism in post-Soviet Eastern Europe. Corruption has been used to justify market fundamentalism around the world (Brown and Cloke 2004), including in post-Soviet Europe, where anti-corruption was used to justify the implementation of ‘shock therapy’, whilst corruption was used to explain away its failures (Krastev 2004). In transition the identification of corruption undermines the legitimacy of existing economic practices and justifies their reorganization. Where neoliberal ideas have come up against rival alternative market-orientated movements, which, for example in Russia, have established and maintained themselves politically, one response has been to undermine their legitimacy by identifying them as corrupt. Thus whereas the anti-corruption discourse in many Eastern European countries is used to justify a small state and market fundamentalism, in Russia anti-corruption has been used as an argument for the transfer of assets and revenues from ‘oligarchs’ to the state (Tsyganov 2007). We argue that a close inspection of the socio-technical networks producing the discourse and devices of corruption/anti-corruption is one way to de-centre and destabilize 113
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the concept of neoliberalism and fruitfully shift the terrain of progressive politics. The argument unfolds in the following way. In the next section we discuss the status of the concept of neoliberalism and argue that it is a theory of resistance which reifies the object which is supposed to be critiqued. Thereafter we argue that one way of deconstructing neoliberalism, in the context of post-Soviet ‘transition’, is by thinking about corruption as an ‘industry’ which hails market-orientated policies commonly identified as neoliberal (de Maria 2008: 184; Krastev 2004).
Neoliberalism in Crisis: Elephant in the Room or Apparition? Neoliberalism is in crisis in two senses. First, the onset of the 2007–9 global financial-economic crisis has undermined the recent dominance of market fundamentalism (French et al. 2009), and, second, the coherence and relevance of the concept has been questioned. Neoliberalism has been thought about in three main ways. First, it is treated as a normative ideological class project intended to restore the power of the bourgeoisie. It is argued that neoliberal policy is a national project of the state and of capital in the most advanced Western economies, intended to reduce the power of the working class by creating and maintaining an external labour reserve (Harvey 2005). Second, neoliberalism is understood as a neo-imperial project. Chang (2002), a development economist, argues that liberalization of international trade and investment and selective labour flows is a deliberate strategy by advanced Western capitalist countries to lockin their comparative advantage by preventing poorer countries from using import substitution to develop infant industries and accumulate national capital. Third, neoliberalism is treated as a market-fundamentalist ideology which is manifest in state strategies which generate processes of neoliberalization. In this rendition neoliberalism remains a universally recognized phenomenon but is treated as a spatially and temporarily variegated process. This approach seeks ever more conclusive and comprehensive specifications of neoliberalism. Peck and Tickell (2002; see also Tickell and Peck 2003) examine the temporal evolution of national neoliberalisms in the heartlands of the US and the UK, and their extension to virgin territory. Some critics of market fundamentalism have recently subjected the concept of neoliberalism to critique. Clive Barnett (2005; see also Barnett et al. 2008) argues that the conceptualization of neo114
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liberalism is based on functionalist readings of both Marxist notions of hegemony and Foucault’s theory of governmentality. He maintains that this reading, which tends to ignore not only resistance but also difference, ascribes to neoliberalism a unity and a power it does not possess and concludes ‘[t]here is no such thing as neoliberalism!’ (2005: 9). Castree (2006) maintains there is confusion over what neoliberalism is and what exactly its effects are. Moreover, he doubts whether its conceptualization will ever be refined and clarified. Faced with a burgeoning literature revealing the ever greater variation in the forms of ‘actually existing neoliberalism’, scholars have sought to identify mesolevel abstract versions of neoliberalism as expressions of an essential universal core. We wish to extend this critique by arguing for a rejection of ‘residual structuralism’ (cf. Murdoch 2006: 15) and for a deconstruction of the discourse of neoliberalism. To do this we seek to highlight the critical potential of work which understands the economy as an emergent configured performance (Callon 1998) constructed through the interplay of rival projects and their associated socio-technical networks (Mitchell 2008; see also Lohmann’s analysis of carbon trading in this volume). Whilst this way of understanding the economy is not without its own problems, in particular the danger that the complex construction of the economy is simply normalized, it can also be used as a targeted critical-political tool intended to selectively intervene in and progressively reconstruct the economy. We critique three discursive practices which underpin the discourse of neoliberalism. First, neoliberalism is represented as a total, unified and systemic entity – much in the way, indeed, that some Marxists represent capitalism (Gibson-Graham 1996: 4). Such representational forms recognize a particular form of economic and political authority in which power is imagined as (more or less) centred and (more or less) unevenly radiating outwards from neoliberal heartlands. Second, neoliberalism is an emblematic theory of resistance and as Rose (2002: 384) argues: ‘Resistance theory attempts to disrupt structuralist notions of hegemony by demonstrating that systems are always destabilized. Yet, in doing so, it simultaneously constitutes the structured nature of the system as primary.’ There is a fine line between on the one hand recognizing the influence of neoliberal ideas and on the other hand justifying and even promoting those very same ideas. Recognition of the role of think tanks in producing and promoting neoliberal ideas risks simply describing and reifying 115
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market fundamentalism (see Birch and Tickell, this volume). One notable critic of market fundamentalism, Jamie Peck, with his collaborator Nik Theodore (2007: 760), examines the threat posed by the rise of neoliberalism to the continental European variety of capitalism. They argue that the varieties of capitalism literature is ‘defensive’ because it provides intellectual justification for the continental social market model of capitalism, and – paradoxically and prophetically – that scholars working within the varieties of capitalism tradition need to recognize the power of neoliberalism more fully. In so doing they come perilously close to re-presenting the self-understanding of triumphal market fundamentalism. More recently Peck (2008) has dissected the intellectual history of neoliberalism but in so doing arguably justifies rather than negates the truth of neoliberal theory. Equally, the framing of opposition to market fundamentalism as resistance to neoliberalism locates oppositional politics on a ready-made terrain in which the marginalized and the dispossessed are, well, already marginalized and dispossessed. The identification of, and resistance to, hegemonic neoliberalism may well undermine the generation of alternative political imaginaries. If neoliberalism is about making the economy in a particular image then remaking the economy in a new image may require a new imagination; an imagination in which neoliberalism is at most recognized as an effect of and not a cause of politicaleconomic practices and discourses. Our contention is that to the extent to which neoliberalism may be said to exist it is performative, and that a different way of thinking and acting is the first step to progressive change. To update Harvey (1973: 137; emphasis in the original) from a generation ago: ‘Our aim is to eliminate neoliberalism. Therefore the only valid politics . . . is to eliminate the conditions which give rise to the truth of neoliberal theory. In other words, we wish neoliberal theory to become not true.’ Taking our cue from Harvey, this entails destroying the mechanisms which make neoliberal theory ‘true’ or performable, thereby rendering it irrelevant to understanding society. To be sure, neoliberalism cannot simply be wished away; it can only be willed away through alternative social construction (Gibson-Graham 2006). Third, just as neo-classical economists compare ‘real’ economies to their abstract models represented in economics textbooks and find them wanting (cf. Carrier and Miller 1998) so critics of neoliberalism compare contingent varieties of ‘actually existing neoliberalisms’ 116
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with an essentialized ‘neoliberal model’ which nowhere is realized in a pure form. Thus neoliberalism is represented in a way which inadvertently reinforces the notion of a pure essentialized economy separate from an impure economy of practice. This discursive practice enacts a binary form of thinking which privileges expert, Western economic and political knowledge as authentic over indigenous actors and knowledges that are rendered inauthentic (Mitchell 2002). This binary way of thinking not only privileges certain places over and above others, but also privileges the future over the present. It envisions an idealized version of the economy in the future that can never be realized, for the process of realization would entail the loss of its disciplinary power. This historicizing process means certain economies are treated as ‘less modern’ than advanced capitalist countries. The privileging of particular ideas, places and temporalities over other ideas, places and temporalities is used to justify and legitimate disciplinary action – that is, action designed to ‘correct’ irrational economic actors and ‘improve’ backward economies. This mode of representation produces academic authority and scripts for promoting market fundamentalism. In the following section we seek to highlight how the corruption industry produces expert knowledge claims and disciplinary power.
The Post-Soviet ‘Corruption Industry’ The collapse of the Soviet bloc, the end of the Cold War and the dissemination of transition policies helped to promote the anticorruption discourse within post-Soviet Europe and beyond (Abed and Gupta 2002; Krastev 2004). Figure 6.1 shows that the number of English-language academic publications devoted to the topic of corruption increased dramatically from the late 1980s onwards. In these academic and policy research debates the region functioned as a microcosm or laboratory with which to experiment with corruption to draw conclusions to be applied within and outwith transition countries. Indeed corruption has been a recurring theme in accounts of post-Soviet transition and has produced a body of literature which is as voluminous as it is varied. However, here we wish to deconstruct the anti-corruption discourse to think of it as an industry or assemblage of academic and professional experts engaged in the production, circulation, (re)interpretation and enactment of the idea of corruption/anti-corruption, which thereby 117
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Figure 6.1. Academic journal publications on the topics of corruption, rent seeking and neoliberalism, total number per year, 1978–2008 Source: Authors’ own calculations on the basis of ISI Web of Knowledge: Web of Science, (17 March 2009).
contributes to the formation of particular economic practices and identities. The industry comprises networks, continuously in flux, spanning academics, policy makers and practitioners operating at different sites. The corruption industry defines, measures, and marshals arguments in favour of and against certain forms of political-economic development under the banner of ‘anti-corruption’. It seeks (a goal it only partially attains) to eradicate difference by capturing, aligning and controlling practices and actors. By disclosing this disciplinary power we seek to open fertile terrain for a progressive politics that challenges conventional universalist and essentialist definitions of ‘the corrupt’. In post-Soviet Eastern Europe this entails recognizing the ways Western geopolitical and geo-economic centres of power use corruption to align post-Soviet political economies with their interests. The industry engages in three main interlocking activities: the identification of corruption as 118
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a discursive category by academics and policy makers; the measurement, calculation and benchmarking of corruption; and, the simulation and experimentation with the idea of corruption through the practices of anti-corruption initiatives such as technical assistance projects funded by international donors and civil society activities.
Theorizing corruption Socio-technical networks of academic and professional economists in transition countries and beyond produced theories of corruption and economic development. Figure 6.2 shows that the number of English-language academic publications about corruption in postcommunist states significantly increased in the early 1990s. One of the earliest contributions was made by Andrei Shleifer and Robert Vishny (1993), academic economists at Harvard and Chicago respectively, who argued that corruption was caused by weak central government and that its effect was to distort the economy significantly. On the basis of research in Russia, they argued that the central authority present during the Soviet era resulted in monopoly or organized corruption – in which one actor had to be bribed who would then confer favour – whereas under post-Soviet conditions weak central authority resulted in competitive corruption, in which many actors had to be bribed without any certainty that the favour would be supplied. Professional economists working for IFIs also studied corruption and used it to justify the Washington Consensus (Kaufmann 1997; Tanzi 1998). These theorizations did not escape critique. Krastev (2004) argued that corruption was an effect of and not a cause of weak states and underdevelopment. He maintained that the mis-identification of unfamiliar socio-economic practices, such as blat (Ledeneva 1998), as corrupt exaggerated its occurrence and resulted in ‘corruption-centred politics’, which distorted democracy and undermined faith in the judicial system (see also Grigorescu 2006). It was also argued that in certain circumstances, such as in divided political systems and in the presence of a weak state, corruption could promote political stability and state building (Hislope 2008; Darden 2008). However, a notable feature of orthodox work on corruption was the way it underpinned prejudicial theories of economic development in the former Soviet Union which undermined the legitimacy of existing economic practices and justified intervention by external experts. In 1998, Joel Hellman, a political scientist then working for 119
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the European Bank for Reconstruction and Development (EBRD), published a paper entitled ‘Winner Takes All: the Politics of Partial Reform in Postcommunist Transitions’ in World Politics, in which he argued that in countries where politicians were protected from electoral jeopardy, initial winners of reform were able to ‘stall the economy in a partial reform equilibrium that concentrated rents’ (1998: 204, emphasis in original). This was a reformulation of earlier work on ‘rent seeking’ which argued that artificial monopolies resulted in welfare costs (see Figure 6.1). Hellman joined the World Bank in 2000 and with his colleague Daniel Kaufmann used the ‘Business Environment and Enterprise Performance Survey’ (BEEPS), a firmlevel dataset covering 22 transition countries commissioned by the Bank and the EBRD in 1999, to develop and measure what they termed ‘state capture’: ‘the efforts of firms to shape the laws, policies, and regulations of the state to their own advantage by providing illicit private gains to public officials’ (Hellman and Kaufmann 2001). Hellman and his collaborators used the data to produce an index of the ‘capture economy’: countries with an aggregate capture economy index of less than the country average were classified as having a low capture economy, whereas countries with a higher than average score were classified as high capture economies. The dataset was also used to identify ‘captor firms’ – firms that ‘frequently’, ‘mostly’ or ‘always’ are required to make extra, unofficial payments to public officials to influence the content of new laws, decrees and regulations. In transition economies, corruption has taken on a new image – that of so-called oligarchs manipulating policy formation and even shaping the emerging rules of the game to their own, very substantial advantage. We refer to this behavior as state capture. Though this form of grand corruption is increasingly being recognized as the most pernicious and intractable problem in the political economy of reform, few systematic efforts have been made to distinguish its causes and consequences from those of other forms of corruption. Moreover, there have not been any attempts to measure this specific type of corruption and to compare it across countries. (Hellman and Kaufmann 2001, emphasis in original)
Hellman and his collaborators argued that captor firms, which emerged during the initial stages of transition, monopolized contact with corrupt members of the state bureaucracy to produce capture economies. To protect their privileged positions captor firms and the corrupted bureaucrats colluded to form a rent-seeking elite which sought to prevent further market reform. The state capture argu120
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ment was elaborated in relation to other forms of corruption and broader political and economic reform, in the World Bank’s Anticorruption in Transition: a Contribution to the Policy Debate report in 2000 and in two further reports following repeated surveys in 2002 and 2005 (Gray et al. 2004; Anderson and Gray 2006). These reports suggested that ‘reform’ reduced administrative corruption even though economic growth was associated with state capture. In successive reports the World Bank’s emphasis shifted from data on firms’ experiences of corruption and state capture towards managers’ perception of corruption. Another influential theorization of post-Soviet economic development was made by Clifford Gaddy of the Brookings Institution and Barry Ickes, an academic economist (Gaddy and Ickes 2002). They identified a discrepancy between what they termed Russia’s ‘virtual economy’, as represented in tax returns, profit statements, company accounts and so on, and its ‘real’ economy as practised by economic actors. The visible economy was thus represented as inauthentic
Figure 6.2. Academic journal publications on the topic of corruption in post-communist transition states, total number per year, 1978–2008 Source: Authors’ own calculations on the basis of ISI Web of Knowledge: Web of Science, (17 March 2009).
121
As above
Governance World Bank Matters – Institute Worldwide Governance Indicators
Washington DC, USA
The Heritage Washington Foundation & DC, USA The Wall Street Journal World Bank
1996
1995
1995
1973
Individual, 1995 foundation & corporate donations
Washington DC, USA
Bilateral & multilateral donors; individual & corporate donations
2006 (‘Functioning of government’)
Inclusion of corruption in index
1995
Governance
1996 (‘Control of corruption’)
Economic freedom 1995 (‘Freedom from corruption)
Corruption
Democratization 1999 of post-communist (‘Corruption’ Central Europe ratings) and post-Soviet Eurasia
Political freedoms & civic liberties
Index Benchmarks established
Index of Economic Freedom
Freedom House
Nations in Transit
Washington DC, USA
Source of funding
Bi-annual composite poll of polls
Annual aggregate of quantitative metrics
Annual composite poll of polls
Annual poll of in-house experts
Annual poll in-house of experts
Methodology
212
183
180
29 transition countries
Interactive website & print
Web-hosted database, online & printed report
As above
Online & printed report
193 countries Web-hosted and 15 database; territories online & printed report
Coverage of Availability countries (No. & territories)*
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As above
Freedom House
Freedom in the World
HQ
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Corruption Transparency Berlin, Perceptions International Germany Index
Organisation
Name of index
Table 6.1. Corruption and corruption-related indexes and benchmarks of post-Soviet countries
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Organisation
Freedom House
Countries at the Crossroads
Sources: Authors’ own compilation based on institutional websites.
2004
2003
1999
1999
Government performance
Public experience & attitudes of corruption
Bribes by industrialized countries’ MNCs
Business environment
Index Benchmarks established
2004 (‘Anticorruption and transparency’)
1999 (‘evaluates the supply side of corruption – the likelihood of firms from the world’s industrialised countries to bribe abroad.’) 2003 (‘Corruption’)
1999 (‘Corruption’)
Inclusion of corruption in index
22 advanced economies
26 transition countries
Bi-annual poll of in-house experts
60 strategically important countries
As above
As above
Online & printed report
Interactive website & database
Coverage of Availability countries (No. & territories)*
Annual survey 60 of public opinion
Occasional company survey
Occasional company survey
Methodology
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Washington As above DC, USA
As above
Transparency Berlin, International Germany
Global Corruption Barometer
EBRD
Source of funding
Bilateral & multilateral donors; individual & corporate foundations
London, UK
HQ
10/6/10
Bribe Payers Transparency Berlin, Index International Germany
Business EBRD and Environment World Bank and Enterprise Performance Survey
Name of index
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Source: Transparency International.
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Figure 6.3. Transparency International Corruption Perception Index, 2008
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compared to the economic models to which it was supposed to correspond. They maintained that the economy, ‘a mutant system, with laws of behaviour and evolution all of its own’ (2002: 10), was sustained by the ‘loot chain’ – financial dependence on fictitious pricing, virtual accounting and relational capital. As both the state capture and virtual economy theories argued that economic actors were behaving rationally and that the system was in equilibrium (able to re-produce itself), systemic reorganization would only occur through external political intervention.
Calculating corruption The theorization of corruption was indistinguishable from the experimental development of technologies for calculating or measuring corruption – what Krastev calls ‘the new science of corruption’ (Krastev 2004: 3; see also de Maria 2008). Table 6.1 shows that at least nine indexes related to corruption in transition countries were regularly calculated. The indexes made it possible for experts to claim corruption could be measured and compared over space and time. Indeed ‘[t]he invention of corruption as a global policy issue that can be solved with the “one size fits all” policy would be unimaginable without the radical discovery that corruption is measurable’ (Krastev 2004: 23). Some indexes were pure polls of expert opinion whereas others were aggregate or composite polls of polls. The similarity in the results of the various indexes may be a measure of their accuracy (Tanzi 1998: 578; Rose-Ackerman 2006) or the way they used and exchanged data (autocorrelation). The most influential indexes were two polls of polls produced by Transparency International (TI) (Wang and Rosenau 2001). In 1995, TI began to publish the ‘Corruption Perceptions Index’ combining the opinions of various country experts, consultants, business people and local correspondents operating under the auspices of 11 different organizations (see Figure 6.3). In 1999, TI started to publish the ‘Bribe Payers Index’. The World Bank Institute produced the Worldwide Governance Research Indicators Dataset which aggregated 39 different polls of experts and surveys of public and elite opinion by more than thirty NGOs, think tanks, development agencies and private investment risk consultancies. The World Bank also published the ‘Doing Business’ dataset, which included a series of indicators, such as contract enforcement, related to corruption. Both the TI and the WBI used Freedom House’s 125
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‘Nations in Transit’ ratings in calculating their aggregate governance perceptions scores. Freedom House, a US-based NGO, published a pure poll of expert opinion and developed criteria for monitoring civic liberties and political rights across the world and measuring democratic governance in post-Soviet countries in particular. Other similar indexes included the ‘Economic Freedom of the World’ Index produced by the Cato Institute (Washington DC) and the Fraser Institute (Canada), and the ‘Freedom in the World’ Index produced by the Heritage Foundation (Washington DC). These indexes meant ‘[t]he study of corruption was portrayed as similar to the study of inflation. The causes of corruption were reduced to the effect of the governments’ role in politics’ (Krastev 2004: 33) and excluded wider moral, political and institutional questions relating to Western supremacy (Bukovansky 2006: 183). Moreover the indexes attracted the attention of policy makers, businesses and, especially, the media.
Simulating corruption Multilateral and bilateral overseas development assistance donors were instrumental in the establishment of many corruption indexes. For example the World Bank was instrumental in the founding of TI in Berlin in 1995. In turn donors used the indexes to allocate assistance to countries (Grigorescu 2006: 522) and to determine their policy advice, technical assistance and lending activities. Beginning in the mid-1990s, the World Bank and IMF identified corruption – ‘the abuse of public office for private gain’ (IMF 1997: 2, fn2) – as a prime justification for the liberalization of international markets and structural reform of developing and transitional economies (Everett et al. 2006; Bukovansky 2006; Marquette 2004). In 1997, the IMF adopted ‘a more proactive approach in advocating policies and the development of institutions and administrative systems that eliminate the opportunity for bribery, corruption, and fraudulent activity in the management of public resources’ (IMF 1997: vi). In this way the IFIs extended the scope of their surveillance of and intervention in recipient countries to include ‘good governance’ (see van Waeyenberge, this volume). The professional activities of anti-corruption initiatives involved experimenting with the idea of corruption, although the evidence of their directly reducing recorded levels of corruption is slim (Rousso and Steves 2006). Initially anti-corruption initiatives were overwhelmingly conceived, managed and monitored as part of wide126
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ranging lending by IFIs, and technical assistance programmes and projects funded by multi-lateral donors, such as the EU TACIS and PHARE programmes, as well as by bilateral donors, such as the UK government’s DfID and the US government’s USAID. Projects included those which focused on corruption in a narrow sense (judicial reform, public procurement, media development, public information strategies, political processes) as well more general projects including those which were intended to fund research and to popularize and promote the work of advocacy groups such as TI. Advocacy work focused domestic politics, especially at election time, on corruption and exaggerated citizens’ perception of its occurrence (Krastev 2004; Grigorescu 2006). Ironically, some of these projects themselves became embroiled in allegations of corruption, including one USAID-funded project, on which Andrei Shleifer worked, in which the Harvard Institute for International Development provided economic policy advice to the Russian government (Wedel 2000). From the outset of transition, assistance to the FSU was regarded as an instrument for promoting Western interests (Shleifer and Vishny 1991) and the focus on corruption can be understood in these terms despite subsequent efforts by the industry to enrol the antipoverty agenda to justify its activities. Krastev (2004) argued that the anti-corruption discourse in Eastern Europe was an instrument to promote US anti-protectionist trade policy and transnational capital, and to provide a post-Cold War rationale for the existence of the World Bank. More broadly it has been argued that anti-corruption is an international governance regime in which IFIs and TI deploy an array of technocratic methods and enrol expert knowledges to measure and realize international norms (Wang and Rosenau 2001).
Conclusion: Neoliberalism and Corruption In this chapter we have focused on the way the idea of corruption is used to justify and promote policies commonly labelled as ‘neoliberal’. Indeed the discourses of corruption and neoliberalism may be considered counterparts; residual categories into which orthodox and heterodox commentators respectively place phenomena which are imagined to contradict normative prescriptions. In this sense studies of corruption can simply be understood as accounting for the inevitable failure to disseminate a supposedly universal model of economic development, whilst studies of neoliberalism can be understood as 127
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explaining away the effects of dissemination. There are two similarities between the way corruption and neoliberalism are represented. First, the definition of corruption along with the identification of its causes and consequences is fuzzy – Everett et al. (2006: 9) regard corruption as a ‘free-floating signifier’. Corruption can refer to the conduct of a specific economic or political practice at one extreme – low-level corruption – and to the organization of an entire economy and associated politics at the other – grand corruption. The idea of corruption can be understood as simultaneously both universal and situated. Moreover, it is precisely this ambiguity and elusiveness which enhance its economic relevance and political potential. Second, the idea of corruption reinforces the notional separation of economies of practice from both idealized orthodox and heterodox accounts of the economy. For example de Sardan (1999: 25–6) argues that corruption should be understood as a ‘moral economy’ underpinned by ‘value systems and cultural codes’, which explains why technocratic anticorruption initiatives fail. There is an imaginary world where corruption does not exist, which is nowhere realized in a pure form, and there are ‘real world’ economies where extant corruption is inevitable. It is the very impossibility of realizing a corruption-free economy which produces its disciplinary power, for its realization would dissolve its traction. Exiting this bind demands greater recognition and tolerance of the rich variety of socio-technical practices which make the economy in different times and places. Post-Soviet Eastern Europe was used as a laboratory where experiments with corruption could be staged in order to realize envisioned political-economic identities. Equally, corruption was used to justify neo-imperial projects intended to reorganize the state, and especially its relationship to economic organizations, and realign it Westwards. The attribution of practices or actors as corrupt or otherwise was just one mechanism to selectively confer modernity on some and stigmatize others (cf. Mitchell 2007). However, the 2007–9 global financial-economic crisis with its origins in the financial system of the core Western capitalist countries challenged the assumption that corruption is confined to the non-West and undermined the authority and political agility of the corruption industry. Our analysis of corruption suggests neoliberalism can be understood as a configured performance involving a cacophony of discourses and a profusion of socio-technical practices, rather than as a cause of them. To be sure, there is neither a hidden hand of 128
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the market, a politico-capitalist conspiracy, nor a recurring process of subjectification which conjures up a neoliberal world. In so far as neoliberalism may be thought to exist, it is a precarious achievement subject to communicative and practical disruption.
Acknowledgements An earlier version of this chapter was presented in the ESRC Seminar Series ‘Neoliberalism, anti-neoliberalism and de-ideologization’, at the University of Glasgow on 1 April 2008. We would like to thanks the participants for their comments. We thank Alex Vasudevan and Kean Birch for their comments on an earlier draft of this chapter, and Elaine Watts for drawing the map.
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Kaufmann, D. (1997) ‘Corruption: the Facts’, Foreign Policy, Vol. 107, pp. 114–31. Krastev, I. (2004) Shifting Obsessions: Three Essays on the Politics of Anticorruption, CEU Press, Budapest. Ledeneva, A. V. (1998) Russia’s Economy of Favours: Blat, Networking, and Informal Exchange, Cambridge University Press, Cambridge. Lloyd, J. (1996) ‘Eastern Reformers and Neo-Marxist Reviewers’, New Left Review, Series I, No. 216, pp. 119–24. Marquette, H. (2004) ‘The Creeping Politicisation of the World Bank: the Case of Corruption’, Political Studies, Vol. 52, No. 3, pp. 413–30. Mitchell, T. (2002) Rule of Experts: Egypt, Techno-Politics, Modernity, University of California Press, Berkeley CA. —— (2007) ‘The Properties of Markets’, in MacKenzie, D. Muniesa, F. and Siu, L. (eds) Do Economists Make Markets? On the Performativity of Economics, Princeton University Press, Princeton NJ, pp. 244–75. —— (2008) ‘Rethinking Economy’, Geoforum, Vol. 39, No. 3, pp. 1116–121. Murdoch, J. (2006) Post-Structuralist Geography: a Guide to Relational Space, Sage, London. Mykhnenko, V. (2007) ‘Strengths and Weaknesses of “Weak Co-ordination”: Economic Institutions, Revealed Comparative Advantages, and Socio-Economic Performance of Mixed Market Economies in Poland and Ukraine’, in Hancké, B., Rhodes, M. and Thatcher, M. (eds) Beyond Varieties of Capitalism: Conflict, Contradictions and Complementarities in the European Economy, Oxford University Press, Oxford, pp. 351–78. Nesvetailova, A. (2005) ‘Globalization and Post-Soviet Capitalism: Internalizing Neoliberalism in Russia’, in Soederberg, S., Menz, G. and Cerny, P. G. (eds) Internalizing Globalization: the Rise of Neoliberalism and the Decline of National Varieties of Capitalism, Palgrave Macmillan, Basingstoke, pp. 238–54. Peck, J. (2008) ‘Remaking Laissez-Faire’, Progress in Human Geography, Vol. 32, No. 1, pp. 3–43. Peck, J. and Theodore, N. (2007) ‘Variegated Capitalism’, Progress in Human Geography, Vol. 31, No. 6, pp. 731–72. Peck, J. and Tickell, A. (2002) ‘Neoliberalizing Space’, Antipode, Vol. 34, No. 3, pp. 380–404. Rose, M. (2002) ‘The Seductions of Resistance: Power, Politics, and a Performative Style of Systems’, Environment and Planning D: Society and Space, Vol. 20, No. 4, pp. 383–400. Rose-Ackerman, S. (2006) ‘Introduction and Overview’, in Rose-Ackerman, S. (ed.) International Handbook on the Economics of Corruption, Edward Elgar, Cheltenham, pp. xiv–xxxviii. Rousso, A. and Steves, F. (2006) ‘The Effectiveness of Anti-Corruption Programs: Preliminary Evidence from the Post-Communist Transition Countries’, in Rose-Ackerman, S. (ed.) International Handbook on the
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Economics of Transition, Edward Elgar, Cheltenham, pp. 247–69. Sher, A. (2008) ‘The Making of Capitalism in Post-Soviet Russia: Modern Corporate Reform and State-Led Development in Tartarstan’, in Atasoy, Y. (ed.) World Hegemonic Transformations, the State and Crisis in Neoliberalism, Routledge, London, pp. 186–206. Shields, S. (2003) ‘The “Charge of the Right Brigade”: Transnational Social Forces and the Neoliberal Configuration of Poland’s Transition’, New Political Economy, Vol. 8, No. 2, pp. 225–44. Shleifer, A. and Vishny, R. (1991) ‘Reversing the Soviet Economic Collapse’, Brookings Papers on Economic Activity, Vol. 2, pp. 341–60. —— (1993) ‘Corruption’, Quarterly Journal of Economics, Vol. 108, No. 3, pp. 599–617. Smith, A. (2006) ‘Articulating Neoliberalism: Diverse Economies and Everyday Life In “Postsocialist” Cities’, in Leitner, H., Peck, J. and Sheppard, E. (eds) Contesting Neoliberalism: Urban Frontiers, Guilford, New York NY, pp. 204–22. Smith, A. and Rochovská, A. (2007) ‘Domesticating Neo-Liberalism: Everyday Lives and the Geographies of Post-Socialist Transformations’, Geoforum, Vol. 38, No. 6, pp. 1163–78. Swain, A. (2006) ‘Soft Capitalism and a Hard Industry: Virtualism, the “Transition Industry” and the Restructuring of the Ukrainian Coal Industry’, Transactions of the Institute of British Geographers, Vol. 31, No. 2, pp. 208–33. —— (2007) ‘Projecting “Transition” in the Ukrainian Donbas: Policy Transfer and the Restructuring of the Coal Industry’, in Swain, A. (ed.) Re-Constructing the Post-Soviet Industrial Region: the Donbas in Transition, Routledge, London, pp. 161–87. Tanzi, V. (1998) ‘Corruption around the World: Causes, Consequences, Scope, and Cures’, IMF Staff Papers, Vol. 45 No. 4, pp. 559–94. Tickell, A. and Peck, J. (2003) ‘Making Global Rules: Globalization or Neoliberalization?’, in Peck, J. and Yeung, H. W.-C. (eds) Remaking the Global Economy, Sage, London, pp. 163–81. Tsyganov, Y. (2007) ‘The State, Business and Corruption in Russia’, in Holmes, L. (ed.) Terrorism, Organized Crime and Corruption, Edward Elgar, Cheltenham, pp. 130–54. Wang, H. and Rosenau, J. N. (2001) ‘Transparency International and Corruption as an Issue of Global Governance’, Global Governance, Vol. 7, No. 1, pp. 25–49. Wedel, J. R. (2000) ‘Tainted Transactions: Harvard, the Chubais Clan and Russia’s Ruin’, The National Interest, No. 59, pp. 23–34. World Bank (2000) Anticorruption in Transition: a Contribution to the Policy Debate, World Bank, Washington DC.
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Remaking the Welfare State: from Safety Net to Trampoline JULIE MACLEAVY
Since the 1970s and early 1980s, the worldwide ascendancy of market-based modes of governance has seen neoliberal policies adopted by parties at either end of the political spectrum. As a consequence, the manifestations of the express commitment to market exchange are multifarious, disparate and fractured. This chapter explores the influence of neoliberal theory on welfare state restructuring to illustrate the mixing of neoliberal policies and discourses with other social, political and economic interests. Its particular focus is on the narratives of deregulation, privatization and social austerity that have been used to legitimate temporary labour market attachments as a recurrent objective in welfare policies in the Anglophone world. The articulation and reiteration of a neoliberalized approach to the broader political economy has transformed attitudes towards welfare: from a general consensus that welfare exists as a safety net for people with no or low incomes, towards a more punitive approach which emphasizes self-sufficiency and individual requirements to work. Yet keystones of the welfare state continue to underpin the regulation of local labour markets. This suggests unevenness in the neoliberal project, which abnegates any suggestion of neoliberalism as a universal, totalizing and inevitable process (see Birch and Mykhnenko, this volume). To explore the continuum between the post-war Keynesian welfare state and the contemporary era of neoliberal workfarism (understood – after Jamie Peck (2001) – to comprise work-based welfare reform), this chapter will first consider the process of policy development that epitomizes the rise of this new policy regime. Following this, it will establish what constitutes neoliberalism and the defining features of a ‘workfare state’ in general terms. It will then examine the extent to which neoliberal workfarism relies on the re-articulation
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of core precepts of the welfare state as a safety net. This entails a discussion of (1) state strategies that support the flexibilization of the labour market and the maintenance of low-wage work; (2) the mechanisms that ensure the integration of welfare recipients into consumer culture; and (3) the long-standing methods of discipline that coerce people into behaving as market actors. The chapter concludes by contemplating the implications of the current economic crisis, particularly the effect of rising unemployment, on the present framing of the welfare state not as a safety net, but as a ‘trampoline’ that rebounds people from benefits (back) into employment.
The Decline of the Post-War Welfare State Governments of both the Right and Left are involved in debates over the best way to deliver public services. Whereas during the post-war period it was widely accepted that state provisioning of infrastructure, health, education and social services was the best way to ensure well-being, today markets are increasingly understood to be a better way of delivering public goods and services because they are associated with competition, economic efficiency and consumer choice. The express commitment to market (or market-like) rule is widely understood to transform state strategies, modes of governance and political subjectivities through the destruction and discrediting of Keynesian welfarist and social-collectivist institutions (broadly defined) and the construction and consolidation of neoliberalized state systems, forms of intervention and regulatory reform (Peck and Tickell 2002). This political shift is predicated on the promotion of a minimalist state infrastructure, which is framed as a reaction to the Keynesian and/or collectivist strategies that prioritized demand-side management at a national scale (stimulating jobs by encouraging mass production and consumption, for example). It requires the promotion of structural or systemic competitiveness through supply-side policies, which aim to increase labour market flexibility, by putting downward pressure on the social wage and thereby reducing the cost of international production (Jessop 2002). It also entails a qualitative shift in welfare provision, whereby welfare is based less on a model in which the state counters the market and more on a model where the state serves the market, as other chapters in this book illustrate (see Jessop; van Waeyenberge). In many Western post-industrial nations this is observed through 134
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a shift from flat rate to graduated benefits and from universalism to greater means testing. ‘Activation’ policies form part of this approach, placing work requirements on welfare recipients as a condition of their benefit payments. In the Anglophone model, governments have increasingly promoted individual responsibility through work incentives, welfare disincentives, and the privatization of service provision. The welfare state is no longer viewed as a ‘safety net’ for people with low or no incomes, but has been restructured to support training and the use of compulsions in relation to welfare-to-work programmes. In this sense, it functions somewhat like a ‘trampoline’, not only catching people but bouncing them from benefits back into the paid labour market. In support of this restructuring process, a free-market ideology has been marshalled, as described by both Miller and Birch and Tickell earlier in this book, alongside a (moral) discourse of welfare that warns of the dangers of welfare ‘dependency’. This builds on conservative discourse that presents welfare recipients as ‘naturally’ deficient in the characteristics that made responsible citizens and good workers, and frames welfare as a system in need of reform, not least for its propensity to harbour joblessness and inactivity in the lowest socio-economic sectors of society. This anti-welfare rhetoric is frequently directed at the discursive (and material) body of the young/single/minority-ethnic/inner-city mother, unable to support herself and her children through ‘a lack of gainful employment’ – a claim which has been expanded and used in some instances to depict the welfare system itself as an enlarged maternal system, spawning offspring who are not only a drain on the public purse, but also constitute a threat to society through their links with rising crime, juvenile delinquency and a myriad other social problems (England 2008). Rhetoric of this kind points towards the embedding and extension of neoliberalism through the imposition of a new form of governance, and is said to signal the end of the post-war welfare state (Powell and Hewitt 1998). In contrast to this claim, however, the ascendancy of a set of neoliberal processes, rules and institutions requires a form of statecraft that retains rudiments of the Keynesian welfare state. Flexible labour markets are underwritten by (conditional) welfare provisions. Social cohesion is maintained through means-tested payments that enable citizens with no or low incomes to participate in society as low-level consumers. Furthermore, in 135
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spite of frequent allusions to the establishment of ‘active citizenship’ through the restructuring of social benefits to support training and enterprise, the use of compulsions in relation to state-supported labour market programmes acts to create ‘docile bodies’ who discipline themselves in the name of individual initiative and responsibility, in a move that parallels the individual self-regulation that was previously achieved through Fordist organizational forms and management practices (see Fraser 2003; Hartman 2005).
Neoliberalism and the Workfare State: Key Features Neoliberalism is a distinctive political economic theory proposing that ‘human well-being can be best advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade’ (Harvey 2005: 2). Based on the monetarist theories and research of Milton Friedman (1962; Friedman and Schwartz 1963), it places primary emphasis on the maintenance of (macro)economic stability as opposed to the Keynesian goals of full employment and the alleviation of poverty. Its political philosophy builds on Friedrich von Hayek’s (1944) critique of the interventionist state and asserts that the only legitimate role of the state is to safeguard individual and commercial liberty, and strong private property rights. It therefore advocates a ‘rolling back’ of the state and the creation of a society governed by market mechanisms. While the market is traditionally defined through an absence of state intervention, it is acknowledged that markets are not naturally occurring phenomena, but need to be made, steered and policed. To this extent, neoliberalism maintains a self-contradicting theory of the state as laissez-faire policies cannot be implemented without government intervention. The mantra of ‘less state’ is thus illusory, as neoliberalism compels rather than reduces state action (O’Neill 2004: 259), albeit in different ways to those of more openly interventionist forms of political economy. In recent times, the principles of marketization, privatization and deregulation have been extended across policy arenas in the Global North and Global South (see Hinojosa and Bebbington, this volume). Emanating from the political projects of Thatcher and Reagan, this form of statecraft has advanced the qualitative reordering of state–economy relations through an experimental 136
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repertoire of policies. The ubiquity of market-orientated politics positions neoliberalism as universal, yet neoliberalism is not a monolithic or entirely homogeneous entity. As Wendy Larner (2003) notes, there are different variants of neoliberalism, each of which results from the general assertion that market mechanisms are the optimal way of organizing all exchanges of goods and services. While recognizing that neoliberalism is variegated (Peck and Tickell 2002), constellations of core values can be identified in Anglophone versions of this political economic phenomenon. Wendy Brown (2006), for instance, identifies the particular formulation of neoliberalism in the United States, which accords full citizen rights only to those who are autonomous individuals, whereby autonomy is construed as independence from the state or other institutions. This idealized conception of American citizens as those with the ability to provide for their own needs and service their own ambitions, whether as welfare recipients or workers in ephemeral occupations, devalues or misplaces the role of social relationships in promoting autonomy. This produces a culture in which political problems are transformed into individual problems with market solutions. As neoliberalism produces the citizen on the model of the entrepreneur and consumer, it simultaneously opens citizens to a heavy degree of governance and authority (Brown 2006: 705). This remakes the state on the model of the firm, with entrepreneurial and managerial functions, and facilitates and legitimates significant state intervention in personal, social and economic affairs. Yvonne Hartman (2005), commenting on the Australian context, notes a contradictory commitment to a libertarian economic philosophy combined with a morally conservative view of family, in addition to an appeal to nationalism. The privatization of public assets, the outsourcing and contracting out of government services (through competitive tendering), and the private provision of economic and social infrastructure have helped to replace state interventionism with market-guided regulation. At the same time, reforms to the Australian welfare system have privileged better-off two parent families, while expanding the scale and scope of regulation for single parents without an employment wage, and asylum seekers (Hancock 2002). These covert forms of government intervention comprise policies (such as mutual obligation and work-for-the-dole) which attempt to construct particular subjectivities on which to impose market disciplines (Dean 2002). 137
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In the UK, neoliberalism is articulated with social democratic principles in British Labour’s ‘Third Way’. This has given rise to a centralist philosophy of governance that embraces a mix of market and interventionist philosophies (MacLeavy 2007). This starts from the premise that as relatively closed national economies no longer exist, there is little scope for national-level economic management; however, if decisions are left purely to market forces then failures will result. Thus it follows that a ‘new democratic state’ is needed, in which progress and market innovations are promoted alongside supply-side objectives to permit the pursuit of equity and the improvement of efficiency in contemporary circumstances (Giddens 1998). In each of these different national contexts, then, neoliberal discourse tends to castigate welfarism as economically inefficient as well as morally dubious. With competitive mechanisms seen to herald the key means through which states can achieve economic progress, systems that ‘discourage’ competition in the labour market through the provision of a basic level of income to the unemployed are seen as problematic and in need of revision. Altering this, there is now a mantra of ‘positive welfare’ – ‘a hand up, not a handout’ (Labour Party 1996: 2). Whereas welfare has negative connotations of inactivity, workfare embraces a more punitive approach that emphasizes self-sufficiency and individual requirements to work. Civil society has also been strengthened through the establishment of a new relationship between citizens and the state, in which there is an expectation of increased participation in the socio-political realm: in neighbourhoods, communities and complementary arenas of local governance. This change in the dominant form of state intervention is theorized by Bob Jessop (2002) as a transition from a Keynesian Welfare National State (KWNS) to a Schumpeterian Workfare Post-national Regime (SWPR). Each of the four component terms used in these descriptors is linked to a basic dimension of economic and social reproduction. The KWNS was ‘Keynesian’ in so far as it aimed to secure full employment in what was treated as a relatively closed national economy, and to do so primarily through demand-side management (stimulating jobs by encouraging mass production and consumption). It was ‘Welfare’ in so far as it tried to generalize the norms of mass consumption beyond male workers earning a family wage so that all national citizens and their depen138
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dants might share in the fruits of economic growth. It was ‘National’ in so far as the national territorial state assumed primary responsibility for developing and guiding welfare policies on different scales; and, ‘Statist’ in so far as state institutions were the chief complement to market forces and had a dominant role in the institutions of civil society. For more on this, see Jessop’s chapter later in this book. In contrast, the ideal-typical SWPR has four key characteristics. First, it demotes the promotion of full employment in favour of promoting structural or systemic competitiveness. It is therefore ‘Schumpeterian’ in so far as it aims to foster entrepreneurship to sustain long-term economic growth. Second, it is a ‘Workfare’ regime in so far as it subordinates social policy to the aims of labour market flexibility and competitiveness, aiming to put downward pressure on the social wage and the cost of international production. Third, it signifies ‘Post-national’ welfare governance in so far as other scales of analysis (local, regional and international) have increased significance. Not only is power transferred upwards to supranational agencies, but there is a simultaneous devolution of some economic and social policy making to the regional, urban and local levels on the grounds that policies intended to influence the micro-economic supply-side and social regeneration are best designed close to their sites of innovation. Fourth, the SWPR is de-statized in so far as non-state mechanisms and private network partnerships are more important than state institutions in the delivery of government policies. This form of government is denoted as a ‘Regime’.
Repositioning Workfare The preceding account of the transition from Keynesian welfarism to neoliberal workfarism passes over the extent to which the workfare state is subtended by the continued operation of the welfare state as a safety net. It implies that welfare reform is driving a fundamental restructuring of welfare across Western post-industrialized nations, through the reduction of cash benefits to the unemployed and the ‘underemployed’ (who do not quality for unemployment insurance but instead are eligible to receive means-tested welfare payments), as well as the introduction of new labour market measures that are subordinate to market forces (such as increased private sector involvement in the delivery of state services). While 139
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significant, this trajectory of development ought not to frame the welfare state as immobile and thus outmoded, but rather should be used to unpack the different forms of welfare that have emerged in the contemporary period. As Hartman (2005: 61) observes, ‘[al]though welfare may now be leaner and meaner for some, the welfare state has not shrunk; rather, different forms of welfare have arisen coupled with new modes of administration and underpinned by a theoretical rationale that has shifted from entitlement to obligation’. The conceptualization of workfare as a trampoline that rebounds people back into the labour market should therefore also include a surrounding net enclosure that acts to prevent injuries from falls. This would make visible the extent to which Keynesian welfarism underwrites neoliberalism. In the present era of post-Fordist globalization, welfare has three key functions: first, it underwrites the peripheral labour market by ensuring a minimum level of income to those switching between welfare and work in line with fluctuations in the economy and changing personal circumstances; second, it allows those with low or no pay to maintain (at least) an impression of social integration through consumer activity, because welfare payments are discreetly made and because blame is allotted at the level of public debate rather than at the level of (publicly visible) failure to ‘pay one’s way’; third, it provides education and training to help (re)connect welfare recipients to work that legitimates a level of (self-) regulation, which is reminiscent of the social control established through the disciplinary apparatuses of the post-war period (for instance, social services, public health measures, therapeutic practices) (on this see Foucault 2003).
Regulating the labour market The welfare states of the Anglophone or market-based model of capitalism (including Australia, Canada, New Zealand, the UK and the US) are fundamentally labour market institutions, which condition the rules and dynamics of the job market, particularly with regard to low-wage employment relationships (Piven 1999). As ‘liberal welfare regimes’, they have long attempted to restrict government intervention in the market by targeting welfare assistance to those in greatest need. This reflects an underlying assumption that the market will be able to provide for most, if not all, who are willing to participate in it. As Gøsta Esping-Andersen (1990: 26) observes, ‘[b]enefits cater mainly to a clientele of low140
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income, usually working-class, state dependants’ and those on welfare are often stigmatized as unproductive and lacking in work ethic. In recent years, although anti-welfare rhetoric has increased, state provisions have continued to support the (low-wage) labour market. In the UK, for example, Income Support payments are made to those on low or no wages and Working Tax Credit has been introduced (in place of Family Credit, a welfare benefit) to encourage a steady supply of workers to the low-end labour market through tax breaks to ensure that ‘work pays’ for people in minimum wage jobs (Brewer 2001).1 With deregulation of the labour market creating a periphery of workers who engage in precarious employment, the provisions of the welfare state might even be becoming more rather than less important (Hartman 2005). Low-wage workers cannot usually survive on what they earn from work alone, so welfare provision is crucial in allowing this end of the labour market to flourish. Through the granting of tax credits through earned income, the government buttresses the working poor and furthers the establishment of a dual labour market which is comprised of a core of stable well-paid jobs, and a periphery of precarious employment (Hartman 2005). This indicates that flexible labour markets, which are seen to have been established through laissez-faire economic policy, are not naturally occurring phenomena, but instead must be constructed, regulated and policed (Peck 2002). This requires an interventionist strategy to underwrite the operation of contingent labour markets and to socialize the working poor for flexible employment (Peck and Theodore 2000). The normalization of the flexible labour market and worker insecurity is achieved through the undermining of union organization and experimentation in active welfare and workfare programming. As Peck (2002) shows in the US context, this re-regulation intensifies competitive pressures by expanding the labour pool, keeping wage inflation low, and facilitating an increased rate of worker exploitation. With the macro-orientation of policy towards full ‘employability’ rather than full employment, a concordant privileging of individual responsibility over social rights is achieved through the pastoral activities of government directed at individuals so that they work upon and monitor themselves (for example, through further education and training and/or participation in welfare-to-work schemes). 141
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Maintaining social cohesion Workfarist policies are promoted on the basis of a three-fold politicaleconomic critique of the welfare state. This contends that long-term unemployment depletes skills and damages motivation adversely, affecting future chances of getting a job; that people remain unemployed for longer than is necessary because of the level of benefit payments that are made available to them; and that reconnecting people to the labour market through mandatory welfare-towork programmes will put downward pressure on wage inflation, thereby permitting the economy to operate at a higher level of employment (Peck 2001). Workfare, by contrast, seeks to (re)attach people to the labour market through temporary work placements; to restructure benefit payments in order to remove the ‘welfare trap’ that effectively sanctions limited non-participation in the labour market; and, through welfare retrenchment, to induce and enforce new rules of engagement with the paid labour market that will animate latent market forces (Peck 2002). This neoliberal politics is invoked through public discourse which articulates the doctrines of the individual and the free market (Brown 2006). In the UK, for example, a tough commentary on welfare has accompanied the explicit focus on paid work in government policy (DSS 1998; DWP 2006). Soon after Labour was elected to power in 1997, the New Deal for the Unemployed was introduced by the Department for Education and Employment in collaboration with the Employment Service and a range of public-private training providers. Originally aimed at getting young people (aged 18 to 24) back to work, it has subsequently been extended to include lone parents, the disabled and those over the age of 25. Under the scheme those who have been unemployed for a set period – the specific amount of time depends on which claimant group a person is categorized under – are ‘offered’ a range of options including subsidized work, full-time education or training, voluntary sector jobs, or an environmental task force placement. These activities are intended to improve the welfare recipient’s job prospects (through training, rehabilitation and work experience) and be of benefit to society (by improving expertise and efficiency in the labour market and improving local community arenas through voluntary contributions) (DfEE 1997; DSS 1998). 142
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Further legislative reforms of the incapacity benefits system have since been implemented in the context of very high levels of economic inactivity through sickness and disability (including high numbers of people displaced by the collapse of traditional industries and those suffering from, for example, mental illness). In 2008, an Employment and Support Allowance was introduced to bring existing social insurance and social assistance schemes for people incapable of work through long-term illness or disability under the rubric of a single system. This has helped to tighten the basis on which people’s capacity for work is assessed, with new arrangements for supporting people’s (re)entry to the labour market, through personal action plans and financial sanctions for failure to engage in work-related activity. Such reforms are constituted through the putative relationship of welfare claimants to the job market. People of working age have no other legitimate status or basis for social inclusion (Dean 2006). As the Rt Hon James Purnell MP noted in his first speech as Secretary of State for Work and Pensions, the government sees the welfare state as a way out of ‘worklessness’ and a way up the career ladder, not a way of life: My title . . . embodies an ideological break with the past. It is not all that long ago that my predecessors were called the Secretary of State for Social Security. What a telling name: security as something handed down; welfare as a bureaucratic transfer; people as the recipients of funds. The title said nothing about people’s actual lives and ambitions, nothing, in fact, about the best way of securing their welfare. The new title, Secretary of State for Work and Pensions, tells a wholly different story. It tells you that work is the best route to personal welfare and wellbeing: it tells you that if you work hard and contribute then you deserve your retirement to be free from anxiety about money. (Purnell 2008: no pagination)
This implies a welfare state that is a facilitator of the labour market rather than a welfare state that has and will continue to function as a fallback for those outside of the labour market. The logic of welfare-to-work is complex and hybrid in nature, comprising a problematic combination of ‘human capital development’ and ‘work first’ approaches (Dean 2006). While policy rhetoric signals the empowerment of claimants, their preparation and ownership of action plans and the utilization of untapped skills, 143
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the strong emphasis on compulsion, participation and the application of benefit penalties or sanctions for non-compliance indicate a different notion of responsibility that obscures the state’s failure to meet people’s non-material needs, including their need to work. Thus as job insecurity becomes increasingly common for those who do contingent work or work in low-paid service positions, the requirement for all to look for work, train for work or face sanctions is applied alongside cash transfers to sustain those at the bottom end of the labour market. In contrast to rhetoric about ‘hand ups’ not ‘hand outs’, such payments allow recipients to get by and get on at the more mundane level of everyday life. This promotes social cohesion by helping to reduce the income inequalities between workers and the unemployed, and allowing the latter group to conform to societal norms as citizen consumers in spite of the scapegoating that appears at the level of public debate (for a useful discussion of the building blocks of social cohesion see Forrest and Kearns 2001). At the same time, it could be argued that the deliberately covert nature of discreet welfare payments effectively institutionalizes welfare support as a ‘guilty little secret’ at an individual and interpersonal level, as something which ought to be hidden from view (so as not to risk public recognition of ‘dependence’ on the state).
Preserving social control By making welfare payments conditional upon recipients’ willingness to seek employment, undertake training and/or volunteer for work in the local community, workfare programmes enforce the civic responsibilities of citizens to sustain themselves. This assault on the chimera of dependency culture is concerned to draw individuals into accepting responsibility for aspects of social protection once governed by the welfare state by codifying rules of conduct (such as independence and a preference for paid employment to welfare benefits as a source of income) and making them the basis for government intervention (Dean 2002). As poverty is associated with individual irresponsibility or the failure to manage risk, work assumes the form of a moral obligation. This moral obligation entails compliance with the social order in the workfare state era. The fostering of a shared sense of morality and common purpose is an important element of social control. While antiwelfare discourse operates to legitimate an increased level of 144
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control over income recipients’ lives, it simultaneously ensures that expectations regarding citizen entitlements will be dampened. Thus measures are introduced to make the receipt of welfare payments more onerous for some groups, with broad public support (Hartman 2005). In the Anglophone model, the state promotes a general shift away from a culture of state support of the economy, business and society to a new ethos of self-help, enterprise and individual initiative. This occurs through the provision of selfesteem training and job search skills in a quasi-market. Such quasimarkets of public and private service providers are intended to educate the unemployed into exercising choice in relation to their own economic development and are further used to promote the neoliberal assumption that the delivery of welfare services and benefits through the market is not only efficient, but also in the interests of individual liberty in the sense of giving the welfare ‘consumer’ the freedom to choose. To make certain that choice is exercised at a micro-level, the UK’s New Deal for the Unemployed allots a case manager to individuals to ensure they enrol for courses and training activities tailored to meet their ‘specific needs’. This micro-regulation is at variance with the interpretation of welfare reform as a kind of market deregulation, because it reveals that declining support for social welfare is part of a punitive policy development in which the state has a substantial and active role (Beckett and Western 2001). In the wake of Victorian penal policies that reflected the individualist, laissez-faire philosophy of free market capitalism, the post-war welfare state was built on the assumption that government intervention could and should reform and integrate the socially marginal (Garland 1985). This has since been undermined by new conceptions of social marginality that imply the need for more exclusionary and security-minded responses to marginal groups and individuals. Hence, there is a shift in governance towards workfarist programmes that emphasize the undeserving or unreformable nature of welfare recipients that tends to stigmatize and separate them from society as a whole. These programmes feature less generous welfare benefits and more punitive anti-crime policies as a result of political discourse about individual responsibility for social problems, and welfare programmes and the ‘culture of dependency’ as important causes of crime (Beckett and Western 2001). 145
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Once again, however, this transformation should not be interpreted simply by counterposing an interventionist to a noninterventionist state. As Nikolas Rose and Peter Miller (1992) make clear, neoliberal political initiatives entail the adoption of a range of devices which seek both to create a distance from the formal institutions of the state and other social actors, and to act upon policy subjects ‘at a distance’. This ought not to be viewed as the disintegration of the disciplinary apparatuses of the postwar period, but as a transformation in the mechanisms of control that are pivotal to the governance of social life. An array of organizational forms and technical methods now impels citizens to conform to particular codes of behaviour through the utilization, instrumentalization and mobilization of techniques and agents other than ‘the state’ (for example, the calculative personnel of the jobcentre who impel individuals within that locale to work out ‘where they are’, calibrate themselves in relation to ‘where they should be’ and devise ways of getting from one state to the other). In the Anglophone model of capitalism, the expansion of workbased welfare reform in the current context of rising unemployment and deep recession could pose a challenge to the promotion of self-provisioning, prudentialism and an individualist ethic of selfresponsibility. In contrast to the buoyant economic climate of late 1990s when the New Deal for the Unemployed was first established in the UK, for example, present financial-economic conditions pose a specific challenge to the neoliberal philosophy of a smaller (welfare) state, the primacy of the market, and the renewed significance of labour flexibility. With businesses shedding jobs and households struggling to pay debts, more skilled workers are coming onto the job market with the effect that the most excluded have to compete even harder to get work. As Richard Johnson, managing director of welfare-to-work for Serco Civil Government (an organization that works with government to deliver front-line public services) says: ‘Think of it like a conveyor belt: as unemployed numbers rise, those at the front of the queue get pushed lower down’ ( The Guardian 2008). More able-bodied people coming onto the job market means that the most excluded will now have to compete even harder to get work, which has led to calls for greater consideration to be given to intervention to help people cope with long periods of economic inactivity (ibid.). 146
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Conclusion At the level of policy, tactical, pragmatic modifications are currently being made to the neoliberal standard of efficiency as determined by competition in an economy fully open to world markets, issues that are addressed throughout this book. In addition to the recent subsidization and nationalization of corporations in an attempt to stabilize the economy and society, a proto-Keynesian system of debt-financed tax cuts and spending increases has been launched to help lift the economy out of recession. To this end, it has been suggested that we are witnessing a ‘regime change, propelled by a wholesale loss of confidence in the Anglo-American model of transactions-orientated capitalism and the neoliberal economics that legitimized it’ (Wade 2008: 5). By attributing to market-orientated politics a hegemonic status, such claims imply a period of closer regulation of the markets, and the renewed necessity of activities and efforts to reduce citizens’ reliance on the market as concordant with a new period of economic development. In this context, it should be more broadly recognized that workfare requires an active role for the state both in underwriting the economy and in creating the conditions appropriate for its redevelopment. This is paradoxical to the original ‘closed’ notion of neoliberalism, but serves to illustrate the extent to which the concept can be manipulated and orchestrated in different ways, leading to a much larger spectrum of strategic options, policy prescriptions and de facto practices. It further proves neoliberalism to be ‘a relatively manipulable and fungible platform for actors to use to reconstitute their strategies and tactics’ in the context of a multi-level, more open and market-like globalizing world (Cerny 2008: 39). Because neoliberalism encompasses a range of agendas, it is open to several often conflicting interpretations. Neoliberalism is, therefore, more variegated than self-representations suggest. Its mixture of free-market liberalism and arm’s length regulation has varied historically and across space. As such, current challenges to emerge from the instability and inequality of the neoliberal model are likely to see the re-articulation of SWPR principles. This is because the contemporary framing of neoliberalism as inevitable/all-encompassing prevents any serious discussion of alternatives to workfare policy, particularly alternative forms of intervention that might achieve greater economic equality (von Mahs 2001). 147
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Note 1 For details see: (8 January 2009).
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The Guardian (2008) ‘How the Financial Crisis Will Affect Welfare-to-Work’, 8 October. von Mahs, J. (2001) ‘Globalization, Welfare State Restructuring and Urban Homelessness in Germany and the United States’, Urban Studies, Vol. 22, No. 5, pp. 457–82. Wade, R. (2008) ‘Financial Regime Change?’ New Left Review, Second Series, No. 53, pp. 5–21.
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Zombieconomics: the Living Death of the Dismal Science BEN FINE
From time to time, capitalism has been likened to hell on earth, not least with the image of those dark satanic mills. Rosa Luxemburg came close to perceiving capitalism as a vampire system in arguing that it could only reproduce itself on an expanded scale by absorbing non-capitalist production, thereby infecting the life-blood on which it depended, whilst Frimpong-Ansah (1991) has posited the African vampire state as the antithesis of the developmental state. There is also the classic contribution by Taussig (1980) in which confrontation with the commodity is perceived as experiencing the devil itself, quite apart from the moneylenders in the temple.1 The idea that economics itself derives from the underworld is, as far as I know, rare if not unknown. But, as I will argue, the current phase of economics as zombie-like is particularly apt. Not that economics is short of pejorative labels, from the ‘dismal science’ first posited as such by Thomas Carlyle for failing to keep individuals in their designated (servile) positions, through to the autism with which it has most recently been labelled in the pursuit of greater heterodoxy. Even the mainstream itself, prior to the current crisis, has garnered unprecedented levels of popularity, hitting the bestseller lists, by self-deprecatingly referring to itself as ‘freakononomics’ (see Levitt and Dubner 2006 – and Fine and Milonakis 2009; Milonakis and Fine 2009 for critique, and for a detailed background to much else in this chapter). Significantly, in the wake of the crisis, whilst economists are probably second only to bankers in public disdain, they have confidently declared that none of it is their fault – it is only that their principles have been improperly applied.2 The main reason that mainstream economics in the current phase of neoliberalism is zombie-like is because it is both dead and alive at the same time, ‘undead’ as popular culture suggests. That it
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prevails within its own disciplinary boundaries with little or no contest and with scant respect for alternatives is uncontroversial – as many of the chapters in this book will attest. Zombieconomists are out there: they are extraordinarily powerful and almost impossible to slay. So zombieconomics is alive but not well because it is also undead, in two senses, as the genre suggests. First, it is entirely parasitic upon the living, feeding upon them in order to sustain its own life. Second, in so feeding, it degrades whatever it touches and transforms it into its own condition. The process can only come to an end in that nightmare vision in which we have all become zombies. It is apparent that the appropriate metaphor for economics is one of zombies and not vampires, for Dracula was at least a cultured and sophisticated being, well-attuned to the sensitivities of both his victims and their cultures and histories. The purpose here is to examine the nature of zombieconomics and how it came into being. In successive sections, I trace the evolution of economics from the marginalist revolution of the 1870s through the Keynesian revolution and the monetarist counterrevolution to the current phase of economics imperialism, in which both economic and non-economic analysis is primarily reduced to the optimizing behaviour of individuals in face of market imperfections. Such reductionism endows zombieconomics with so much life – yet with so little content, both in terms of analytical elements and understanding of contemporary capitalism. In addition, the closing remarks locate its significance in relation to the current financial crisis. It is a moot point whether it offers a critique or a support for neoliberalism in such changed circumstances.
From Marginalist to Formalist Revolution Apart from a few technical developments, the core components of orthodox, mainstream neoclassical economics would be understood by the marginalist economists of the 1870s. Indeed, many of the concepts now used were put forward and popularized by Alfred Marshall in his Principles of Economics of 1891 – the main economics textbook for the next fifty years. The marginalist revolution put forward the notion of economic rationality and drew out its implications from optimizing behaviour for the theory of supply (production) and demand (consumption). It gave rise to a technical apparatus associated with a utility function to explain demand and 154
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a production function to explain supply, and corresponding marginal utility and productivity. For the newly emerging orthodoxy, the inter-war period was dominated by placing the ‘technical apparatus’ on a sound footing. The task set was of incorporating marginalism into a mathematical form in which the consequences of economic rationality could be identified in a tight deductive fashion. Does an optimum exist for the consumer? Is it unique? Is it efficient? Do demand curves always slope downwards? Answers to these and similar questions were elusive, especially without the support of an extraordinarily restrictive range of assumptions and methods to accommodate them. Or, to put it more constructively, the goal of answering these questions became imperative and almost any sacrifice would be made in order to attain it. The result was an ‘implosion’ of the marginalist principles in upon themselves. In brief, first, utility itself was reduced from general wellbeing to a logic of choice across bundles of goods. Second, preferences as the basis for those choices were assumed to be fixed. Third, these preferences were the only rationale for behaviour. Fourth, technical assumptions were made about consumer choices, such as convexity (a mix is better than a pure consumption) and nonsatiation. Similarly, production became a simple technical relationship in which inputs, including labour, are seen as physical entities which provide output through given technologies. Fifth, both individuals and goods were stripped of any meaning and became abstract formal symbols of themselves. Sixth, issues of method were simply overlooked as deductivism came to the fore independent of any claims to realism. But, equally important, the new marginalist principles were seen to be at most a part of an economic explanation. In particular, they had no purchase upon either the other motives of individuals or systemic behaviour. They were simply the science of reduced individual behaviour in market-type situations. The inadequacy of such principles could not have been more strikingly exposed than by the mass unemployment of the 1930s. To cope with this challenge, marginalist microeconomics needed to be complemented by an entirely different set of principles. With these came the division of the discipline into microeconomics and macroeconomics, the latter dominated by Keynesianism. In addition, there remained in place throughout the inter-war period a strong commitment to what would now be called heterodox economics. 155
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In short, during the inter-war period, microeconomic principles were in the process of being established but only at the expense of an implosive reductionism to an extraordinarily narrow range of assumptions and methods, ones that were unacceptable to the rest of economics, let alone the other social sciences, and whose scope of application was perceived to be confined to the science of market supply and demand. This was, however, not so much to be changed as to be thrown into reverse. For, in describing developments within economics between 1945 and 1955 as a ‘formalist revolution’, Blaug (2003) highlights what is an uncontroversial and rapid process in which mathematical and statistical techniques assumed much greater, and ultimately, overwhelming significance. But we are less concerned with the rise of formal techniques than with shift in substantive content and the reasons for it. This has a number of elements. First, during this period, the goal of perfecting the technical apparatus was finally accomplished, not only for the consequences of the optimizing individual (the HicksSlutsky-Samuelson conditions) but also for general equilibrium theory (Arrow-Debreu), which focused upon the conditions under which optimizing individuals as a whole are coordinated through the market mechanism. Second, the centre of gravity for economics switched from the UK to the US, symbolized by the rise of importance of Samuelson in place of Marshall/Keynes (see below). Third, a remarkable flip in the analytical status of the core technical apparatus began to gather momentum, from implosion as the condition of its establishment, to explosion of the scope of its application. The latter gave rise to ‘economics imperialism’. This involves appropriating the subject matter of other disciplines by reducing it to the principles of marginalism. There is a historical logic underpinning this process. For the marginalist principles have no limitations set upon their scope of application, since they are universal in content. Optimizing and utility and production functions have no ties to historical or social specificity by time, place or activity. They can, in principle, be applied to anything. In practice, though, historically the principles were first obtained, as indicated, by confining them to a particular type of behaviour in a particular context, the market. Consequently, and subsequently, where and how the boundaries are drawn between the application of these principles and those of the other social sciences is contingent, both upon the internal character and dynamics of the constituent 156
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disciplines of the social sciences themselves, and upon the external influences to which they are subject.
From Formalist to Keynesian Revolution What was not achieved in the immediate post-war period, with the formalist revolution, was the triumph of neoliberal economics. The period straddling the formalist revolution to the end of the post-war boom was undoubtedly Keynesian in character despite the bias, if not predetermined predisposition, towards laissez-faire that is part and parcel of the technical apparatus of mainstream economics. This does not mean that neoliberalism had no influence on the form taken by Keynesianism, as Miller illustrates earlier in this book. For US laissez-faire ideologues conducted a concerted campaign to associate Keynesianism with communism and to depict it as an instrument of the enemy in the Cold War. As Backhouse (2006: 16) puts it, ‘Prominent Keynesians, from Galbraith to Samuelson, were vilified and labelled Marxists or communists.’3 In short, Keynesianism in the immediate post-war period was a hot political and ideological potato, sharpening and representing major differences between Republicans and Democrats and their differing responses both to the experience of inter-war depression and to the way in which to preclude such a disaster in the future. With the post-war boom and the passage through the extremes of McCarthyite anti-communism, such differences were tempered as Keynesianism became the orthodoxy. But, even if its ultimate triumph was inevitable – as long as the economy was doing well and this could be imputed to macroeconomic management – the forms and direction taken by Keynesianism were not fixed at the outset. In this light, Colander and Landreth (1996) usefully point to the Keynesian revolution as comprising theoretical, political and textbook elements. But it is inappropriate to see these as separate from one another. And it is equally important to recognize that for a couple of years Keynesianism was taught from a much more radical text by Tarshis (1947), who had studied in Cambridge in the 1930s. Tarshis’s sympathies lay with working people, in aiming at as high a level of wages as was consistent with full employment. He was also opposed to the negative impact of monopoly on employment and distribution. Not surprisingly, following a vicious campaign, his text was dropped from curricula across the United States after threats of 157
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withdrawal of private funding (see Colander and Landreth 1996). Thus, whilst Samuelson became the leading figure in promoting Keynesianism in the United States, he was not in the lead initially. This tends to be forgotten given his subsequent domination of Keynesianism in the United States. His text Economics first appeared in 1948 and is now in its eighteenth edition, with William Nordhaus as co-author from 1985. It has spawned many imitators alongside its own adoption across the US and elsewhere as a major textbook. It is sufficiently important as a text in the history of economic thought to have been reissued in 1998 in its original edition! It follows that the political climate may not have prevented the rise of Keynesianism in the United State, but it had considerable influence over both its theoretical direction and its textbook content, most obviously as dictated by Samuelson. As Backhouse (2006: 16) puts it, surely too cautiously, ‘doubts about its closeness to communism did not prevent Keynesianism from becoming widely accepted in academia, though that may have contributed to its being expressed in more careful, technical language than might otherwise have been the case’. But, as mentioned, it is not simply a matter of ‘whether Keynesianism’ but also of ‘what Keynesianism’. For there are sufficient differences in substance between Samuelson’s treatment and that of Tarshis, whose style and content of analysis is unrecognizable to a reader guided by comparison with macroeconomic texts of today. And it is not simply a matter of the differences as they were but as they might have become. Tarshis, for example, is not so far short of the approach being offered by Kalecki, the major difference being the latter’s denial of the possibility of eliminating unemployment under capitalism for want of its capacity to discipline workers when jobs can be left without fear of being unable to gain another. But the emphasis on monopoly as a key characteristic of the Keynesian system – as output-restricting and distributionally disadvantageous to real wages and effective demand – was inspired by Kalecki but has only survived in the heterodoxy of post-Keynesianism (see Fine and Murfin 1984). In short, given outside influences, it is hardly surprising that Keynesianism should take the route laid out by Samuelson as opposed to Tarshis. But this was not just a matter of external influence on what may or may not have been acceptable. It also reflected developments within the discipline itself. It is, for example, apparent that Keynes himself, as he was formulating The General 158
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Theory, became opposed to methodological individualism, to mathematical modelling (other than as a guide to clear thinking and presentation) and, most of all, to econometrics (for fixing parameter values to an economy necessarily subject to uncertainty and waves of expectations). Yet, the Keynesian revolution that bore his name was to be developed along these lines, most notably in the IS/LM approach to macroeconomics and the building and estimation of macroeconomic models.4 The exceptional case of methodological individualism is important. For, despite its consolidation through the formalist revolution, mainstream macroeconomics remained for the time being immune from its charms and drew upon more or less theoretically arbitrary ways of constructing macroeconomic aggregates. One reason for this is that the way in which the microeconomic principles had been established, and the qualifications associated with them, remained fresh in the minds of the new generation of mathematical economists. It was not simply a matter of the difficulty of extrapolating the behaviour of the individual to the behaviour of the economic system as a whole, as had been accomplished with general equilibrium theory. In addition, the newly completed principles were extraordinarily vulnerable to the introduction of any rogue element, at least until established as a conventional wisdom. There could be no externalities, interdependent preferences, market imperfections, uncertainty, institutions, non-economic behaviour and so on. No role could be found for money. As a result, mainstream economics remained aloof – precisely because of their destructive implications for its core principles – from developments that it would embrace so warmly later on. This is apparent from Amadae’s account (2003: 11–12) of the promotion and rise of rational choice across US social science. During the period of the formalist revolution, as the neoclassical technical apparatus was consolidating its hold over the discipline, within the university, rational choice theory developed as a series of overlapping, multidisciplinary revolutions . . . three distinct disciplinary transformations . . . social choice, public choice, and positive political theory. . . . The path-breaking rational choice scholars all shared two institutional foci crucial to the institutional and professional success of rational choice.
These were RAND (Research and Development Corporation) and the Public Choice Society. The aim of RAND was in part to 159
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inform US military strategy, and it called upon economists and other social scientists to investigate self-interested behaviour from a variety of perspectives. So, long before they were taken up in economics in its now latest phase of economics imperialism (see below), there was a focus on game theory, behaviouralism, and strategizing. As Amadae (2003: 77) puts it: The theory of rational choice has interlocking descriptive, normative, and prescriptive components, and was developed to inform action respecting nuclear strategy and complex questions of weapon procurement.
As a result, it deployed a diverse toolbox and, at least in principle, exhibited a close attachment to US Cold War policy. These developments were not particularly attractive to a neoclassical economics, consolidating around Keynesianism and Pigovian welfarism based on a corrective, benevolent state (see MacLeavy, this volume). As a result, microeconomic principles, offering a case for laissez-faire, had little purchase upon the academic profession relative to mainstream macro (Keynesianism) and micro (welfarism) perspectives. Indicative of this is the marginal position of Hayek at the time. As Mirowski (2007) perceptively observes, Hayek’s intellectual trajectory draws upon very different approaches. But what they have in common with rational choice theory is the wish to popularize intellectually the case for neoliberalism. Initially, these neoliberal precursors may have drawn upon orthodox economic thinking in the dispute with Keynes and the market socialism debate, but, ultimately, the Road to Serfdom – the founding document of neoliberalism – involves an entire break from mainstream economics and is entirely incompatible with it. Instead, it draws upon uncertainty, innovation and spontaneous order, none of which was, or has become subsequently, compatible with the mainstream (see Birch and Tickell, this volume). So, with the formalist revolution focused upon and inspired by the individual, neoliberalism in theory was confined to microeconomics, too vulnerable to be extended to the economy as a whole or to incorporate previously excluded elements underpinning the systemic case for neoliberalism based on spontaneous order, inventiveness, or uncertainty. Samuelson’s own account of conversion to Keynesianism in Colander and Landreth (1996) is extraordinarily revealing in these respects. For him, becoming a Keynesian was a matter of overcoming or, more exactly, unsuccessfully reconciling it, 160
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with his prior predilection for micro-foundations. He confesses, ‘What I resisted in Keynes the most was the notion that there could be equilibrium unemployment’ (p. 159). Indeed, ‘I was like a tuna: the Keynesian system had to land me, and I was fighting every inch of the line. I was worried about micro foundations’ (p. 161). He places considerable emphasis on his own personal experience of unemployment, finding himself as a student in the 1930s unable to get a summer job at any wage to relieve family poverty. So Samuelson wanted to be a Keynesian but could not marry it with microeconomic principles. How did he resolve this conundrum? The plain answer is that he did not and simply accepted the intellectual incompatibility, ‘I was content to assume that there was enough rigidity in relative prices and wages to make the Keynesian alternative to Walras operative’, presuming the presence of some ‘substructure of administered prices and imperfect competition’ (p. 160). And, in retrospect, he judges: It’s a modern desire to have impeccable micro foundations for macro. . . . I decided that life was more fruitful not worrying about it. . . . Moreover, the search today for micro foundations for macro does not have a rich set of results. . . . It’s because I get a better positivistic macroeconomics to do some worrying about the micro foundations that I do the worrying, and not because I have a tidy conscience that everybody’s micro foundations must be tidy. (p. 162)
From Keynesian Revolution to Monetarist Counter-Revolution Samuelson’s retrospective account has a modern ring about it in its mode of expression, with its reference to micro-foundations for macroeconomics. For his attitude is embedded in his and the discipline’s past, with an ill-concealed contempt for such microfoundations in and of themselves as a logical exercise in mathematical consistency (his target was the New Classical Economics, see below). For Samuelson’s generation, Keynesianism was macro, and it floated systemically free from micro, although the latter might offer ideas on how to go about the former. Thus, Samuelson offers the remarkably frank confession that his Keynesian macro had not been landed in the sense of being founded on sound micro foundations, and that he had ceased to care about this. But rather too convenient is the extent to which his presumed micro foundations are those of a slight rigidity in prices, derived from ‘imperfect competition’, and 161
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incorporated into an equilibrium, possibly at less than full employment for the economy as a whole. For the reference to imperfect competition, and the use to which it is put, scarcely begins to get to grips with the systemic consequences of the monopolization of modern capitalism, and other features, and its implications for its underlying dynamic let alone its level of economic activity. To some extent this helps us to explain why Tarshis should have given way to Samuelson, even though both were Keynesians, without resting the explanation upon relatively less important factors such as Samuelson’s powers of exposition and his use of mathematics as a neutrally professional and more acceptable form of exposition. For one of the consequences of the Keynesian and formalist revolutions was to divide the discipline into microeconomics and macroeconomics as its core constituent theoretical components, with the remainder of the subject matter relegated to the applied or policy backburner as regards both its lesser analytical principles and its practical significance. By the same token, the conventional wisdom became one in which the post-war boom was perceived to have been the triumph of interventionist Keynesian policy making over the instability created by unfettered markets. In addition, somewhat inconsistently, macroeconomics became analytically preoccupied with short-run deviations around given long-term trends. In this way, the major factors underpinning the post-war boom were simply overlooked or reduced to epiphenomena. In these I would include the interpenetration of trade and investment within the advanced countries, and the role of the state in expanding health, education and welfare and in intervening to restructure domestic economies through measures ranging across industrial policy to public ownership. Consequently, with the collapse of the post-war boom in the 1970s, the crisis of Keynesianism, and the resurgence of monetarism, the prospects for neoliberalism were entirely different from those that prevailed at the time of the formalist revolution, as discussed elsewhere in this book (see Birch and Mykhnenko; Jessop, this volume). Not only were the marginalist principles sacrosanct, but they were also unburdened by any memory of the extraordinary qualifications that had been necessary to allow them in the first place, either by assumption or scope of application. Economics imperialism had made great strides in, for example, human capital theory, the new economic history (cliometrics) and public choice 162
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theory. And Thatcherism and Reaganism reigned supreme. The time was more than ripe for the emergence of monetarism in its most extreme form, the New Classical Economics, with the presumption that all markets work perfectly but for random shocks, and that the principles of marginalist economics should be extended to the macroeconomy. In addition, following Milton Friedman, the idea of expectations is reduced to the domain of knowable outcomes with attached probabilities as opposed to the irreducible uncertainty associated with Keynesianism. Further, the principle of optimization is extended to include the processing of information in the theory of rational expectations – so that individuals now optimize by modelling the economy and, thereby, have the capacity to neutralize interventions by the state as long as they can be anticipated. Other than in distorting microeconomic functioning, the state is therefore perceived as ineffective in macroeconomic policy. Indeed, in the wake of the stagflation of the 1970s, it is truly remarkable that it should be felt possible to understand the economy in terms of single representative individuals for households and firms, with the leading New Classical Economists proclaiming that ‘the term “macroeconomic” will simply disappear from use and the modifier “micro” will be superfluous’ (Lucas 1987: 108). New Classical Economics, then, sought to wash Keynesianism away and, without wishing to blame the victim, it could do so because of the latter’s narrow understanding of macroeconomic theory itself, in leaving aside those systemic factors that were not reducible to macroeconomic aggregates that could be incorporated into mathematical models of supply and demand. But it is important to recognize, or recall, that the neoliberalism in scholarship of the New Classical Economics is highly peculiar relative to the neoliberalism both of ideology and of the practice-producing diversities of neoliberalism highlighted by many other contributors to this collection. It is totally orthogonal to neo-Austrian arguments concerning the virtues of free markets. And, in practice, neoliberalism has always been highly interventionist. This can be understood in two ways. On the one hand, the free market is a myth and the state can and does intervene to make markets work in particular ways and in favour of particular interests. On the other hand, the ideology of non-intervention is more appropriately seen as a rationale for discretionary and not minimal intervention. In this light, it is not surprising that there are many different 163
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accounts of, and forms taken by, neoliberalism. They all involve a transformation as opposed to a reduction of the role of the state (see Birch and Tickell, this volume). But what we can now see after thirty years of neoliberalism is that it is heavily steered by the vested interests, practices and ideology of finance, not least through what has been appropriately termed ‘financialization’, discussed earlier in this volume by Tyfield and later by Shaoul. This involves both the proliferation of ‘fictitious’ financial markets built upon existing activities as well as the creation of new spheres of operation for finance (Fine 2007). For the New Classical Economics, of course, this proliferation of finance would not occur unless it were efficient in mobilizing and allocating resources and managing risk. This is stretching credibility when the rewards at a macro-level of managing finance are exceeding those of using it. With the emergence over the last decade of financial crises, now deep and global, this logic is indeed running incredibly thin, and the first call for intervention to rescue financial markets always comes from those markets themselves!
From Monetarist Counter-Revolution to Zombieconomics This all suggests that neoliberalism is currently going through a second phase, distinct enough from the first that it can be perceived as a reaction against neoliberalism itself as ‘Third Wayism’, ‘the social market’, or whatever (see also Jessop, this volume). For, whilst the first phase involved state promotion of interests through the market, especially liberating financial markets, the second phase is faced with both ameliorating the consequences of this shock therapy and of continuing to intervene to allow it to be sustained. The emphasis, in principle, is upon how to make markets socially acceptable and work in general, however that might be defined in employment, distribution and welfare delivery – as explored earlier by MacLeavy (this volume). In practice, the markets given the greatest priority will be those of finance. As is apparent, the New Classical Economics (and neoliberal ideology more generally) is totally inadequate to this task other than as an unremitting pressure against collectivist forms of provision and interests. Exactly the opposite is the case for the new informationtheoretic economics, which emphasizes the importance of market imperfections. Crucial to the New Classical Economics is the 164
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assumption of perfectly working and instantaneously clearing markets: supply always equals demand. This reflected the monetarist world vision that markets work well if left to themselves, a position posing the analytical challenge to argue otherwise than, ‘interfere in markets and you prevent them from working well’. The market imperfections approach offered an answer, especially in the case of imperfect information. In such circumstances, it could be shown that markets might not be efficient, they might not clear (persistent imbalance between supply and demand), or that markets might fail to arise altogether. This might be so even if prices were perfectly flexible in principle. An employer, for example, might not reduce wages despite high levels of unemployment, in order to maximize profit through attracting a more productive, disciplined and loyal workforce on average. In short, the new market (and information) imperfection approach displayed an ability to address macroeconomic problems despite being based on the aggregated optimizing behaviour of individuals. In this way, the technical apparatus of utility and production functions could be used to extend microeconomics to incorporate macroeconomics, even that with a Keynesian flavour. Together with other developments within microeconomics, especially those related to the now acceptable game theory, this allowed the use of the technical apparatus of consumer and producer theory to be extended almost universally across the discipline of economics. Areas that had previously been seen to be more applied, inductive and policyoriented – from industrial through to development economics – increasingly came under the umbrella of the microeconomic principles that had only been established initially by accepting their limited scope of application. Nor has this process of expansion of microeconomic principles been confined within the borders of economics. Previously, as indicated, economics imperialism had been based on the idea of treating the non-market as if it were the (perfectly working) market by other means. By contrast, with the market imperfections approach to the economy, the non-market could be understood as the induced response to those market imperfections, whether this be institutions, culture or customs. Whereas previously these had been seen as irrelevant or, at most, an irrational barrier to the (as if) perfectly working market, it was now possible to explain their existence and see them as a way of improving upon imperfectly working markets. 165
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The effect was to reinvigorate economics imperialism across a broader front and to render it more palatable to other social sciences despite its methodological and theoretical peculiarities from the perspective of other disciplines. Whilst methodological individualism of a special type (utility maximization) persisted, it could be cloaked in terms less dismissive of the other social sciences. For it now accepted that institutions and history matter, rather than being seen as at most temporary obstacles to the reach of the perfectly working market across all economic and social life. Thus, economics imperialism has now built upon old fields and created new ones in and around the borders of economics: the new growth theory, the new trade theory, the new economic sociology, the new institutional economics, the new welfare economics, the new political economy, the new economic geography, the new development economics (see van Waeyenberge, this volume, for the impact on World Bank policy), and so on. In a sense, it has done this in two different ways. First, it has brought back in what was previously left out in the reductionist process by which its technical apparatus was established. In general terms, the ‘social’ becomes important where the social ranges over the non-market and the non-individualistic, even though these still remain tied to optimizing behaviour; individuals choose to be altruistic, for example, because it is a way of overcoming market imperfections or coordination problems. Second, though, this often leads to what might be termed mixed or dirty models. Whether for theoretical or empirical expediency, the standard technical apparatus is supplemented by some other factor or set of factors appropriated from another social science or simply through speculative reasoning. This is to bridge the previous divide between rational and irrational. A good example is the recently prominent economics of happiness, where populations do not seem to report themselves happier despite rising incomes over time. It is a simple matter to add in some other variable to utility theory to address this, the most convenient being reference to relative income position. Then we are able to explain why short-run increases in one person’s income improve feelings of well-being but not improvements in income for everybody over time, as relative positions remain the same. This is the basis for ‘freakonomics’ – with an inclination to rely upon self-interest, a willingness to incorporate other factors as necessary, and otherwise to provoke by appeal to statistical analysis and other damn lies. 166
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But freakonomics is just the most popular form taken by zombieconomics, itself the form adopted by economics imperialism in the age of neoliberalism. This approach is dead in that it is based upon an unquestioned methodological individualism and technical apparatus of the narrowest type, it is totally ignorant of its own history, of its own methodology and of alternatives, and it fails to engage with them except to dismiss them as unscientific and lacking in rigour (whereas it is its own intellectual fragilities in these respects that are most marked). It has no concept of the systemic, such as globalization, nor of power and conflict, and it has no understanding of the meaning of categories of analysis in terms of historical and social specificity other than in defining path dependence, initial conditions or choice between models or equilibria. And it is undead in blundering around looking for applications out of the incidence of market imperfections, whether in the dimly incorporated real world, or through appropriation and degradation of the material of other social sciences. In the realm of policy, it seeks interventions to correct market imperfections on a piecemeal basis and, even though recognizing that such imperfections arise in financial systems themselves, it fails to address how the power of such systems are to be curbed. The goal is to restore financial markets to health, through whatever interventions are necessary, although it is a moot point whether this is or will represent a break or a support to a continuing neoliberalism. In these respects, zombieconomics is an ideal frame for supporting any of the variegated forms and applications of neoliberalism as outlined by Jessop and MacLeavy in this volume.
Conclusion I am acutely conscious that zombie movies rarely end happily, with the best case scenario being survival to live another day. Within the discipline of economics itself, there is much to confirm, and regret, in adopting this perspective. This view is not universally accepted, for there are those who believe that the signs of life in zombieconomics, not least the innovations upon its frontiers in technique and subject matter, will lead it to be transformed into something else (see, for example, Colander et al. 2004; Davis 2006). This cannot be ruled out in principle, but a zombie is a zombie and the prospects of its becoming different and better are not bright. Equally, the prospects for neoliberalism remain uncertain in the light of the 167
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current financial crisis, and extensive neoliberal measures to secure intervention by the state to rescue the financial system, even to the point of nationalizing financial institutions. But it is salutary to recall that the end of the post-war boom witnessed, with the rise of the New Classical Economics, an approach that denied macroeconomics as opposed to microeconomics, focused on hyper-rational representative individuals, presumed markets work perfectly, and believed that government could be at best ineffective and at worst inefficient. Further, to move from the ridiculous to the more ridiculous, zombieconomics has, with an ubiquitous reach far exceeding its puny grasp, offered one more new field – neuroeconomics! Building upon insights from neuroscience that reveal some of the workings of the brain, it might be thought that the rational economic agent of mainstream economics would have to be rejected since the science shows that other influences on individual behaviour impact much faster than rational calculation. But one school of neuroeconomics cleverly suggests that the optimizing individual is aware of these flaws and takes them into account in optimizing. For Glimcher et al. (2005: 253): Neoclassical economics and utility theory on which it is based provide the ultimate set of tools for describing these efficient solutions; and evolutionary theory defines the field within which mechanism is optimized by neoclassical constraints: and neurobiology provides the tools for elucidating those mechanisms.
In plain language, optimizing individuals treat their own brains as an obstacle in pursuing given goals rationally! More encouraging are the prospects for the renewal of political economy across the social sciences, despite the designs of, and in contest with, economics imperialism. I see this as the consequence of the current dual retreat from the extremes of both postmodernism and neoliberalism, not least as the past decade or so has witnessed a revival of interest in understanding contemporary capitalism, systemically and simultaneously, as both a material and cultural system. In this light, the current directions to be taken by social theory are remarkably open and are liable to be diverse across disciplines and topics. It may not be possible to take the zombie out of the economics but we can restore political economy to social science.
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Notes 1 Indeed, ‘Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money’ – Sir Josiah Stamp, formerly a director of the Bank of England, and reputedly the second richest man in England in the 1930s. See also John Lanchester on ‘zombie banks’ in ‘It’s Finished’, London Review of Books, 28 May 2009. 2 See, for example, Barry Eichengreen, ‘The Last Temptation of Risk’, The National Interest, May/June, 2009. 3 See also Backhouse and Medema (2007), Colander and Landreth (1996), Galbraith (1975, as victim at Harvard), and especially Lee (2009). 4 IS/LM is not an acronym but derives from the standard depiction of Keynesianism through the IS (goods market) and LM curves (money market).
References Amadae, S. (2003) Rationalizing Capitalist Democracy: the Cold War Origins of Rational Choice Liberalism, Chicago University Press, Chicago IL. Backhouse, R. (2006) ‘Economics since the Second World War’, paper to the History of Postwar Social Science Seminar Series, London School of Economics, March, . Backhouse, R. and Medema, S. (2007) ‘Defining Economics: Robbins’ Essay in Theory and Practice’, mimeo, . Blaug, M. (2003) ‘The Formalist Revolution of the 1950s’, Journal of the History of Economic Thought, Vol. 25, No. 2, pp.145–56. Colander, D. and Landreth, H. (eds) (1996) The Coming of Keynesianism to America: Conversations with the Founders of Keynesian Economics, Edward Elgar, Cheltenham. Colander, D., Holt, R. and Rosser, B. (2004) ‘The Changing Face of Mainstream Economics’, Review of Political Economy, Vol. 16, No. 4, pp. 485–99. Davis, J. (2006) ‘The Turn in Economics: Neoclassical Dominance to Mainstream Pluralism?’, Journal of Institutional Economics, Vol. 2, No. 1, pp. 1–20. Fine, B. (2007) ‘Financialisation, Poverty, and Marxist Political Economy’,
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Poverty and Capital Conference, University of Manchester, 2-4 July 2007, . Fine, B. and Milonakis, D. (2009) From Political Economy to Freakonomics: Method, the Social and the Historical in the Evolution of Economic Theory, Routledge, London. Fine, B. and Murfin, A. (1984) Macroeconomics and Monopoly Capitalism, Harvester, Brighton. Frimpong-Ansah, J. (1991) The Vampire State in Africa: the Political Economy of Decline in Ghana, James Currey, London. Galbraith, K. (1975) ‘How Keynes Came to America’, in Keynes, M. (ed.) Essays on John Maynard Keynes, Cambridge University Press, Cambridge. Glimcher, P., Dorris, M. and Bayer, H. (2005) ‘Physiological Utility Theory and the Neuroeconomics of Choice’, Games and Economic Behavior, Vol. 52, No. 2, pp. 213–56. Lee, F. (2009) Challenging the Mainstream: Essays on the History of Heterodox Economics in the Twentieth Century, in preparation. Levitt, S. and Dubner, S. (2006) Freakonomics: a Rogue Economist Explores the Hidden Side of Everything, Penguin, London. Lucas, R. (1987) Models of Business Cycles, Blackwell, Oxford. Milonakis, D. and Fine B. (2009) From Political Economy to Economics: Method, the Social and the Historical in the Evolution of Economic Theory, Routledge, London. Mirowski, P. (2007) ‘Naturalizing the Market on the Road to Revisionism: Bruce Caldwell’s Hayek’s Challenge and the Challenge of Hayek Interpretation’, Journal of Institutional Economics, Vol. 3, No. 3, pp. 351–72. Samuelson, P. (1948) Economics: an Introductory Analysis, McGraw-Hill, New York NY, with W. Nordhaus (since 1985), eighteenth edition 2005, first edition republished in 1998. Tarshis, L. (1947) The Elements of Economics: an Introduction to the Theory of Price and Employment, Houghton Mifflin, Boston MA. Taussig, M. (1980) The Devil and Commodity Fetishism in South America, University of North Carolina Press, Chapel Hill NC.
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From Hegemony to Crisis? The Continuing Ecological Dominance of Neoliberalism BOB JESSOP
After 160 years one would need to change the first sentence of the Communist Manifesto only slightly if one wanted to write a neoliberal manifesto. A spectre is haunting Europe – the spectre of neoliberalism. All the powers of old Europe have allied in a holy witch-hunt against this spectre. (Wohlgemuth 2007: 1, my translation)
Although written by a neoliberal thinker, the first two sentences of Wohlgemuth’s manifesto indicate recent worries about neoliberalism. For him, it seems to be the target of hostile forces rather than prone to collapse from its own contradictions. The world was not always so hostile. Indeed, in the 1980s its supporters were celebrating the global acceptance of neoliberalism as a theoretical and policy paradigm. Now, apart perhaps from the USA and the UK, the continuing global crisis of finance-led accumulation seems to have tolled the death-knell of neoliberalism. It seems that, rather than its arrival marking the end of history, neoliberalism itself is destined for the dustbin. From its initial formulation as a political project in Paris in 1938 to the panic-stricken meetings in New York 70 years later, there have been many efforts to promote and defend neoliberalism as the ideal basis for economic, legal, political, social and moral order. Yet the moment of its triumph was when it began to decompose and acquire its current zombie form (cf. Fine, this volume). It remains uncertain, however, whether the current crisis will be treated as one in or of neoliberalism. Before proceeding, the extreme polyvalence of the term ‘neoliberalism’ must be noted (see Birch and Mykhnenko, and other contributions in this volume). As Neoliberalismus, the term was coined in Germany by Alexander Rüstow in 1932 and entailed a strong state to police as well as to guard markets. This Ordo-liberal ‘social
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market economy’ model contrasts with the Chicago free market version of neoliberalism that was adopted in Chile in 1973 and then pursued in many other countries. Given the many forms and degrees of neoliberalism (distinguished theoretically below and illustrated empirically by other contributors), it is sensible to see neoliberalism as a socially constructed term of struggle (kampfbegriff) with a more or less ‘productively fuzzy’ role in economic, political and ideological contestation. This said, my current remit is to approach neoliberal restructuring through the critique of political economy and show how its impact will outlast the possible collapse of neoliberalism in the current crisis.
A Typology of Efforts at Neoliberalization Four main forms of neoliberalism emerged during the 1970s and 1980s. They are presented below as points on a continuum rather than in terms of chronological succession, and they also overlap at the margins. The most radical form of neoliberalization is neoliberal system transformation. This was attempted in the national states that emerged from the decomposition of the former Soviet Bloc, with Russia and Poland providing the two best-known examples from many (see Swain et al., this volume). System transformation involved a tabula rasa approach in which ‘creative destruction’ of inherited state socialist institutions was expected to lead somehow to the spontaneous emergence of a fully functioning liberal market economy and society and a more gradual development of liberal democracy. This approach owed more to Chicago-style neoliberalism than to Ordo-liberalism and it was intended to create the conditions for the far-reaching commodification of economic relations and the extension of the commodity form into social relations previously subject to non-market forms of provision. Next in the continuum are essentially endogenous neoliberal regime shifts in so-called ‘liberal market economies’. Familiar cases are those associated with Thatcher and Reagan but similar shifts occurred in Australia, Canada, New Zealand, and, most recently, Iceland. The standard case involves a shift from the accumulation regimes and modes of regulation associated with post-war compromises between capital and labour in Atlantic Fordism to regimes and modes of regulation that systematically privilege capital over labour. This shift combines the roll-back of policies and institutions 172
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associated with the Atlantic Fordist post-war settlement with the roll-out of new or restructured institutions intended to consolidate the regime transition and entrench the change in the balance of forces (cf. Peck and Tickell 2002). While typically introduced by parties on the right of the political spectrum, such shifts have also been supported by centre-left parties, often under a disingenuous ‘Third Way’ label. Moreover, with a little help from Northern friends and/or military dictatorships, many Latin American economies also undertook such transitions from the 1970s to 1990s in response to crises in the import-substitution industrialization model (see Hinojosa and Bebbington, this volume). Indeed, the first neoliberal experiment of world-historical significance occurred in Chile under General Pinochet following his US-backed military coup d’état in 1973. The economic policy mix pursued in both types of regime shift included measures to promote liberalization, deregulation, privatization, market proxies in the public sector, internationalization, and reduced direct taxation. It was also associated with changes in social policy that subordinate welfare provision to the demands of competitiveness, labour market flexibility, and reduction of the social wage as a cost of (international) production (cf. MacLeavy, this volume). The overall aim was to modify the balance of forces in favour of capital and institutionalize the neoliberal economic imaginary (cf. Duménil and Lévy 2004; Harvey 2005; Howard and King 2008; Birch and Tickell, this volume). This has occurred with varying success, if ultimately disastrously owing to blowback effects in neoliberal regimes and the broader world market. The third form of neoliberalism comprises more or less wideranging neoliberal structural adjustment programmes. These restructuring processes and regime shifts are more exogenous and top-down in character than neoliberal regime shifts, emerging less from domestic politics, whether in liberal democratic or authoritarian regimes, than from external imposition by the leading capitalist powers and/or transnational economic institutions and organizations (see Tyfield; van Waeyenberge, this volume). This process typically involves adopting neoliberal economic policies in line with the ‘Washington Consensus’ as part of the conditions attached to financial and other forms of assistance to crisis-ridden capitalist economies in parts of the Global South (see, for example, Gowan 1996; Gwynne and Kay 2000; Robinson 2008; Saad-Filho and 173
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Johnson 2005; Sader 2008; Veltmeyer et al. 1997). Neoliberal conditionalities may, of course, be endorsed by certain local capitals and state managers, but, where political opposition is relatively unified (as in Mahathir’s Malaysia in 1997–8), they may be diluted or waived. Such programmes are often presented as technocratic solutions to economic crises, as van Waeyenberge (this volume) shows for the World Bank, but they also have uneven economic, political and social impacts domestically as well as broader geoeconomic and geo-political significance. Finally, regardless of casespecific features, the policies adopted in the second and third forms of neoliberalism display many similarities when they occur outside advanced capitalist economies. Fourth, there are relatively pragmatic and potentially reversible neoliberal policy adjustments. These comprise modest changes deemed necessary to maintain alternative economic and social models in the face of internationalization and a global shift in the balance of forces. They are often combined with adaptation in corporatist and/ or statist features of the corresponding accumulation regimes and modes of regulation and with shifts in the balance of forces between centre-left and centre-right parties. The Nordic social democracies and Rhenish capitalism provide several examples (cf. Becker 2007; Cox 2001; Lavelle 2009; Lindbom and Rothstein 2005; Streeck 2009). These four forms coincided in the 1990s, producing the highpoint of neoliberalism (see Birch and Mykhnenko, this volume). At the very moment of neoliberal triumphalism, however, signs of failure started to emerge. Within ten years it became clear that: (1) neoliberal system transformation had largely failed as a ‘grand project’; (2) neoliberal regime shifts need to be flanked and supplemented by various forms of ‘third way’ policies, networks, and public–private partnerships to maintain their overall momentum in the face of mounting resistance and/or growing signs of failure; (3) neoliberal structural adjustment rarely produced the promised results, often aggravated the underlying problems, and could provoke a political backlash as populist politics were revived (see Hinojosa and Bebbington, this volume); and (4) neoliberal policy adjustments rarely lead to neoliberal regime shifts (witness Sweden and Germany in the 1990s, where conservative governments accepted the broad constraints of their respective inherited models of social compromise). 174
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Neoliberalism and Economic Determination Despite the passing of the neoliberal highpoint, there are significant path-dependent effects resulting from the crisis tendencies associated with each form of neoliberalism and from their interaction. These effects are not only economic but also political and ideological. This is evident in the ways that neoliberal policies have shaped the forms, timing, and dynamics of economic crises (broadly understood) not only in countries where neoliberalism had been adopted, imposed or adapted but also in regions where this had not yet occurred. It can also be seen in the geo-economic and geo-political effects of failed neoliberal system transformation and structural adjustment programmes, and in the uneven terrain on which struggles over the interpretation of the crisis in and/or of neoliberalism and the appropriate policy responses are being conducted in social formations where neoliberal regime shifts or significant neoliberal policy adjustments have occurred. To establish why neoliberalisms and neoliberalization processes have been and, despite their respective crisis tendencies, remain so influential on a world scale, we must not only relate them to domestic and international politics but also locate them within the overall logic of capital. To do this we can draw on Marx’s distinction between the use-value and exchange-value aspects of the commodity, and his subsequent elaboration of analogous categories within the capital relation more generally. Thus the worker is a concrete individual with specific skills, knowledge, and creativity and an abstract unit of labour power substitutable by other such units (or, indeed, other factors of production); the wage is a source of demand and a cost of production; money functions as a ‘national’ currency circulating within a monetary bloc and as an international currency exchangeable against other currencies; productive capital is a more or less concrete stock of time- and place-specific assets undergoing valorization and abstract value in motion (notably as realized profits available for re-investment); land is a gift of nature and a monopolistic claim on revenues; knowledge circulates as part of the intellectual commons and can also be subject to intellectual property rights as Tyfield (this volume) illustrates in an earlier chapter; and so forth. For each of these social forms, neoliberalism privileges its exchange-value over its use-value moment, emphasizing cost reduction and cost recovery, and subjecting all economic 175
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activities to demands to meet or exceed the prevailing world market average rate of profit. Such one-sided treatment can only disguise, but not suppress, the significance of the use-value aspect of these relations. Eventually this aspect reasserts its importance to the overall reproduction of the capital relation (and social life more generally) and, in the absence of appropriate ways to handle the contradictions between use value and exchange value, crises emerge that effect a forcible re-imposition of the unity of the capital relation. Neoliberalism tends to judge all economic activities in terms of the prevailing global average rate of profit and all social activities in terms of their contribution to capital accumulation. For it is capital in its exchange-value aspect that is most easily disembedded from broader socio-spatial-temporal contexts and thereby freed to ‘flow’ relatively smoothly through space-time. Unsurprisingly, then, the pursuit of neoliberalism tends to privilege hypermobile financial capital at the expense of capitals that are embedded in broader sets of social relations and/or that must be valorized in particular times and places (see Shaoul, this volume). It also encourages the extension of profit-oriented, market-mediated accumulation into spaces where it was previously absent. It is therefore associated with time-space compression as well as time-space distantiation. One way to make sense of the emergent dynamic and continuing impact of neoliberalism is through the concept of ‘ecological dominance’. Developed in the biological sciences, it refers to the relative dominance of different species in an ecological system. Transferred to the social field, it signifies the relative dominance of one subsystem or institutional order within a self-organizing ecology of subsystems or institutional orders. This can be explored in terms of the extent to which the development of one societal subsystem or institutionalized order has a bigger impact on the development of other subsystems or orders than they have on it. It is important in the context of capitalist social formations to note that this encompasses the impact of crisis tendencies and crises as well as the impact of relatively successful performance – especially as the latter is usually confined to specific times and places and involves the displacement and/or deferral of problems elsewhere and/or into the future. This overall criterion can be re-specified in terms of seven aspects of the social world, each of which is relevant to the capacity of one subsystem or institutional order (such as the market economy, 176
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the legal system, political authority, education, science, and so on) to become ecologically dominant (see Table 9.1). All seven aspects vary across social orders but they are closely associated with the logic of capitalism, especially when this logic is generalized to a world scale on neoliberal, finance-led lines. Indeed, I argue that the profit-oriented, market-mediated logic of capital accumulation (including its extra-economic supports), operating on a world scale, can shape the development of other ensembles of social action more powerfully than they can shape it. This includes the impact of both positive and negative externalities – that is, beneficial and harmful effects. It must be emphasized here that ecological dominance does not involve an automatic, one-sided relation of domination in which the economy always and everywhere imposes its logic on other systems. There is no ‘last instance’ in relations of ecological dominance (Morin 1980: 44). It is always differential, relational, contingent, and reversible. Hence, rather than being a necessary feature of capitalist social relations from their first emergence onwards, ecological dominance is one of their contingent features. It is stronger when capitalist relations are disembedded from other social relations and institutional orders and the logic of capital can therefore operate relatively unhindered by its overlap with these other social ensembles. Yet excessive disembedding of market transactions – especially in land, labour and money – can provoke economic and social crises and, in response, social demands for their re-embedding and re-regulation to ensure structured coherence and social cohesion (cf. Polanyi 1944). Let me now comment on the connection between the seven aspects of societal relations conducive to ecological dominance and the finance-led, neoliberal form of organizing the social relations of production.1 First, as the capitalist economy becomes increasingly disembedded from other institutional orders, there is a tendency for the direct impact of external pressures on the organization and performance of the market economy to diminish. Instead internal competition tends to become the most powerful driver of accumulation. This occurs because external pressures are mediated increasingly through the competition among individual capitals to profit from such pressures and/or to move capital elsewhere (including in liquid assets) to escape them. Furthermore, as financial capital tends to control the most liquid, abstract and generalized expression of capital, it is better placed to respond to short-term 177
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Table 9.1. Factors relevant to ecological dominance in the relations among societal systems Internal
• Scope for continuous self-transformation because internal competitive pressures are more important than external adaptive pressures in the dynamic of a given system • Extent of internal structural and operational complexity and the resulting scope for spontaneous self-adaptation in the face of perturbation or disruption (regardless of the external or internal origin of adaptive pressures) • Capacity to distantiate and/or compress its operations in time and space (i.e. to engage in timespace distantiation and/or time-space compression) to exploit the widest possible range of opportunities for self-reproduction
Transversal • Capacity to displace its internal contradictions, paradoxes and dilemmas onto other systems, into the environment, or defer them into the future • Capacity to redesign other systems and shape their evolution by context steering (especially through organizations that have a primary functional orientation and also offer a meeting space for other functional systems) and/or constitutional (re)design External
• Extent to which other actors accept its operations as central to societal reproduction and orient their operations in this light (e.g. integrating its needs into their own decision-making premises and programmes as naturalized constraints). Organizations also have a key role here through their ability to react to the irritations and expectations of several functional systems • Extent to which a given system is the main source of external adaptive pressure on other systems (e.g. through the impact of recurrent system failures, worsening social exclusion, and positive feedback effects) and/or is more important than their respective internal pressures for system development
Source: Modified version of Jessop (2007).
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profit opportunities and threats (Bryan and Rafferty 2006). However, as Minsky (1982) pointed out, stability within capitalism leads to instability; thus this capacity of financial capital contains the seeds of its eventual financial collapse. Second, the anarchy of market forces and the dual role of the price mechanism in reallocating capital and enabling learning and reflexivity on the part of economic actors mean that the profitoriented, market-mediated economy tends, other things being equal, to have greater (but by no means infinite) resilience in the face of exogenous disturbances. It is mainly through flexible forms of competition and the resulting scope for local variation that capital as a social relation can adapt to external perturbations. Indeed, adopting a different approach to the same question, Peck and Tickell (2002) argue that there are several local forms of neoliberalism, neglect of which leads observers to underestimate its survival power. Third, and relatedly, because money can dissociate economic transactions in time and place, capital can extend its operations in time and space (distantiation) and/or intensify them in these regards (compression). The mutual reinforcement of these processes facilitates real-time integration in and across the world market and gives capital greater flexibility to reorganize its activities. Fourth, through these and other mechanisms, the expanded reproduction of capital tends to weaken the structural constraints associated with other societal subsystems or institutional orders and/or to resist their agents’ efforts to control the economy. Capital can do this up to a point through its internal operations in time (discounting, insurance, risk management, futures, derivatives, hedge funds, et cetera) or space (capital flight, relocation, outsourcing abroad, claims to extra-territoriality, et cetera) as well as by extending the logic of exchange value into other systems, the public sphere, and everyday life. This increases the ‘indifference’ of the profitoriented, market-mediated economy to its environment (see Lohmann 1991, and this volume). Such indifference is very typical of international finance, which is more tightly integrated – for better or, more recently, worse – on a global scale than other forms of capital. Nonetheless finance capital (let alone capital in general) cannot escape its long-term material dependence on the principle of economic determination in the first instance: wealth must first be produced before it can be distributed or, in terms more appropriate 179
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to capitalism, surplus value must be produced before it can be realized and distributed. Nor can it escape its material dependence on the existence and performance of other institutional orders (such as protection of property rights and contracts, basic education, legislation and its enforcement, scientific discoveries). And, of course, it always remains the prisoner of its own crisis tendencies. Thus the overaccumulation of financial capital enabled by its dissociation from, and indifference to, other moments of the capital relation eventually led to the bursting of financial bubbles around the world. More generally, as the world market grows in the shadow of the ecological dominance of neoliberalism, all its contradictions are generalized and come into play. Fifth, compared to the species involved in natural evolution, social agents have much stronger capacities to redesign their environment and their evolutionary potential, and even to change modes of social evolution (Willke 1997). In addition to the immense innovative capacities within the market economy, with all its implications for social evolution, we should also note the scope that exists for redesigning the rules that govern the market economy and the ways in which it is embedded in the wider social formations. The four varieties of neoliberalization all involve efforts to redesign the framework within which struggles around competition and accumulation occur, modifying thereby the capacity for exchange value to become ecologically dominant. Indeed, whereas the Chicago School tends towards blind faith in markets, the Ordoliberals insist on a robust regulatory framework and measures to compensate for market failure. Sixth, the primacy of accumulation over other axial principles of societalization (such as national security, ‘racial’ supremacy, religious fundamentalism, adherence to the rule of law, or social solidarity) is related to the power of the respective self-descriptions and social values of these principles, especially as articulated and represented in the public sphere and, above all, the mass media in the course of struggles for political, intellectual, and moral leadership (see Miller, this volume). The influence of such selfdescriptions and values in everyday language and the mass media is seen in the role of economic considerations in choosing among alternatives in a non-economic institutional or organizational context – for example, in designing school curricula, choosing research topics, or deciding what is newsworthy. Struggles over 180
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competing axial principles will be easier to win where the corresponding institutional order is organized, like the world economy, on the basis of centre–periphery relations rather than a multitude of essentially similar segmented units, such as schools or families (Luhmann 1996). Neoliberalism illustrates this in terms of the dominant role of financial capital over other fractions of capital on a global scale and of hegemony of the USA as an imperial power that is far more than first among equals in the inter-state system. Both played key roles in promoting neoliberalism and marginalizing opposition from peripheral economic forces and smaller, less powerful states. Hegemonic struggle is also easier where social forces that cross-cut functional systems seek to coordinate their respective operations via positive or negative coordination. A power bloc organized through parallel power networks provides an important mechanism of system and social integration in this regard (Poulantzas 1978; Baecker 2001). Seventh, as a correlate of the first factor, an ecologically dominant system is the primary source of external adaptive pressure on other systems. So, as the world market grows more complex, the environment of other institutional orders, institutions, organizations and networks becomes more complex too, forcing them to increase their internal complexity to remain operationally autonomous. Moreover, as Wagner (2006) notes, where the failures of one system (or order) have a disproportionate impact on other systems (or orders), this also reinforces its ecological dominance. This holds not only for the impact of market failures on resources and revenues required by other systems, but also for the more general social repercussions of economic crises in an integrated world market. This is very clear in the dynamics of the current world recession (or, perhaps, imminent depression) in so far as it is the failures of neoliberalism more than its previous limited successes that are forcing the most significant adaptations elsewhere within social formations up to and including world society.
How Neoliberal Globalization Favoured Capital’s Ecological Dominance Marx argued that the world market is the most developed mode of existence of the integration of abstract labour with the value form. Here production is posited as a complex totality but, at the same 181
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time, all contradictions come into play (Marx 1973: 227). In contrast to crude versions of world system theory, this does not entail a single logic operating on a global scale with singular directionality. Instead we find a variegated world market with an emergent logic based on interaction among different ‘varieties of capitalism’ and other forms of economic organization as mediated through shifts in the balance of forces (see Birch and Mykhnenko, this volume). As the world market has operated ever more as an integrated system in real time under the ecological dominance of neoliberalism, Marx’s analysis becomes ever more relevant. The always tendential ecological dominance of capitalism is closely related to how far its internal competition, internal complexity and loose coupling, scope for self-reorganization, ability to engage in time-space distantiation and compression, capacity to displace and defer problems, and hegemonic aptitudes are freed from frictions and obstacles established by other societal systems. The most significant source of such friction has been the Westphalian inter-state system with its mutually exclusive sovereign territorial states and, at least for the most powerful states, ability to set boundaries to the full realization of the logic of capital accumulation on a world scale. Globalization, especially in its neoliberal form, has had a key role in reducing the frictions introduced by national ‘power containers’ or analogous borders, and thereby advances the relative ecological dominance of the world market. It reinforces the dominance of exchange value within economic organization and frees money capital (the most abstract expression of the capital relation) to move at will in search of profit world-wide (Jessop 2002). Liberalization, deregulation, privatization, expansion of market proxies in the residual state sector, internationalization, and the lowering of direct taxes all boost the scope for internal variation and selection in the profit-oriented, market-mediated economy. Along with commitment to shareholder value, this benefits hypermobile financial capital, reinforcing its competitiveness and ratcheting up its ability to displace and defer problems onto other economic actors and interests, other systems, and the natural environment (see Shaoul; Lohmann, this volume). Yet, as Marx foresaw, this also enhances the scope for the contradictions and dilemmas of a relatively unfettered (or disembedded) capitalism to shape the performance of other systems, undermining crucial extra-economic conditions for accumulation. Even after the global neoliberal highpoint has passed and all the 182
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contradictions of neoliberalism have come into play, neoliberal logic still dominates world society through the path-dependent effects of policies, strategies, and structural shifts that occurred before or during the highpoint and the continuing attempts to impose that logic. This is particularly (but by no means exclusively) associated with the weight of the American economy in the world market and, as noted above, the ecological dominance of the world market within world society as a whole. Recognizing the significance of neoliberalism in these respects indicates the need for a change in perspective on the place of the USA in the world market and world society. Often discussed as an economic superpower and/or as a global hegemon, the USA no longer enjoys the economic domination and multiple hegemonies that it exercised in the immediate post-war economic order. Its rulers were willing to sacrifice immediate economic interests for long-term global advantage by enabling economic rivals to join, directly or indirectly, an expanding international economy. In the last two decades the US has been losing economic and political dominance at different rates and in different ways relative to the European Union, Brazil, Russia, India, China and South Africa. This can be seen in the US fiscal, budgetary, and trade deficits and the re-emergence of a multi-polar international order. It nonetheless remains ecologically dominant by virtue of its overall weight in the world market and, more significantly, because of the many disproportions with which it is associated on a world scale. This produces a pathological co-dependence of the US and other economies. This is especially clear in the structural coupling of the American and Chinese economies, which supported the unsustainable growth of production in China and consumption in the United States. Among the most obvious indicators of the ecological dominance of the American economy are the positive feedback effects of the growing international trade and financial imbalances between the United States, China and Japan, as well as their implications for environmental destruction through the unsustainable growth of production in China and consumption in the United States. Accordingly the crisis tendencies and failures of the US economy still cause more problems for other economies than they can cause for it. To this we must add the paradox that the capacity of US capital and state to displace and defer the contradictions of neoliberalism onto other spaces and times at relatively little cost to themselves (as 183
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opposed to workers and the wider population) has reached its limits. This is reflected in ‘blowback’ (using Chalmers Johnson’s term, 2000) in the form of neoliberal crisis at home, with, as is evident, massive potential to damage the growth dynamic of the US economy too. Elsewhere we are witnessing an intensification of financial mercantilism, ‘competitive austerity’ policies, trade wars, and the deepening of imperialist rivalries. It is difficult to foresee how the necessary adjustments can be made without a major global crisis that will forcibly re-impose proportionalities in the global circuit of capital that have proved impossible to resolve politically. The credit crunch and resulting debt deflation have the potential to promote this re-equilibration but the capacity of neoliberal forces to define the current crisis as one within neoliberal, finance-led accumulation has limited this process to date, despite a worsening conjuncture in the ‘real economy’. It is tempting, now that the financial and asset bubbles have burst, to focus on capitalism’s long-term future and ignore the irrationality of unregulated finance-led accumulation (see Shaoul, this volume). Yet this would involve overlooking the continued pathdependent effects of that irrationality in the overall logic of capital. Compared to the role of finance in the structured coherence of Fordism and in the prospective coherence of a more productivist, post-Fordist knowledge-based economy (see Tyfield, this volume), the ecological dominance of neoliberal financialization continues to undermine the structured coherence and spatio-temporal fixes of regimes based on the primacy of productive capital. The destructive impact of financialization in this regard is reinforced through the neoliberal approach to accumulation through dispossession (especially the politically licensed plundering of public assets and the intellectual commons – see Lohmann, this volume) and the dynamic of uneven development (enabling financial capital to move on when the disastrous effects of financialization weaken those productive capitals that have to be valorized in particular times and places). It is also supported by the markets opened for the ‘symbionts and parasites’ of ecologically dominant capital fractions, which have their own forms of uneven development on local, regional, national and global scales.
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Conclusions As Wohlgemuth suggests, neoliberalism is currently recognized as a potentially threatening spectre or zombie not only by old (social democratic) Europe but also by many other powers, major and minor. In part this is because neoliberalism has rarely been realized in the form envisaged by its first advocates – the Ordo-liberals – because of the usual slippage between theoretical paradigms and policy implementation, the greater influence of the Chicago School from the 1970s, and, most significantly, the dominance of transnational finance capital interests in economic and political strategy following the crisis of post-war modes of growth. Now there is more recognition of the need for close regulation plus flanking and supporting mechanisms to ensure that market failures and the effects of ‘blow-back’ neoliberalism do not undermine the market economy and threaten the cohesion of market society. Nonetheless less regulated variants of neoliberalism seem to have survived in the Anglo-American heartlands thanks to the continuing domination of finance-led accumulation. The explanation for these differences must be found in the relative balance of forces in different ‘varieties of capitalism’ within the world market and their associated state forms at different scales. There is certainly a growing antagonism between demands for re-industrialization, a Green New Deal, and promotion of the globalizing knowledge-based economy as the material and ideological expression of productive capital and the logic of a finance-led, shareholder-value-oriented process of capital accumulation that is more concerned to re-capitalize the financial institutions and restore the finance-led accumulation regime. Even if neoliberalism is less pervasive overall, ecological dominance is not confined to success but also includes the impact of failure. Accordingly, it will prove hard to reverse the legacies of ‘roll-back’ neoliberalism on a world scale and/or to tame it on the same scale through the flanking and supporting mechanisms adopted in rollforward neoliberalism. It is more worrying that the ecological dominance of neoliberalism may be ended by the ecological dominance of the natural environment in a period of growing environmental crisis. Whether or not the spectre of neoliberalism can be exorcised is an open question; more fearsome is the spectre of environmental crisis and here there are disheartening signs that all the powers of Europe and beyond have not yet allied decisively to destroy it. 185
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Note 1 Analogous forms of ecological dominance can be identified in fractal fashion in the relations among different fractions or forms of capital and different varieties of capitalism in the world market, and even at more micro-levels of analysis (such as the relative primacy of calculation in terms of production criteria, financial returns, and marketing in the organization of the activities of a given enterprise and its output).
References Baecker, D. (2001) ‘Managing Corporations in Networks’, Thesis Eleven, No. 66, pp. 80–98. Becker, U. (2007) ‘The Scandinavian Model: Still an Example for Europe?’, Internationale Politik und Gesellschaft, Vol. 4, pp. 41–57. Bryan, D. and Rafferty, M. (2006) Capitalism with Derivatives: a Political Economy of Financial Derivatives, Capital and Class, Palgrave, Basingstoke. Cox, R. H. (2001) ‘The Social Construction of an Imperative: Why Welfare Reform Happened in Denmark and the Netherlands but not in Germany’, World Politics, Vol. 53, No. 3, pp. 463–98. Duménil, G. and Lévy, D. (2004) Capital Resurgent: Roots of the Neoliberal Revolution, Harvard University Press, Cambridge, MA. Gowan, P. (1996) ‘Eastern Europe, Western Power and Neo-Liberalism’, New Left Review, Series I, No. 216, pp. 129–40. Gwynne, R. N. and Kay, C. (2000) ‘Views from the Periphery: Futures of Neoliberalism in Latin America’, Third World Quarterly, Vol. 21, No. 1, pp. 141–56. Harvey, D. (2005) A Brief History of Neo-Liberalism, Oxford University Press, Oxford. Howard, M. and King, J. (2008) The Rise of Neoliberalism in Advanced Capitalist Economies: a Materialist Analysis, Palgrave, Basingstoke. Jessop, B. (2002) The Future of the Capitalist State, Polity, Cambridge. —— (2007) ‘What Follows Neo-Liberalism?’ in Albritton, R. Jessop R. and Westra, R. (eds) Political Economy and Global Capitalism, Anthem, London, pp. 67–88. Johnson, C. J. (2000) Blowback: the Costs and Consequences of American Empire, Little, Brown, London. Lavelle, A. (2009) ‘Explanations for the Neo-Liberal Direction of Social Democracy: Germany, Sweden and Australia Compared’, in J. Callaghan et al. (eds) In Search of Social Democracy: Crisis and Modernisation in the West European Left, Manchester University Press, Manchester, pp. 9–28. Lindbom, A. and Rothstein, B. (2005) ‘The Mysterious Survival of the
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Swedish Welfare State’, paper presented at Conference of the American Political Science Association, Chicago, 2–5 September. Lohmann, G. (1991) Indifferenz und Gesellschaft, Suhrkamp, Frankfurt. Luhmann, N. (1996) ‘Politics and Economics’, Thesis Eleven, No. 53, pp. 1–9. Marx, K. (1973) Grundrisse, Penguin, Harmondsworth. Marx, K. and F. Engels (1976) The German Ideology, in Marx-Engels Collected Works, Vol. 5, Lawrence and Wishart, London, pp. 19–539. Minsky, H. (1982) Can ‘It’ Happen Again? Essays on Instability and Finance, M. E. Sharpe, Armonk NY. Morin, E. (1980) La méthode: volume 2. La vie de la vie, Seuil, Paris. Peck, J. and Tickell, A. (2002) ‘Neoliberalizing Space’, Antipode, Vol. 34, No. 3, pp. 380–404. Polanyi, K. (1944) The Great Transformation: the Political and Economic Origins of Our Time, Rinehart and Company, New York NY. Poulantzas, N. (1978) State, Power, Socialism, New Left Books, London. Robinson, W. I. (2008) Latin America and Global Capitalism: a Critical Globalization Perspective, Johns Hopkins University Press, Baltimore MD. Saad-Filho, A. and Johnson, D. (eds) (2005) Neo-Liberalism: a Critical Reader, Pluto, London. Sader, E. (2008) ‘The Weakest Link: Neoliberalism in Latin America’, New Left Review, Series II, No. 52, pp. 5–32. Streeck, W. (2009) Re-Forming Capitalism: Institutional Change in the German Political Economy, Oxford University Press, Oxford. Veltmeyer, H., Petras, J. and Vieux, S. (eds) (1997) Neoliberalism and Class Conflict in Latin America, Palgrave, Basingstoke. Wagner, T. (2006) ‘Funktionale Differenzierung und ein ökonomischer Primat?’, available at , (30 July 2009). Willke, H. (1997) Die Supervision des Staates, Suhrkamp, Frankfurt. Wohlgemuth, M. (2007) ‘Das Gespenst des Neoliberalismus’, available at (30 July 2009).
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DIY politics is an expression of this strong democracy which seeks a reinvention and reinvigoration of political process, decision making and communication through experimentation with particular organizational principles such as face-to-face democracy, decentralization and consensus (Seeds for Change 2003; Starhawk 1988). These are flexible tools and creative processes acting as building blocks for resistance. They value the input of all comers and attempt to reinvent everyday social relations and encourage participants to communicate more consensually. They have drawn on tools for direct democracy such as the use of affinity groups (action or organization in small groups sharing common goals), spokes-councils (a federated structure of the previous groups, offering proposals and making decisions at a wider level), and consensus decision-making techniques (a rejection of decision making by majority voting, hierarchy and committee) (see Routledge, this volume). Rather than trying to impose the will of the majority, tools for direct democracy attempt to highlight, acknowledge and deal with differences. Many anarchist and autonomous groups have, rightly so, been wary of the idea of organization. The traditional Left is often characterized, and with good reason, as containing dead-end bureaucracies, ineffective party and union officials, declarations and marches, all leading to questionable amounts of empowerment, action and change. Instead, direct democracy values flexibility and innovation, and seeks constant renegotiation and reaffirmation rather than dogmatic adherence to fixed leadership and hierarchical structures. These characteristics can, given the right attention, create a certain robustness in the face of authority and surveillance, and lean, flexible structures allow quick movement as events happen. A key aspect is biodegradability, where groups compost back into the subsoil of political activism, often reforming anew. This renewal and regeneration is a healthy part of the lifecycle of protest and dissent, guarding against hierarchies and rejuvenating energies. Again, given the right commitment, experimentation in organizational form allows opportunities to evaluate, reflect and change, and the participatory nature of this process means that groups evolve to reflect the needs of participants. Clearly there are limits here too. The temporary nature of political activity and groupings can also erode effectiveness. The key is to build capacity for sustained action in ways that also guard against hierarchies, cults of leadership and disempowerment. Other 195
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challenges exist such as the difficulty of shifting from passive consumers to active participants. The dominance of paid work makes most people sceptical of the idea of voluntaristic participation and outside pressures of debt, work and family prohibit many from getting involved. Direct democracy is also an experiment in group self-discipline – how do participants (re)regulate themselves and others, relying not on values in our individual capitalist lives, but on those to which we aspire in our collective non-capitalist lives? Many people are, understandably, wary of self-policing, but recognition of collectively agreed norms is essential for the health and continuation of groups.
Build infrastructure that meets needs without increasing dependency Beyond the temporary autonomous zone (Bey 1991), communities of resistance need to build parallel infrastructures, which genuinely represent non-capitalist values and are embedded in activities that represent the needs of a locality. Many aspects can be envisaged here – community bakeries, free shops, food programmes, skill exchanges and local trading systems, local currencies, seed swaps, printing presses, home schooling, local history walks, retraining and so on. A key aspect is to build this infrastructure in ways that builds a commons, where access is unmediated by the logic of work and capital. As welfare state infrastructure declines, outlined earlier by MacLeavy (this volume), and are made into new income sources for the private sector, what kinds of infrastructure can, and should, be built in its place? Can these meet our desires and needs right here and now and what are the consequences of building these spaces? Key issues include capacity for building and maintaining infrastructure, making wider links and strategic alliances with groups, sharing resources, managing conflicts, and securing resources. Of particular importance is the need to embed activity that responds to actual needs, empowering without creating new dependency cultures. One of the most difficult elements to resist is the seduction of social enterprise and the rise of enterprise culture at the grassroots. One concern which Mayer (2003) raises is the extent to which activist projects are becoming cornered by modes of neoliberal governance based around mobilizing ‘social capital’, becoming entrepreneurial and chasing grants to maintain their activities. This is compounded by the fact that the decline of generous welfare 196
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benefit regimes which supported ‘dole autonomy’ (non-market labour) has shifted activists into professionalizing and monetarizing formerly more confrontational political activity. Some activists have found sums of money, for example, to provide activities and services for the most vulnerable groups in society such as the homeless or asylum seekers/refugees. One unintended, very important and often overlooked aspect of this is that it can create a mini local welfare state, unburdening the local state of statutory responsibilities for these vulnerable groups, without any shifts in the allocation of taxes. The local state is then free to retreat to its core functions of promoting business and inward investment. In such a context, activists need to organize and make the case that if they are going to take on selected functions of the local state then the ownership of public assets and the payment of taxes have to become renewed arenas for political contestation. Within such neoliberal governance (Brenner and Theodore 2002; see Jessop, this volume), these groups need to consider what kind of relationship, if any, should be maintained with the state. Strategically, is it the right thing to do to opt out and promote self-management? It is worth keeping in mind that poorly conceived and implemented forms of service provision can be as damaging as dependence on external ones if they are temporary and vulnerable to closure by the state. Nevertheless, all groups need to consider how to deal with the local state as it seeks to discipline, neoliberalize and depoliticize community activism.
Embrace the impure, messy politics of the possible One of the most liberating aspects of recent political organizing is that participants are invited to engage more directly, experimentally and creatively with what social change means. When Holloway and Pelaez (1998) talked about ‘reinventing the revolution’ they were referring to a more participatory process – a revolution as the Zapatistas say, ‘that is made by walking’. The very idea of a revolution, then, is reconceptualized in a number of ways at a more mundane level as rupture through a million bee stings rather than a great dagger blow (Holloway 2010); through ordinary people doing extraordinary things rather than heroic feats by a vanguardist party. On this journey, participants aim to self-critique their own practice and impacts, and seem to be genuinely open to dialogue 197
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rather than self-congratulation. This kind of dialogue creates ‘third spaces’ (Routledge 1996) between those who self-identify as activists and wider publics, creating new and unforeseen political identities. In this messy world of the possible, the process is as important as the outcome of resistance; the journey is an end in itself (Wright 2006). On the terrain opened up by the failure of state-based and ‘actually existing socialism’, DIY politics allows a rethinking of the idea of revolution – it is not about seizing the state’s power but, as Holloway (2002) argues, ‘changing the world without taking power’. However, we are not seeking the absence of structure or order, but the rejection of a government that demands obedience (Castoriadis 1991). DIY is a politics of possibility, where activism is also a postcapitalist politics for what comes next (Gibson-Graham 2006). This spirit of possibility is used to counter the fixity of representative politics. It is a politics of prefiguration (‘be the change you want to see’, as Gandhi said) which aims to build achievable future aspirations in the present through an accumulation of small changes. It is about embracing ‘power together’ rather than power over. A constant sense of opening and possibility, of becoming, is at the heart of this political identity – that projects are not fixed and can be altered or renegotiated by the creative energies of participants. DIY and autonomous politics embrace political identities that are open, incomplete, complex and multiple. They share a suspicion of Manichean politics, of its simple binaries, dividing activist from ordinary citizen, left from right. Part of the messiness of politics is creating space for emotions. Emotional connections are as important as intellectual arguments in building participatory politics (Pulido 2003; Gibson-Graham 2006; also Routledge, this volume). We need to dispel notions that activism is emotionally objective. Awareness of our emotions allows us to ask – are we promoting explicit, cooperative ways of interacting which are rooted in a deep desire for mutual aid, to develop a sense of care and responsibility for others? The everyday emotional work of caring in political communities, especially by women, is often overlooked but is central to building a sense of belonging. We need to be attuned to the sheer amount of unequally distributed effort which goes into the social reproduction of political groups.
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Get out of the activist ghetto – be accessible, relevant and fun Recent activism has seen a tendency to reach out beyond what is seen as the activist ghetto – part of a conscious political strategy to engage more broadly with radical, anti-capitalist ideas that emphasize the potential for self-management in people’s daily lives (see Hinojosa and Bebbington, this volume, for examples from Latin America). Many involved in horizontal DIY politics are aware of the need to avoid internally focused ghetto politics, recognizing that subcultural spaces often fail to provide bridges between radical ideas and their usefulness in daily reality. We need to tease out how people’s problems impact on their everyday lives, avoid judging people, and encourage them to express themselves in their own way. Activists too often forget that political engagement is also about looking at where people find themselves and how they understand what’s going on around them. The key issue at stake, then, especially in our media-saturated societies, is one of relevance, accessibility and messaging. One of the challenges is how progressive political groups on the Left need to shake off associations with dogmatic/moralist politics and promote accessible, alive, relevant and fun politics. In particular, how can anti-capitalist ideas be made relevant and gain in popular currency, and be seen as a rational and feasible response rather than a minority concern? Duncombe (2007) explored how progressives often fail to capture the popular imagination and are often perceived to be dogmatic and moralistic as they don’t creatively use the more spectacular elements of consumer culture (but see Routledge, this volume). The historic challenge which remains, as Wendy Brown (2002) reminds us, is to make whatever micro tactics we are involved in seem feasible and exciting. Humour can play a key role in generating common identification and solidarity. Saul Alinsky, the grandfather of community organizing, used to say that ridicule is man’s (and assumedly woman’s too) most potent weapon, and that a good tactic is one your people enjoy (see Alinsky 1972). Many groups have taken these ideas seriously, creating fast-moving, media-savvy tactics that make people think and laugh, attempting to be more professional and welcoming, pitching themselves on the intersection between subculture and pop culture with greater attention to aesthetics and design. However, as we have seen this raises criticisms of co-optation and a creeping lifestylism. But attention to message 199
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content, distribution and the messengers are all still crucial. What is required is a clear, identifiable message, a solid analysis of your target audience and how you will reach them. Creating messages that tap into the way people see the world and pick up on popular narratives, opens up possible areas of dialogue between the radical and the everyday.
Think and act strategically Thinking strategically and planning are the often overlooked elements of contemporary DIY politics. Spending time to fit our activities into a longer strategy, reflecting on tactics and making time to plan is also essential for the success of any group or initiative. It’s only through these kinds of steps that a group can understand where it is, how well it is doing, and if it is meeting its aims. A recurrent question for those embarking on DIY, with its less rigid political forms, is what would it actually mean to win?3 This is a tricky question when there is not a single clear enemy (but global capitalism, neoliberal elites, poverty, carbon criminals to name a few), and what is being challenged is an internalized social relation of capitalism possessed in varying degrees by us all. So what does social change look like and what does it feel like when it comes? When can we confidently say that we are making progress towards our goals? One response is that winning is related to process as much as content – it is about the way we struggle as much as the issues we are struggling on. If in the process of building a movement against climate change, for example, we are simply reinforcing market-based solutions or building redundant bureaucracies, can we claim victories for the kinds of politics we espouse? Additionally, creating a series of steps as a goal, rather than aiming too high, is essential to building a campaign that has coherence and is legible to those that might want to join. Setting aims and objectives can be done poorly, quickly and in a way that raises expectations about what can be achieved. But given enough time and focus any group can develop a core goal or aim, a clear target, and objectives to work towards. Knowing your enemy, as well as your allies, is crucial and depends on good research. These aspects don’t have to be immovable, and they should be flexible and change as the group and its values change.4 Bill Moyer (2001) in his Movement Action Plan highlighted the need for clear organizing, and an awareness of where a movement is in a longer cycle of growth 200
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and decay. After an intense moment of victory, many groups misinterpret periods of inactivity as failure rather than quiet growth and consolidation. Moyer has stressed how social movements need to build towards structural change by proposing new alternatives and worldviews rather than just opposing symptoms. A key lesson here is not resting on false hopes that any gains secured will be permanent. Problems emerge when it is actually unclear what does come next or what our hoped-for future looks like. Participatory visioning and action planning can help tremendously here, where collective energies are focused on planning actions, visioning alternatives and clarifying campaigning strategies. Disorganization and horizontal politics can also become overfetishized, seeing organization building as a sure route to co-optation and deradicalization. But thinking strategically is not the same as succumbing to institutionalization. As Hardt and Negri (2000) outline, tactics of desertion, exodus and nomadism allow us to reject established forms of institutionalized power and build more mobile counter-powers from our own resources. The process of institutional renewal needs to relate as much to group process as to content. The former without the latter can lead to lack of focus, and the latter without the former can lead to wasteful organization building. Our strategies should look to be interconnected and expansionary, making strategic alliances where practicable. They should also appreciate that reforms can lead to a demand for more reforms and create a non-reformist situation (Albert 2004). A key lesson of the most successful campaigns is to recognize the long haul. There will be compromises along the way, but not so many that they undermine group values. Groups also need to be ready to take risks and defend gains. And this is where strategic allies can come in extremely useful, especially for smaller micro examples.
Evaluate and reflect The phase of evaluation and reflection is an essential but often overlooked element of building and sustaining movements for change. In our urgency to move on to the next stage or action, we often overlook the need to reflect on what is and isn’t working, how people feel, what impact we are having and what potential problems are ahead. It often seems a diversion from the real business of activism out on the streets. We need to evaluate in order to be realistic about what anti-capitalist ideas can achieve, and in what ways they spread. 201
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It is important to recognize that reflecting on our practice allows us to refine our analysis and improve our practice. Regular times should be built in for evaluation and reflection so that they become part of the natural cycle of politics. Being critically evaluative is about being brave enough to acknowledge what isn’t working and being prepared to change course. It is also about being clear on the differences between outcomes and impacts. Our activism should not be just about generating outcomes. What we are looking for is impact in terms of real change. And this should be embedded in our goals, to which we need to constantly return. Consultations and militant co-inquiry are useful techniques to explore what issues to fight on. This kind of work has been used successfully in 1970s Italy and more recently in Argentina in the 2001 crisis (see Malo de Molina 2005; Holdren and Touza 2005; Colectivo Situaciones 2003).
Conclusion: from the Ashes of the Crash In this chapter I have focused on the idea of DIY politics, as it contains so much potency for empowerment and galvanizing immediate action in the face of the multiple crises of our neoliberal age. I have outlined seven principles, which I hope will be of some use in terms of critically evaluating and offering ways forward for building a politics to change our world and challenge the hegemony of the neoliberal market economy and market society. This kind of politics is by no means a simple or straightforward process. It is not doctrinaire, well-organized, coherent and easily defined – and nor should it be. It is simultaneously in, against and beyond capitalism. Its complexity and shifting nature are key to its survival, resilience and creativity. In the face of the recent failure and crisis of the global economic model of neoliberalism and the political institutions that hold it up, as well as the looming twin problems of fossil fuel dependency and dangerous climate change, it is a politics that is needed now more than ever. Time has never been better for revaluing the potential for self-managed forms of community, work and services based on mutual aid and collectivity. Examples of how people can do it themselves are part of the old battle of ideas, words and practices about how to build a better world. They need to expand, connect, and look feasible without becoming too fixed. We need to make the 202
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old order look ridiculous, and shout out, like the small child did, that we cannot see the emperor’s new clothes. Given what is at stake and how dire the consequences of carrying on with ‘business as usual’ are, it is a battle that we cannot afford to lose.
Notes 1 See and Trapese 2007; . 2 See . 3 See Issue 1 of Turbulence magazine at . 4 Many guides exist on campaigning. See Coover (1985); Crimethinc (2005); Minieri and Getsos (2007); Moyer (2001); Lattimer (2000); Rose (2005); Coe and Kingman (2007). 5 This phrase is taken from the recent New Economics Foundation report. See .
References Albert, M. (2004) Parecon: Life After Capitalism, Verso, London. Alinsky, S. (1972) Rules for Radicals, Random House, London. Barber, B. (1994) Strong Democracy: Participatory Politics for a New Age, University of California, Berkeley CA. Barclay, H. (1990) People without Government: an Anthropology of Anarchy, Kahn and Averill, London. Bey, H. (1991) The Temporary Autonomous Zone, Ontological Anarchy, Poetic Terrorism, Autonomedia, New York. Brenner, N. and Theodore, N. (2002) Spaces of Neoliberalism, Blackwell, Oxford. Brown, W. (2002) ‘An Interview with Wendy Brown’ in Schalit, J. (ed.) The Anti-Capitalism Reader: Anti-Market Politics in Theory and Practice, Past, Present and Future, Akashic Press, Brooklyn NY. Carlsson, C. (2008) Nowtopia: How Pirate Programmers, Outlaw Bicyclists and Vacant-Lot Gardeners Are Inventing the Future Today, AK Press, New York NY. Castoriadis, C. (1991) Philosophy, Politics, Autonomy: Essays in Political Philosophy, Oxford University Press, Oxford. Coe, J. and Kingman, T. (2007) Tips on Good Practice in Campaigning. NCVO, . Colectivo Situaciones (2003) Sobre el Militante Investigador, available at: (15 June 2006). Coover, V. (1985) Resource Manual for a Living Revolution, New Society Publishers, Philadelphia PA.
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Crimethinc (2005) An Anarchist Cookbook: Recipes for Disaster, AK Press, New York NY. de Angelis, M. (2007) The Beginning of History, Pluto Press, London. Debord, G. (1983) Society of the Spectacle, Black and Red, Detroit MI. Duncombe, S. (2007) Dream: Re-imagining Progressive Politics in an Age of Fantasy, New Press, New York NY. Gibson-Graham, J. K. (2006) A Postcapitalist Politics, Minneapolis MN. Hardt, M. and Negri, A. (2000) Empire, Harvard University Press, London. Hodkinson, S. and Chatterton, P. (2006) ‘Autonomy in the City? Reflections on the Social Centres Movement in the UK’, City, Vol. 10, No. 3, pp. 305–15. Holdren, N. and Touza, S. (2005) ‘Introduction to Colectivo Situaciones’, Ephemera, Vol. 5, No. 4, pp. 595–601. Holloway, J. (2002) Change the World Without Taking Power, Pluto, London. —— (2010) Crack Capitalism, Pluto, London. Holloway, J. and Pelaez, E. (1998) Zapatista! Reinventing Revolution in Mexico, Pluto, London. Katsiaficas, G. (1997) The Subversion of Politics: European Autonomous Movements and the Decolonization of Everyday Life, Humanity Books, New York NY. —— (2004) Confronting Capitalism: Dispatches from a Global Movement, edited with E. Yuen and D. Burton-Rose, Soft Skull Press, New York, NY. Kingsnorth, P. (2004) One No, Many Yeses: a Journey to the Heart of the Global Resistance Movement, Free Press, London. Kropotkin, P. (1972) Mutual Aid: a Factor of Evolution, Freedom, London. Lattimer, M. (2000) The Campaigning Handbook, Directory of Social Change, London. Malo de Molina, M. (2005) Common Notions, Part 1: Workers Inquiry, CoResearch, Consciousness-Raising, [1 July 2006]. Mayer M. (2003) ‘The Onward Sweep of Social Capital: Causes and Consequences for Understanding Cities, Communities and Urban Movements’, International Journal of Urban and Regional Research, Vol. 27, No. 1, pp. 110–32. McKay, G. (1998) DIY Culture: Party and Protest in 90s Britain, Verso, London. Mertes, T. (2004) The Movement of Movements: a Reader, Verso, London. Midnight Notes (1991) The New Enclosures, Autonomedia, New York NY. Minieri, J. and Getsos, P. (2007) Tools for Radical Democracy: How to Organize for Power in Your Community, John Wiley and Sons, San Francisco CA. Moyer, B. (2001) Doing Democracy: the MAP Model for Organizing Social Movements, New Society Publishers, Philadelphia PA. Notes from Nowhere (eds) (2003) We Are Everywhere: the Irresistible Rise of Global Anti-Capitalism, Verso, London. Pulido, L (2003) ‘The Inner Life of Politics’, Ethics, Place and Environment, Vol. 6, No. 1, pp. 46–52.
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Rose, C. (2005), How to Win Campaigns, Earthscan. Routledge, P. (1996) ‘The Third Space as Critical Engagement’, Antipode, Vol. 28, No. 4, pp. 399–419. Seeds for Change (2003) Consensus Decision Making, Seeds for Change Online @ . Starhawk (1988) Truth or Dare: Encounters with Power, Authority, and Mystery, Harper, San Francisco CA. Trapese (2007) DIY: a Handbook for Changing Our World, Pluto, London. Vaneigem, R. (1979) Revolution of Everyday Life, Rising Free Collective, New York NY. Wright, E. O. (2006) ‘Towards a Socialist Alternative’, New Left Review, Second Series, Vol. 41, pp. 93–124.
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11 Dreaming the Real: a Politics of Ethical Spectacles PAUL ROUTLEDGE
Introduction: Manufacturing Dissent From 6 to 8 July 2005 the G8 (Group of Eight) nations met at Gleneagles, Scotland. The G8 – consisting of the US, Canada, Japan, Britain, Germany, France, Italy and Russia – holds annual summits where top government officials discuss issues of macroeconomic management (or running the neoliberal global economy), international trade, terrorism, energy, arms control et cetera. With the emergence of the global justice (anti-capitalist) movement, such summits have been accompanied by protests – both at the places where the G8 meet, and elsewhere across the globe. These protests provide a critique of neoliberal capitalism, debate alternatives to it, and challenge the ‘business-as-usual’ performance of such summits by attempting to disrupt their operation. In the months prior to the G8 protests, an idea spread meme-like around various British cities, including London, Bristol, Manchester, Birmingham, Sheffield, Aberdeen, Edinburgh, Newcastle and Glasgow, and to parts of Europe and the US. In these cities an army of rebel clowns was being formed and was to be deployed during the G8 protests. This was the Clandestine Insurgent Rebel Clown Army (CIRCA). As they noted on their website: We live on a planet in permanent war – a war of money against life, of profit against dignity, of progress against the future. A war that gorges itself on death and blood and shits money and toxins, deserves an obscene body of deviant soldiers – an insurgent army of rebels, which celebrates life and happiness and continuous rebellion. This army is clandestine because words, dreams, and desires are more important than biographies. Inside everyone is a lawless clown trying to escape, and nothing undermines authority like holding it up to ridicule. Run away
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from the circus and join the Clandestine Insurgent Rebel Clown Army (CIRCA) (www.clownarmy.org).
In early July, people from around the world gathered in Edinburgh for the Make Poverty History march and a week of actions around the G8 meeting in Gleneagles, Scotland. They were met by a ragtag army of some 200 rebel clowns formed from a series of two-day workshops that had been organized in various UK cities in the months prior to the meeting. The Clandestine Insurgent Rebel Clown Army is an exemplar of a new form of politics that seeks to utilize various types of tactical performance in order to raise public awareness about issues, challenge popular assumptions and open up a dialogue on a particular issue (see also Chatterton, this volume). It is an example of what Stephen Duncombe (2007) terms ‘dreampolitiks’ (see below) that articulates a politics embracing people’s dreams and desires to open up the imagination by manufacturing dissent.
Sites of Intervention: Cultural Activism When manufacturing dissent against neoliberal institutions and policies it can be helpful to conceive of a variety of ‘sites of intervention’.1 Forms of resistance associated with labour struggles, revolutionary movements, peasant movements and other risings have frequently taken place at sites of production (such as factories and fields), destruction (such as places of resource extraction), and decision (such as government and corporate headquarters). The methods of resistance associated with such locations have included strikes and picket lines at sites of production; road blockades and tree-sits at sites of destruction; and direct actions and global days of action at sites of decision (such as the G8 protests). However, although these forms of resistance are still pertinent in challenging the ‘accumulation by dispossession’ highlighted by Harvey (2003) and fellow contributors to this book (see Tyfield; Lohmann), other forms of resistance such as cultural activism are also important, particularly in an age of spectacle and screen culture. As Guy Debord (1983: 2) argued in his classic Society of the Spectacle, state and corporate control is frequently achieved in capitalist society through ‘a social relation among people, mediated by images’. In the context of neoliberal capitalism Henry Giroux 207
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(2007) has developed this idea to argue that we live in a culture of commodification whereby visual symbols and visual culture work to aestheticize politics through affective appeals to consumerism (what he terms ‘the terror of the spectacle’). This is juxtaposed by Giroux with the ‘spectacle of terrorism’ which affirms the practice of politics over the aesthetics of commodification through an appeal to the real, building a social consensus around fear rather than consumption. However, this spectacle also relies on mediated images for its power and affect, hence ‘audio-visual culture has become our primary way of coming into contact with the world and at the same time being detached (safe) from it’ (Arva, quoted in Giroux 2007: 17). In such a time of the signs, cultural activism poses a challenge in other sites of intervention, namely those of consumption, potential and assumption.2 Points of consumption such as chain stores and supermarkets are confronted by such tactics as consumer boycotts, market campaigns, and so on. A contemporary example of this approach to cultural activism is the church of the immaculate consumption that targets points of consumption (and indeed assumption) by the activist ‘The Vacuum Cleaner’ and encourages believers to worship products instead of buying them. This particular tactic emerged out of the Laboratory of Insurrectionary Imagination (Lab of II), a cultural activist initiative that developed in preparation for the protests against the G8 meeting in Gleneagles, Scotland, 2005. The counter-logic behind this approach is that contemporary capitalism encourages a consumerism based less on survival than on personal fulfilment through the purchasing of ‘lifestyles’, which takes place in cathedrals of consumption, or shopping centres. Activists will infiltrate a multinational store (the point of consumption) and then commence praying to particular products (trainers, jewels, toiletries), asking for salvation and fulfilment from the product in question. The action not only attempts to increase public awareness about contemporary consumption behaviours, but has also succeeded in temporarily closing stores (The Vacuum Cleaner 2007). Points of potential include imagining possible future scenarios about how to live and actualizing alternatives ‘on the ground’. These are imbued with a desire to create the reality dreamed by activists, and a belief in the capacity of activists to build that world with their own hands – as Chatterton outlines in the previous chapter. Such practices engage with the ethical, political and 208
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aesthetic to connect cultural politics with political and social responsibility. An example of such cultural activism is Critical Mass, an open free-form bicycle ride, in which bicyclists, through their power of numbers – their critical mass – take over city streets. Begun in San Francisco in 1992, critical masses have occurred around the world during the past fifteen years, ranging in size from a handful of riders to several thousands. Critical masses have occurred regularly in over 215 US cities, 143 cities in Europe, 22 cities in Asia, 20 cities in Australia, and 8 cities in Latin America (Duncombe 2007). The object of critical masses is to bring to public attention the inferior status accorded to bicyclists on urban streets, and by the mass occupation of those streets by cyclists, critical masses spectacularly demonstrate cyclists’ right to the road. Indeed, the idea is not so much to occupy space as to open it up for new meanings (what constitutes traffic on urban streets, for example) and experiences (such as various interactions between people using the streets). Critical mass articulates alternative potential uses of the streets, and of what might constitute urban traffic. However, because it is an open-ended spectacle, it is open to a multitude of interpretations (including people not understanding what the point of the critical mass is), and to a range of different types of behaviours, including those of aggression towards drivers (Duncombe 2007). Finally, points of assumption necessitate challenging underlying beliefs and control mythologies, and thus the role of cultural activism is to hijack spectacles using the images and signs of popular culture. An example of such activism is the Clandestine Insurgent Rebel Clown Army, mentioned at the beginning of this chapter and discussed in more detail below. At the heart of these types of cultural resistance is an insurrectionary imagination: a sense of possibility not limited to copying a pattern or following someone else’s design, but rather based on creativity, and dissolving the boundary between dream and reality, what Stephen Duncombe (2007) terms ‘dreaming the real’.
Dreaming the Real Taking its inspiration from the work of Brazilian Augusto Boal’s Theatre of the Oppressed (Boal 1992), the International Situationists (Knabb 1989) and Ken Kesey’s Merry Pranksters, dreaming the real 209
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involves an activism of tactical performance that attempts to raise public awareness about issues; challenge popular assumptions; and open up dialogue on a particular issue. In so doing, the activists articulate their concerns, critiques, and demands through activist media (which activists can control) rather than on a terrain that the activists do not control, like the mainstream media. Such performance anticipates intense reactions or even hostile intervention on behalf of the public, and attempts to incorporate them into the dramaturgy of the event. Powerful or unexpected imagery is often deployed to make a deeper impression on the viewer. Indeed, the form of the performance is part of the content. Activists model a form of behaviour – one that is creative, bodily engaged, surprising, and enjoyable – in the forms of dissent that they hope others will ultimately follow. This approach of ‘dreampolitik’ is aimed at constructing a politics that embraces people’s dreams and desires, and fashions spectacles that give these form, employing symbols and associations that inspire, offer direction, and open up the imagination. Primarily, this is achieved through the creation of what Duncombe terms ‘ethical spectacles’: participatory, open-ended, and playful urban transformations whereby the politics desired is embodied in the means of the spectacle. The principal characteristics of ethical spectacles are that: (1) they are autonomous in character, in that they are selforganized creative actions; (2) they are participatory, in that people (including the public) actively participate in the creation and performance of the spectacle; (3) they involve transformative play (such as humour and satire) to communicate messages to the public. Such play necessitates (like all jokes) active audience participation and imagination (so they get the joke) which creates an intimacy between the performer and the audience. Indeed, such narrative interdependency works against social relations of hierarchy and separation (between the ‘performer’ and the ‘audience’, for example); (4) they are open-ended, being open to ongoing modification and adaptation to specific situations, always being in motion and involving contingency at the level of form and meaning; (5) they are transparent, creating clearly absurd spectacles to get people to reflect upon normal reality in some way. Such transparent spectacle allows spectators to look through what is being presented by the performers to the reality of what is really there. As Duncombe (2007) argues, whereas the society of the spectacle employs illusion in the pretence 210
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of displaying reality, ethical spectacles demonstrate the reality of their own illusions; and (6) they embrace theatrical elements.
The Clandestine Insurgent Rebel Clown Army Perhaps the exemplar of the ethical spectacle in recent times has been the Clandestine Insurgent Rebel Clown Army (CIRCA). CIRCA targets points of assumption (and partially potential) and was formed, as noted above, in order to protest the G8 meeting at Gleneagles, Scotland, in 2005. CIRCA was an autonomous initiative, in that it was self-organized by activists who wished to participate in it, and creative in its approach to activism: the purpose was to develop a form of political activism that brought together the practices of clowning and non-violent direct action which took emotional and political responsibility as an act of self-constitution. Activists (or in this case rebel clowns) actively participated in the creation and the performance of the ethical spectacle of CIRCA’s approach to protesting the G8. Active participation was nurtured primarily though the establishment of affinity groups. Practically, affinity consists of a group of people who share common ground (friends, lovers, shared beliefs, dreams) and who can provide supportive, sympathetic spaces for members to articulate, listen to one another, and share concerns, hopes and fears. The politics of affinity enables people to provide support and solidarity for one another. Ideally, such a politics should be built on consensus decision making, which is non-hierarchical and participatory, embodying flexible, fluid modes of action. The common values and beliefs articulated within the politics of affinity constitute a ‘structure of feeling’ resting upon collective experiences and interpretations, which are cooperative rather than competitive, and which are predicated upon taking political action. The idea of consensus here is based upon the notion of mutual solidarity – constructing the grievances and aspirations of geographically and culturally different people as interlinked. Mutual solidarity enables connections to be drawn that extend beyond the local and particular, by recognizing and respecting differences between people while at the same time recognizing similarities (for example, in people’s aspirations) (Olesen 2005). It is about imagining global subjectivities through similarities of experience, recognizing the shared opportunities and techniques of struggle (Starr 2005). 211
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Figure 11.1: CIRCA help out with security at Faslane nuclear submarine base, Scotland, July 2005 Photograph by Rabbitman.
During the G8 protests, there were fifteen different rebel clown affinity groups from different places. For example, there were groups called Glasgow Kiss, the Cloon Army, Group Sex, Backward Intelligence, et cetera. Affinity was nurtured in a variety of ways. First, through a series of day-long workshops, and subsequent affinity group meetings, clowning techniques were practised and refined. These provided a common repertoire of clowning practices – including group play, movements, gestures, and language – that were shared by all CIRCA participants. Second, all CIRCA ‘clownbatants’ shared a common ‘multiform’. Rebel clowns wore personalized clown faces and rebel clown uniforms that were deconstructed, decorated and subverted according to the individual creativity of each person and/or group. These created a sense of affinity within diversity. The clown masks and multiforms were a form of tactical media: they worked to free up personal inhibitions, magnify activists’ commonality and enable activists to act together, while paradoxically rendering them unidentifiable to the authorities and 212
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Figure 11.2: CIRCA at the Make Poverty History: Shut Down the G8 Demonstration, Edinburgh, Scotland, July 2005 Photograph by Kolonel Klepto.
the media, while at the same time attracting media attention. Third, the workshops and multiforms helped to develop group dynamics and close interpersonal relations. Despite the seriousness of the protests against the G8, clown workshops and actions involved a great deal of play and laughter which helped to forge deep bonds between people and groups. Feeling part of a rebel army, sharing aspects of uniform and language, while at the same time acting autonomously in affinity groups and having their own specific clown characters (General Panic, Major Disaster, Corporal Punishment, Private Function) was empowering and provided activists with a deep sense of solidarity. During the protests, we held clown councils, whereby activists would sit in a circle and have meetings based upon consensus decision making. Each affinity group would propose a spokesperson who would sit at the front of their group and discuss matters with the other affinity groups’ spokespersons. Each issue raised by the ‘spokes council’ would be discussed internally by each affinity group, 213
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and its decision communicated back via its spokesperson to the entire council. Once consensus on each issue was reached, activists would move on to the next issue. These councils were held every day during the protests, at first in Edinburgh, and then at the rural convergence site near Stirling. Each group also kept in contact via mobile phone. In the clown councils activists might agree to differ and to allow each group to pursue its own set of actions during the protests. Or activists might all agree on a specific strategy during one of the protests. CIRCA also actively used transformative play (especially humour and satire) to communicate a message of opposition to the G8. This was achieved through a series of CIRCA ‘operations’, under the rubric of the War on Error. The War on Error was a struggle waged against the political errorism of imperial wars (such as the war in Iraq); the economic errorism of neoliberalism, and the environmental errorism of over-consumption. Through the very idea of a clown army (particular pertinent at a time of illegal wars in the Middle East) and the satirical representation of the War on Terror, the public were invited in on a variety of jokes in order to create an intimacy between them and the rebel clowns. The face-to-face encounters experienced through workshop ‘games’ and through direct action enabled the embodying of affinities. In particular, it was the conducting of action with others – in demonstrations, blockades, occupations, street theatre – that forged the bonds of association crucial to the creation of common ground. Affinity groups tapped into people’s desire to be social, nurturing a politics that recognized everyone (in the group) and their participation. Such considerations are intimately entwined with what Laura Pulido (2003) calls the ‘interior life of politics’: the entanglement of the emotions, psychological development, souls, passions and minds of activists. Emotions are personal feelings that occur in relational encounters with human and non-human others. They mediate social and political processes through which people’s subjectivities are reproduced and performed (Kwan 2007). Politically, emotions are intimately bound up with power relations and also with relations of affinity, and are a means of initiating action. People become politically active because they feel something profoundly – such as injustice or ecological destruction. This emotion triggers changes in people that motivate them to engage in politics (see also Chatterton, 214
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this volume). It is people’s ability to transform their feelings about the world into actions that inspires them to participate in political action. Affinity with others under such conditions creates intensive encounters or what Bey (1991: 23) termed a ‘seizure of presence’, wherein practical politics – embodied, intersubjective and relational – is practised. Collaborative association with (activist) others necessitates interaction with others, through particular actions and the experiencing of personal and collective emotions, through creativity and imagination, and through embodied, relational practices that produce political effects (Anderson and Smith 2001; Bennett 2004; Thien 2005; Bosco 2007). CIRCA was not an excuse for activists to dress up as clowns and bring colour and laughter to protests. Rather, the purpose was to develop a form of political activism that brought together the practices of clowning and non-violent direct action. The purpose was to develop a methodology that helped to transform and sustain the inner emotional life of the activists involved as well as being an effective technique for taking direct action. This was because CIRCA believed that a destructive tendency within many activist movements has been the forgetting of the inner work of personal transformation and healing. By working with the body – through various clowning games and manoeuvres – the purpose was to acknowledge and reveal the fears and anxieties as well as joys and pleasures of being human in these times. In addition, as Bakhtin (1984) has argued, the purpose of play/games was to draw players out of the bounds of everyday life, liberating them from the usual laws and regulations. Through the opening up of emotions, games serve to deprogramme the regulated, inhibited self. Such processes also served to create affective attachments between activists that contributed to the building of solidarity, what Jeffrey Juris (2008) terms ‘affective solidarity’. CIRCA believed that, in addition to the streets, the emotional life of activists was a site of struggle. CIRCA was an attempt to change the way activists felt as well as the way they struggled. Innovative forms of creative street action – materialized as various clown ‘operations’ – were understood as being crucial for building and inspiring movements. CIRCA’s aim was to bring clowning back to the street, to reclaim its disobedience and give it back the social function it once had: its ability to disrupt, critique and heal – adding disorder to the world in order to expose its lies and speak the truth. 215
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The clown soldiers that made up CIRCA attempted to embody life’s contradictions, they were both fearsome and innocent, entertainers and dissenters, healers and laughing stocks. Clowning, like carnival, attempted to suspend and mock everyday law and order (Routledge 2005). This form of emotional politics played out in both the interior life of the clowns and in that of other activists. At times it also seemed to affect some of the authorities. Instead of battling the police and security at the G8 meeting, CIRCA was concerned with undermining and ridiculing the intimidation and provocation of security forces at demonstrations. For example, by blowing kisses to riot cops behind their shields; or by hogging the lenses of police cameras; and following the evidence-gathering teams around, mocking them and preventing them from conducting their surveillance. During the Make Poverty History march in Edinburgh, a large group of black bloc activists were surrounded and detained by police. CIRCA was mobilized to provide solidarity, encircling the cops who were encircling the black bloc. CIRCA’s presence contributed in some small way to the police finally releasing them. Various protesters at the G8 protests later commented that the presence of CIRCA had helped diffuse tense situations at certain times. Moreover, CIRCA clowning attempted to access the person behind the police uniform. During CIRCA operations, police officers were witnessed smiling and laughing in interaction with rebel clowns, and even mimicking the clown salute. This entailed the right thumb of the right hand being held to the nose, with the hand vertical, palm facing to the left, and the fingers wiggling. It was used when clowns met each other, and whenever clownbatants encountered authority figures such as the police (Routledge 2005). CIRCA actions are open-ended in that, within the loose structure of any clown ‘operation’, there is space for spontaneity as well as adaptation and response to emerging events. Indeed, CIRCA actions contained an element of dissimulation, or the unexpected, what Sun Tzu, author of The Art of War, termed ‘being unknowable as the dark’. By this he is referring to the crucial attributes of fluidity and adaptation – the interchange of surprise unorthodox movements and orthodox direct confrontation, mixing together into a whole. Fluidity and adaptation are primary characteristics of affinity groups. The personnel and workings of such groups are fluid and decentralized. There are no real leaders (although there are 216
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temporary organizers of particular actions), which both reflects the autonomist philosophy of such groups as well as posing deep problems for surveillance and control by the authorities. CIRCA tried to remain open to the spontaneity of clowning and of the event, so as not to become too rigid in their action and play (Routledge 2005). CIRCA tactical performances were also clearly transparent: CIRCA was plainly not a real army, but rather people who were presenting themselves as one, albeit a subverted, deconstructed deviant clown army. It was an obvious performance, and in particular one that alienated the familiar world of militarization and foreign wars, and in so doing encouraged the viewer of the spectacle to step back and look critically at the taken-for-granted world. For example, the CIRCA Operation HA.HA.HAA (Helping Authorities House Arrest Half-witted Authoritarian Androids) was deployed to invert the logic and expectations of the 6 July demonstrations against the G8. Instead of replicating the choreography of recent protests against neoliberal globalization, such as activists trying to climb the fences and disrupt the meeting, and engaging in violent confrontation with security forces, CIRCA wanted to deploy rebel clowns to keep the world’s most dangerous ‘errorists’ (the G8 politicians) under house arrest in perpetuity, by helping the police to build the fences around their meeting place at the Gleneagles hotel higher, and never letting them out. Through such open-ended theatrical spectacles, in which public participation was encouraged, CIRCA attempted to fleetingly bring into being new worlds and possibilities, subverting the normative function of space through what Uitermark (2004) terms ‘carnivalesque hacking’. This ‘deprogramming of space’ implies an intentional disruption and disorientation of consensus reality: in this case the established choreography of protest at global days of action whereby protesters attempt to disrupt the meetings (of the G8 in this case) through scaling fences, and the police are trained to aggressively stop them from doing so. Rebel clown logic – an associative logic, based on visual signs – sought to invert or subvert hegemonic logic and the taken-for-granted world. Clown logic used army uniforms to associate itself with a culture of permanent war, and through that to the connections to neoliberalism, wars for oil and the War on Terror. Indeed, CIRCA directly addressed the dominant spectacle of the War on Terror, a war that nurtures fantasies of fear, and where the 217
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desire for security is cloaked in the reality of war. This spectacle pretends to be real via distraction (‘there are weapons of mass destruction in Iraq’) and substitution (permanent war will secure peace). In contrast, CIRCA presented an ethical spectacle, the war on error, through which fears were acknowledged and then deconstructed. The patent artificiality of the war on error made the message more effective. It caused people to laugh (thereby dispelling fear of ‘security’ at demonstrations); it highlighted the falsity of supposed reality (that the G8 leaders really will solve the problems associated with neoliberalism and war); and it let the audience in on the production by dressing up as rebel clowns. Moreover, CIRCA also tapped into a popular desire to rebel, and drew upon a powerful emotional repertoire. CIRCA also attempted to enact an emotional politics that played out in both the interior life of the clowns and in that of other activists – and, at times, among the public and the authorities. CIRCA’s ‘tactics’ recognized the vulnerability of activists as well as people’s fear and concerns during protest events, and in the climate of tension constructed through the War on Terror. Part of CIRCA’s strategy was also to transform fear through laughter, play and ridicule. As Bakhtin (quoted in Lane Bruner 2005: 151) notes, ‘laughter purifies from dogmatism; it liberates from fear and intimidation’. Recent informal research conducted on police responses to the G8 protests in Scotland determined that CIRCA displaced police expectations of activist behaviour at protests, made the police more open to protesters, and encouraged the police to try to avoid arresting protesters and communicate more fully with activists (personal communication, Glasgow, 2007).
Conclusion: Ethical Spectacles and Full Spectrum Resistance Through its intervention into sites of political meaning CIRCA engaged in a particular form of cultural activism that sought to utilize various types of tactical performance in order to raise public awareness about specific issues and practices (the G8 meeting, the War on Terror); challenge popular assumptions about such practices; and open up a dialogue concerning them. CIRCA embodied Duncombe’s notion of a ‘dreampolitiks’: through its practice of ethical spectacles it provided an example of a 218
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different kind of politics, one that was prefigurative in character in that the political ends desired (ones that were participatory, collaborative, non-violent and playful) were embodied in the means used. Moreover, the texture of the experience of activism – the emotions generated and felt – and the autonomy of the action mattered as much as the political outcomes of particular actions. In other words it was the process of the political practice that was insurrectionary (see also Chatterton, this volume). In addition, the involvement of others (including the public) in play opened up a space for people to explore what activism might mean for them, beyond the traditional and, at times, rather passive process of political engagement such as the demonstration and rally. Such political practice opens up important questions for the practice of resistance against neoliberalism. As humanity enters the second decade of the twenty-first century, we are confronted by the perfect storm of global financial and environmental crises. Rather than this heralding the demise of neoliberal globalization in its various predatory forms (see Birch and Mykhnenko; Jessop, this volume), we are likely to see a reconstituted ‘greened’ neoliberal agenda that will become a key element in the management of the global economy, at the level of decision making, political legitimation, and the creation of new processes of capital accumulation. Progressive challenges to the legitimation of this system are crucial in whatever forms people choose to make them. While important forms of resistance associated with traditional terrains such as labour struggles, revolutionary movements or peasant movements continue to take place at sites of production (in the form of strikes and picket lines, for example), destruction (as in the form of blockades), and decision (as in direct actions and global days of action), why should ‘the Left’ (however constituted or imagined) assume that such approaches accompanied by intellectual arguments alone will transform how people perceive reality? As Rist (quoted in Kwan 2007: 30) notes, ‘messages that are conveyed emotionally and sensually can break up more prejudices and habitual behaviour patterns . . . than intellectual treatises’. Indeed, the experiences of CIRCA and other forms of cultural activism provide potent additions to the repertoire of resistance tactics, particularly in their attention to the emotional register of activists’ experiences. Challenges to neoliberalism require full-spectrum resistance across all sites of intervention, if we are to dream reality into being. 219
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Notes 1 This idea is drawn from the Smartmeme Collective (who discuss ‘points of decision’), quoted in Verson (2007). 2 Of course, in practice, these sites of intervention frequently overlap.
References Anderson, K. and Smith, S. J. (2001) ‘Editorial: Emotional Geographies’, Transactions of the Institute of British Geographers, Vol. 26, pp. 7–10. Bakhtin, M. (1984) Rabelais and His World, Indiana University Press, Indianapolis IN. Bennett, K. (2004) ‘Emotionally Intelligent Research’, Area, Vol. 36, No. 4, pp. 414–22. Bey, H. (1991) T.A.Z., Autonomedia, Brooklyn NY. Boal, A. (1979) Theatre of the Oppressed, Pluto Press, London. —— (1992) Games for Actors and Non-Actors, Routledge, London. Bosco, F. (2007) ‘Emotions that Build Networks: Geographies of Human Rights Movements in Argentina and Beyond’, Tijdschrift voor Economische en Sociale Geografie, Vol. 98, No. 5, pp. 545–63. Debord, G. (1983) Society of the Spectacle, Black and Red, Detroit MI. Duncombe, S. (2007) Dream: Reimagining Progressive Politics in an Age of Fantasy, The New Press, London. Giroux, H. (2007) ‘Beyond the Spectacle of Terrorism’, Situations, Vol. 2, No. 1, pp. 17–52. Harvey, D. (2003) The New Imperialism, Oxford University Press, Oxford. Juris, J. (2008) ‘Performing Politics: Image, Embodiment, and Affective Solidarity during Anti-Corporate Globalization Protests’, Ethnography, Vol. 9, No. 1, pp. 61–97. Knabb, K. (ed.) (1989) Situationist International Anthology, Bureau of Public Secrets, Berkeley CA. Kwan, M-P. (2007) ‘Affecting Geospatial technologies: Towards a Feminist Politics of Emotion’, The Professional Geographer, Vol. 59, No. 1, pp. 22–34. Lane Bruner, M. (2005) ‘Carnivalesque Protest and the Humorless State’, Text and Performance Quarterly, Vol. 25, No. 2, pp. 136–55. Olesen, T. (2005) International Zapatismo, Zed Books, London. Pulido, L. (2003) ‘The Interior Life of Politics’, Ethics, Place and Environment, Vol. 6, No. 1, pp. 46–52. Routledge, P. (2005) ‘Reflections on the G8: an Interview with General Unrest of the Clandestine Insurgent Rebel Clown Army (CIRCA)’, ACME: An International E-Journal for Critical Geography, Vol. 3, No. 2, pp. 112–20. Starr. A. (2005) Global Revolt, Zed Books, London.
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The Vacuum Cleaner (2007) ‘How to Prank, Play and Subvert the System’ in Trapese Collective (ed.) Do It Yourself: a Handbook for Changing the World, Pluto Press, London, pp. 187–200. Thien, D. (2005) ‘After or Beyond Feeling? A Consideration of Affect and Emotion in Geography’, Area, Vol. 37, No. 4, pp. 450–6. Uitermark, J. (2004) ‘Looking Forward by Looking Back: May Day Protests in London and the Strategic Significance of the Urban’, Antipode, Vol. 36, No. 4, pp. 706–27. Verson, J. (2007) ‘Why We Need Cultural Activism’ in Trapese Collective (ed.) Do It Yourself: a Handbook for Changing the World, Pluto Press, London, pp. 171–86.
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12 Transnational Companies and Transnational Civil Society LEONITH HINOJOSA AND ANTHONY BEBBINGTON
At the time of writing (June 2009) the Peruvian government was in the midst of its worst political crisis since it was elected in 2006. The cause was a highly conflictive situation in Peru’s Amazonia, where indigenous peoples were protesting against the government’s decision to pass legislation that would facilitate hydrocarbon exploration, mining, commercial farming and logging in their territories. This event, though remarkable for its scale and the authoritarian response it induced from government,1 was hardly an isolated incident. As The Economist (11 June 2009) noted, ‘Peru has seen many conflicts between foreign mining and oil companies and local people, who complain of environmental damage and/or a lack of tangible benefits from these investments.’ Nor is it only the centre-right Peruvian government that has systematically promoted the expansion of extractive industries. In March 2009 the ostensibly post-neoliberal government of Ecuador, already lauding the benefits that ‘responsible’ foreign mining investment could bring to the country, withdrew the legal status of the country’s most vocal environmental NGO.2 The Bolivian government, claiming both post-neoliberal and indigenous credentials, has likewise promoted foreign investment in extractive industries and appears to brook relatively little dissent on the matter from indigenous organizations. This contention reflects the existence of quite different views on the role that extractive industries might play in national development. While foreign and national governments, and private investors alike, see mining as a source of great potential profit and revenue, many communities and civil society groups have opposed excessive expansion because profit has come at the detriment of host localities.
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These groups express concern about environmental damage (resource depletion, contamination, species extinction, landscape transformation) and the social and economic costs that can accompany extraction (livelihood decline, forced labour, the introduction and dissemination of new diseases, enclave economies). This contention is a direct consequence of neoliberal reforms (see van Waeyenberge, this volume) that, since the early 1990s, have created substantially more favourable environments for foreign investment in extractive industries. However, one effect of this contention – as well as of international pressure and the lessons of history – is that these ‘new’ private, mostly multinational, investors are under pressure to establish greater linkages with the local economy and society, demonstrate greater environmental responsibility, and respond to the demands of affected populations. In this process, NGOs, civil society networks and other non-community organizations have played a significant role in shaping the emergence and evolution of communities’ reactions as well as in influencing the responses of multinational companies and governments, as Chatterton and Routledge have explored in earlier chapters in relation to the Global North. This chapter aims to show the basis on which conflicts provoked by the expansion of the mining industry arise and the role that international and domestic actors have played in deepening, mitigating or resolving these conflicts and – as a result – in influencing the trajectory of mining expansion in particular territories. We argue that in order to understand how conflicts emerge and evolve, it is necessary to analyse two phenomena in particular: mining expansion as part of a neoliberal development strategy, which has territorial implications, and the transnational nature of the role played by civil society actors in challenging that strategy. While transnational relationships have often allowed greater leverage, they have also sometimes been asymmetric and on occasion have provoked mutual criticism, tension and rupture within coalitions, as well as conflicts with actors from different spheres. We illustrate our argument with vignettes from our research in Peru, Bolivia and Ecuador (for more detail see Bebbington et al. 2007a, 2008; Bebbington 2007; and Hinojosa 2007).3 Finally, we suggest that the dynamics of these conflicts have changed since the election of ostensibly post-neoliberal governments in Ecuador and Bolivia, and will change again in the face of the global financial crisis. 223
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Neoliberal Policies and Mining as a State Financial Strategy There is consensus, across diverse theoretical and ideological positions, that the 1990s saw neoliberal policies spread throughout the Andean countries (cf. Gwynne and Kay 2004; World Bank 2005). While this has produced macroeconomic stability and some growth, this has primarily favoured urban areas. These policies have also produced growing rural unrest, mainly because much of the economic growth has been based on the extraction and export of minerals and hydrocarbons (primarily, oil and gas) found precisely in some of the poorest areas of the Andean countryside (Keenan et al. 2002). Indeed, despite the period of optimism experienced since 1990 when the economies of Peru, Ecuador and Bolivia grew respectively on average by 4.7, 4.2 and 3.1 per cent per year, poverty – and in particular, rural poverty – shows no significant decline (Hall and Patrinos 2005). As Gwynne and Kay (2004) suggest, neither investment of such importance – foreign direct investment (FDI ) in Andean countries increased from US$4,333 to US$14,714 million between 2000 and 2007 (Economic Commission for Latin America and the Caribbean, quoted in Lara and Silva 2009) – nor its effect on growth would have been possible without a specific set of policies aiming to incorporate national economies into growing global markets. In the case of the mining sector, these policies aimed to attract and facilitate the entrance of large companies with fresh capital and modern technology for exploration and exploitation. The aim was for these companies to modernize the sector and provide governments with the revenue so eagerly needed for public investment – a position strongly argued by the Peruvian President (García 2008). In Peru, successive governments since the 1990s have guaranteed full advantages to firms willing to invest in the country – they received the same treatment as national investors, all barriers to repatriation of profits were removed, fiscal provisions requiring that they pay no more than regular company tax and long-term stability in taxation rates were guaranteed, and imports of inputs and technology were facilitated (Bury 2007). In Bolivia, the ‘new economic policy’ implemented since 1985 likewise produced an environment favourable to foreign investors and in Ecuador similar policies were established, although at a slower pace with fewer enforcement mechanisms and a clear emphasis on the hydrocarbons 224
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sector (Anderson 2004). These domestic policies were complemented with external accords. For instance, the Peruvian government signed and ratified international agreements on private investments such as those with the Multilateral Investment Guarantee Agency (of the World Bank Group) and the US Overseas Private Investment Corporation, plus 28 other bilateral agreements that guaranteed favourable conditions to private investments operating within Peruvian territory (cited in Bury 2007). As a result, FDI in the extractive industries increased. In Peru, investment increased five-fold between 1990 and 2000, with an additional 12 million hectares being given in concession to mining companies and producing an increase of US$3.1 billion in mineral exports over the period 1990–2003 (Bebbington et al. 2007a). In Ecuador, where the emphasis was on the oil sector, FDI grew at about 2.5 per cent per year. By contrast, mining projects were unable to shift from exploration to full-fledged mineral production, accounting for only 0.2 per cent of the total value of the country’s exports (Anderson 2004). In Bolivia mining investments were important in the late 1980s and in the 1990s investments in the hydrocarbons sector were dominant. In order to complete the neoliberal package, investment policies were accompanied by sets of institutional reforms that modified land tenure laws and legal mechanisms for changing the preferred uses of land, which would affect the regulation that applies to the mining sector in each one of the countries. These reforms were meant to ease the establishment and further expansion of private capital and property rights in areas of the countryside with rich mineral deposits. However, the implementation of these policy changes took longer than that of the investment promotion policies. The superposition of formal laws and contradictions between the formal legal system and customary norms and practices governing the access to and control of land in the Andes (Bebbington and Hinojosa 2007) have delayed the process of privatization and land reallocation, but not stopped it. Notwithstanding their inconsistencies, the institutional reforms have allowed national and transnational companies to occupy and assume a degree of control over the mineral-rich rural territories (Bridge 2004; Bury 2007) – areas which would otherwise remain under agricultural use and community governance.
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Neoliberal Mining Expansion, Social Conflict and Civil Society Organizations The new mineral and hydrocarbon concessions in Peru, Bolivia, and increasingly Ecuador cover immense areas for potential exploitation. These spatial consequences of globalizing neoliberal capitalism have threatened (or been perceived to threaten) the viability of small and medium farm agriculture as well as urban and rural water supply. Furthermore, given that mining investments occur in areas currently occupied by peasants and small farmers, this mineral expansion challenges the ability of rural people to control the patterns of change in their lived environment. In the process they have also deepened existing ruptures in society across ethnicities, classes and regions. At the heart of many of the ensuing conflicts lies a confrontation between the economic dynamics of deregulated neoliberal capitalism and the political dynamics of rural populations (and certain parts of the local/regional and national civil society) determined to insist on a right to be heard and to dispute central government’s and private capital’s decisions and actions regarding the use of rural land. Consequently, the surge of conflict in areas affected by mining and hydrocarbons reflects the pre-eminence given to export-oriented resource extraction over the last two decades of economic neoliberalization, and the efforts of civil society groups and social movements to exercise some form of control over these activities and their impacts. This conflict is as much a struggle over whose rights and voices count in political-economic decision making as it is an argument over different pathways of economic development. For some it is also a conflict over models of ownership – and, indeed, within mining protest movements, there are many actors calling for a return to pre-reform state-owned extractive industry and a rejection of the multinational dominance of the sector that is currently evident. Two phenomena are noteworthy in these struggles: the spread of conflict to urban and regional spaces, and the particular roles played by social movement organizations (SMOs). Indeed, in many mining conflicts urban and regional ‘defence fronts’ play an important role. In some cases the concerns of these urban actors are issue-based, above all when populations become concerned about the implications of the mine expansion for the urban environment – in 226
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particular water quality and quantity, and air and noise contamination. In other cases, the involvement of urban groups at a regional level has had a more ‘ideological’ and rights-based component. Here, to paraphrase many informants, people criticize ‘the unfair terms on which multinational companies derive profits from national resources’. The more general point is that within protest movements one encounters both urban and rural voices and concerns – and that while these are partially aligned they are not always completely aligned. The strength that comes from numbers can therefore be offset by weaknesses that come from divergence of interests (Bebbington et al. 2008a).
Social movement organization dynamics and effects Territorially based protest has become increasingly organized in and through a range of SMOs working alongside rural populations. Some of these SMOs have emerged specifically in response to extractive industry; others already existed around interests (such as indigenous rights to territory) that have been threatened by extraction. Examples of such SMOs are CONACAMI (the National Confederation of Mine-affected Communities, Peru), CONAIE (the Ecuadorian Confederation of Indigenous Nations) and CONAMAQ (the Bolivian National Council of Indigenous Organizations from the Qullasuyu).4 These SMOs have been assisted by local and national NGOs (for instance, CIPCA and GRUFIDES in Peru, Acción Ecológica in Ecuador, CISEP, CEPA and FOBOMADE in Bolivia). During the conflicts these NGOs have helped to connect community organizations with international organizations to obtain financial support and influence negotiations through debate, lobby and direct pressure. International NGOs and agencies and networks (such as Friends of the Earth, Oxfam International, the Mining and Communities network, together with their respective national affiliates) have also sought to connect with local organizations to offer financial and logistic support as well as to develop actions in the international arena, where they lobby international governmental organizations and national governments, and promote national and international campaigns advocating for environmental and social justice. As the cases described in this chapter illustrate, the evolution and outcomes of conflicts between communities and large mining companies must be understood in the light of this involvement of non227
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community actors – often referred to, perhaps unfairly, as ‘outsiders’. Although these non-community actors have substantially different aims in certain respects, they also share visions, values and principles that involve a commitment to some kind of sustainable and inclusive pattern of development. Nevertheless, a recurrent theme in mining conflicts is that the involvement of these organizations is always controversial. Business, media, government, and other broadly pro-mining actors criticize them and question their legitimacy and right to become involved in what these actors seek to cast as national or even local debates. Much of the debate about their role hinges around whether they are viewed as inducing and intensifying these conflicts or as mitigating and resolving them. Whatever the case, ‘outsiders’ have played an important role in drawing attention to the information and power asymmetries between companies and local communities, and between states and citizens. At the same time they have suggested – more or less explicitly depending on the case – that the rapid and deepening roll-out of neoliberalism depends on the existence of such asymmetries. Addressing the imbalance, these actors advocate for local communities both at national and international levels, generate new information and analysis, foster public and policy debate and provide direct support to local organizations (though usually on a very modest scale). This role has generally been recognized as valid and useful by communities, particularly when it has produced tangible outcomes. Nonetheless, the relationships between the local communities and NGOs have also involved a fair share of disagreements with regard to the degree of representation that the NGOs should assume on behalf of communities, an issue also raised by both Chatterton and Routledge in earlier chapters. These disagreements have had (generally negative) implications for the strength of social movements around mining issues (Bebbington 2007). With these thoughts in mind we now discuss four separate mining conflicts in the Andes.
Mining and Socio-environmental Conflicts in the Andes Yanacocha (Peru) Minera Yanacocha (MYSA) – a joint venture between the USAbased Newmont Mining Corporation with 51.35 per cent, the Peruvian Compañía de Minas Buenaventura with 43.65 per cent 228
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and the International Finance Corporation from the World Bank Group with 5 per cent – is the biggest open-pit gold mine in Latin America and the fifth largest in the world. Given its high level of production, the richness and purity of the mineral deposit and low production costs, Yanacocha is an especially profitable venture (Bury 2007; Puplava and King 2004). The mine extends across 10,000 hectares in the Cajamarca region (Northern Peruvian Andes), an area larger than the regional capital city. Given that the land market is quite underdeveloped in the area, 1,386 square kilometres of land were acquired from peasant households through mechanisms that later were denounced as unfair, coercive or dishonest – in terms either of the prices agreed or the manipulation of land titling processes and the exercise of pressure over individuals to sell their land. Although such machinations had not led to a large-scale conflict – at least not in the early years of the mine – the effects of MYSA in the Cajamarca region have been controversial. The mine brought significant resources that have had a positive effect on the regional economy. Investment reached around US$860 million, whilst the expenditure on goods and services between 1992 and 2000 was approximately $1.7 billion. Though only 7 per cent of this spending occurred in the Cajamarca region itself, $153.6 million was spent on creating jobs and $11 million on various social programmes. Nonetheless, such an injection of fresh capital has also led to criticisms that an ‘enclave economy’ has been reproduced, with negative effects on the dynamics of domestic markets, and that this injection of resources has caused social dislocation (cf. Roca Servat 2009; Gorritti 2004). MYSA has also generated significant environmental impacts, transforming landscapes, changing vegetation patterns and disturbing water courses. Although initially conflicts between local population and MYSA occurred mostly in the communities directly affected by land purchases, urban discontent was also growing. In 2000 in the roadside village of Choropampa, a mercury spillage from a MYSA contractor’s truck generated severe health effects and led to increased alarm about urban water supply. When in 2004 the company attempted to expand its operations into Cerro Quillish – the mountain that is deemed to contain the water reserves for domestic use in the region – the conflict became thoroughly urbanized (Bebbington et al. 2008). 229
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The process of social mobilization and protest thus gained strength, incorporating a number of new actors from rural and urban areas. Three local NGOs (ADEA, ECOVIDA and GRUFIDES) became more visible, in response to MYSA’s negative impact and its dismissive attitude towards the affected communities. Their work initially emphasized the dissemination of information, environmental education, and awareness raising about the mine’s activities among the local population. Contacts were also steadily developed with international organizations such as Oxfam America and Global Greengrants Fund in order to seek financial support. Over this same period, national and regional organizations such as CONACAMI and the Federation of Women Peasant Vigilance Organizations of Northern Peru were also actively advocating for community rights, mobilizing rural people, and connecting to international organizations such as Project Underground to get funding and additional support. The trajectory of these organizations, however, has involved increased tensions due to internal disputes and controversial agreements between some of their leaders and MYSA. Indeed, by the early 2000s, efforts to create a regional basis of CONACAMI had failed in Cajamarca. Nevertheless, in spite of differences among community organizations and local NGOs, the movement that they produced has influenced the relationships between MYSA and the local population, as well as the relationship between mining, livelihoods and development. Furthermore, at an international level, where the relationships between international NGOs and local organizations have also been characterized by tension and ruptures, YanacochaCajamarca has become an emblematic case used by global civil society organizations to show how campaigning, lobbying and advocacy strategies can contribute to the furtherance of environmental justice.
Majaz (Rio Blanco) (Peru) The Rio Blanco project is a concession acquired in 2001 by Monterrico Metals plc. – a London-registered company that since 2007 has been owned primarily by Chinese capital – to exploit copper and molybdenum deposits. Located in the high Andes at the east of the Piura region (northern Peru, bordering Ecuador) the project occupies land that belongs to two peasant communities who use it for extensive grazing and as a ‘reserve’ for community 230
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purposes. Via its wholly-owned Peruvian subsidiary Minera Majaz SA., Monterrico began exploration in 2002, following government approval of the company’s environmental evaluation. The evaluation process was non-transparent and has subsequently been criticized by local and national organizations as well as by the Peruvian Ombudsman. The company still needs to secure approval of its environmental impact study in order to convert the exploration project into a fully fledged open-pit mine. Reaction and mobilization against Minera Majaz began in the early phases of the exploration process. This protest revolved around the legality of the governmental resolutions that allowed the company to occupy community land without prior permission from the affected villagers and, subsequently, challenged the validity of the environmental evaluation presented by the company in order to begin exploration. Throughout the protest, the two most affected communities were joined by federations of peasant organizations and local municipalities as well as by the communities, municipalities and activists from two neighbouring provinces of Cajamarca, which, due to their location downstream, could be potentially affected by the project. Much of the mobilization was non-violent, yet in both 2004 and 2005 a series of confrontations with the local police led to the deaths of two peasants as well as injuries to several persons. These incidents induced the regional government of Piura to create a space for negotiation. The initiative failed, however, as local activists and communities accused the coordinators of assuming a pro-mining position. An earlier mission composed of the provincial Catholic bishop and representatives from Oxfam America and CONACAMI also failed. Indeed members of the mission wondered out loud whether it had been deliberately sabotaged – the main indicator of this being that the air-force helicopter transporting them deposited them at a site far from the protest, and then the police prevented them from walking to the location of the protest. These incidents were followed by a mass-media ‘war’ which sought to generate public distrust in the coalition of NGO, church and peasant organizations, suggesting that they harboured ‘terrorist’ sympathies. During 2007, local, regional, national and international activists came together in several initiatives to put more pressure on the company. In one case, the Peru Support Group of the UK produced a 231
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report on the case and then, in conjunction with a UK parliamentary body, used it to foster public debate and media coverage in Peru and the UK (Bebbington et al. 2007). In another case, Peruvian organizations drew on international support to organize and sponsor a citizen referendum on the mine’s future. The result was a firm rejection of the mine by over 90 per cent of votes. While both the government and mining sector dismissed the referendum as illegal, it had revealed local concerns and fostered public debate. That said, the government still insists that mining is fundamental for Piura’s and Peru’s overall development, whilst communities and other civil society actors continue to emphasize the threat posed by mining to the natural environment and the sources of their livelihoods. They criticize the bias of a state that, they argue, protects foreign investments above its own citizens’ rights (Burneo 2007). Meanwhile, in 2009, UK lawyers opened a legal case against the company in the UK courts.
Cotacachi-Intag (Ecuador) Canton Cotacachi is located in the north-west Ecuadorian Andes, some two hours drive to the north of Quito, and extends across both high altitude grassland and humid tropical valleys. It includes the Intag sector where copper reserves were found in the 1980s by an exploratory mission funded jointly by the Belgian and Ecuadorian governments. In the 1990s, after a larger-scale phase of exploration financed by the Japanese International Cooperation Agency, the project passed to Bishi Metals (a subsidiary company of Mitsubishi), subsequently bought by Roque Bustamante which, in turn, sold the concession to Ascendant Copper Corporation (a Canadian company based in Colorado, USA). Then Ascendant Copper transferred the property to its subsidiary Ascendant Ecuador in 2005 (Bebbington et al. 2008). More than 20 years after the start of the exploration phase, and despite the fact that significant mineral reserves were found at the time of a global, emergent market-fuelled boom in copper production, the project at Intag has failed to progress towards serious geological exploration. This apparent halt in the expansion of mining capital can be explained by the following four factors. First, from the very beginning there has been strong – and at times violent – opposition to the mine expansion from the local population, which was assisted by the local Catholic Church and national (Acción Ecológica – AE) and local (DECOIN) environ232
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mental NGOs. Indeed, DECOIN itself was created with the participation of the campesino colonos as well as urban activists in response to the initial activity of Bishi Metals. Second, this local protest mobilization has been combined with an active programme of environmental education directed especially towards local youth and women. The programme also facilitates visits to areas elsewhere already affected by open-cast mining. AE, DECOIN, certain local activists and international networks played an important role in this process. Third, given the existing connection between AE and international networks of NGOs (including Friends of the Earth International, Rainforest Action Network and Global Greengrants Fund) and between Intag residents and foreign nationals, the Intag case quickly acquired visibility and international support. Fourth, the case shows the importance of the position assumed by the local government in determining the trajectory of these conflicts and the expansion of mining capital. Cotacachi’s indigenous mayor, Auki Tituaña, himself nationally and internationally visible for his commitment to local democracy and inter-cultural relationships, has assumed an increasingly environmentalist and anti-mining discourse and provided support to local activists. More significantly, the municipality and supportive local organizations have dedicated time and effort to elaborating an alternative strategy for local development based on more sustainable economic sectors such as ecotourism, organic coffee, handicraft production and watershed protection.
Inti Raymi (Oruro, Bolivia) The department of Oruro is located in Bolivia’s high plateau and characterized by remarkably low indicators of social development. Yet the department hosts the country’s richest open-pit gold mine, Inti Raymi (IR), owned primarily by Newmont Mining Corporation. In 2004, having exhausted the gold deposits, IR announced the closure of its Kori Kollo mine (the other site, Kori Chaca, will continue to operate). This has caused the rural communities in the surrounding areas to begin voicing their concerns about the environmental damage caused by the mine over its 20-year-long operation. Local communities demanded that the government intervene and carry out an environmental audit in order to ensure some compensation. The demand was accepted by the government in 2004; however, at the time of writing this audit is yet to be completed. The company argues that its operation was developed within an 233
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existing framework for environmental protection, complying with the mandatory environmental standards and taking steps towards the reduction of the environmental damage potentially caused. By contrast, the affected communities claim that there are signs of substantial environmental degradation. In this case, the confrontation between the company and local communities has continued unabated. In their struggle, the conflicting parties have not acted alone. Inti Raymi relies on a group of external advisers (lawyers, consulting companies and experts) and its External Community Relations team, which is in charge of easing the tensions between the company, the local communities and the state. In turn, the local communities receive assistance from the NGO sector, which has supported the communities by providing them with information, advice and financial help. These NGOs and local activists also engaged in direct lobbying and advocacy with the state officials in La Paz (Bolivia’s capital city).
Conclusion Transnational civil society and effective protest Mining expansion and the conflicts that it has engendered in the Andes have been characterized by a significant presence of international actors – private, public and non-governmental (Bebbington and Hinojosa 2007). The mining industry has become increasingly dominated by multinational corporations, entering into joint-venture, subsidiary, and sub-contractual commercial arrangements with national companies and, through these partnerships, inserting themselves into some of the most remote localities in the Andes. Likewise, civil society action around mining has involved collaborations among international, national and local groups (often on the basis of prior long-standing relationships). Given that pro-mining interests have portrayed external NGOs as one of the most important factors fuelling the conflict, these NGOs are continually under close scrutiny and criticism from mining companies and national governments. In the majority of cases such NGOs have not been recognized as ‘genuine’ representatives of local communities and people’s interests, not to mention regional or national interests. They are criticized for being ‘biased’ towards environmentalism and against economic development. The local 234
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NGOs are also accused of adhering to a foreign anti-globalization agenda and lacking the knowledge about what both the local communities and countries really need (which, according to government and the sector, is FDI and growth: Garcia 2008). As such, NGOs and networks of civil society organizations have been labelled as a threat to the supposedly well-intentioned efforts of national governments aimed at promoting economic development by attracting foreign investment; particularly in sectors such as mining where the Andean countries have, for reasons of natural resources, an absolute or comparative advantage. While we must not generalize too much about the ways in which NGOs participate in conflicts between local communities and big multinationals, certain aspects of the internal dynamics of social mobilization help explain the uneven effect of protest against mining across our cases. Of particular importance are the following: (1) the extent to which NGOs were able to develop close collaboration with community organizations; (2) the extent to which such collaborations have in turn generated alliances with local governments; (3) the strength of the alliance between the local NGOs and international actors; and (4) the role played by the central government. At the same time, the strength and cohesiveness of local capacities (of individuals and community organizations) to organize and mobilize – and to propose alternatives – has been the key to a successful mobilization against the expansion of mining. The two Peruvian cases have shown that the intensive involvement of local and national NGOs and the deployment of international support have created awareness of, and drawn media attention to, the conflict between mining expansion and rural citizenship. In Ecuador and Bolivia, the conflicts have been kept at a ‘more local level’ with the central governments playing a less clearly defined (though still a pro-mining) role; as a result, the mining companies have had to deal directly with the local communities and their representatives. In the Ecuadorian case, the result has (so far) been that the mining industry has been unable to develop the mine in Cotacachi. In the Bolivian case, the mining corporation has found a way to continue its expansion, yet, at the same time, it has had to create compensatory mechanisms to mitigate the conflict. Though civil society actors have at times pursued different (even selfinterested) goals and strategies, the NGOs that collaborated with local communities have indeed played an important role in reducing 235
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some of the relational asymmetries (especially regarding knowledge and information) which give mining companies and central governments much more power vis-à-vis local organizations and communities. NGOs have also played an important role in giving voice to local community concerns in those spaces where for practical reasons it was otherwise quite unlikely that the communities themselves could have assumed a direct presence. Nonetheless, when the NGOs have assumed ‘excessive’ leadership, the cohesion and legitimacy of such a mobilization have weakened. In these cases at least, a ‘successful’ transnational network has not merely been the one with local, national and international actors, but rather the one which was able to elaborate a well-articulated strategy, cutting across geographical scale while giving prominence – particularly in the public sphere – to community organizations.
Transnational civil society and post-neoliberalism What does the current moment – defined by an international financial and economic crisis and the presence of self-styled postneoliberal governments in Bolivia and Ecuador – imply for such transnational NGO strategies around mining? We consider this issue along two dimensions: the impact of the credit crunch on mining investment; and the posture of Andean governments vis-à-vis protest. First, the crisis has led to a slowing of investment across all of the world’s major mining companies, as they have responded to a fall in price for most minerals (except for gold) as well as to capital scarcity. This slowdown in activity should provide transnational networks with time to reflect more strategically on the broader objectives of the movement, and perhaps to institute a shift from reactive to more proactive positioning. However, the economic slowdown has not been the only consequence of the crisis. Non-traditional companies and capital, in particular from China, have moved into the Andean region (for instance, Chinalco purchased 20 per cent of the mining giant Xstrata in Peru). This change in the composition of the sector presents a challenge for social movement organizations, to whom the institutional cultures of these new companies are unknown. A second consequence of the crisis might be that Andean governments, increasingly desperate for investment, will become increasingly intolerant of protest. Indeed, as noted in the introduction, 2009 has seen legal and violent repression of protest in Peru, legal repression in Ecuador, and discursive repression from all three governments, 236
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neoliberal and post-neoliberal alike. The implication is that even under ‘post-neoliberalism’ and in the presence of crisis, it will be largely ‘business as usual’ in the extractive sector. It will continue to generate a similar set of impacts in mineral-rich territories and hence will also continue to induce local protest and a mobilized opposition. However, for such mobilization to be effective in the new ‘postneoliberal’ context, both the strategies and broader alliances of civil society organizations will probably have to change. Crisis is an opportunity, but it is also a crisis.
Acknowledgements We are grateful for an ESRC Professorial Research Fellowship (RES 05127-0191) to Tony Bebbington which made much of this research and this chapter possible.
Notes 1 On 5 June 2009 soldiers opened fire on protesters. The number killed is disputed, ranging from less than one to several dozens of people. In response, protesters also killed policemen. 2 This was later reinstated, following an international outcry. 3 See also . 4 An imperfect translation for Consejo Nacional de Ayllus y Markas del Qullasuyu.
References Anderson, S. (2004) ‘The mineral industry of Ecuador’, in US Geological Survey Minerals Yearbook 2004, USGS, Washington DC. Bebbington, A. (ed.) (2007) Minería, movimientos sociales y respuestas campesinas: una ecología política de transformaciones territoriales, IEP and CEPES, Lima. Bebbington A. and Hinojosa, L. (2007) ‘Conclusiones: Minería, neoliberalización y re-territorialización del desarrollo rural’, in Bebbington, A. (ed.) Minería, movimientos sociales y respuestas campesinas: una ecología política de transformaciones territoriales, IEP and CEPES, Lima. Bebbington, A., Connarty, M., Coxshall, W., O’Shaughnessy, H. and Williams, M. (2007a) Mining and Development in Peru, with Special Reference to the Rio Blanco Project, Piura, Peru Support Group, London. Bebbington A., Hickey, S. and Mitlin, D. (2007b) Can NGOs Make a Difference? The Challenge of Development Alternatives, Zed Books, London. Bebbington, A., Humphreys Bebbington, D., Bury, J., Lingan, J., Muñoz, J. P. and Scurrah, M. (2008a) ‘Mining and Social Movements: Struggles
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over Livelihood and Rural Territorial Development in the Andes’, World Development, Vol. 36, No. 12, pp. 2888–905. Bebbington, A., Hinojosa, L., Bebbington, D. H., Burneo, M. L. and Warnaars, X. (2008b) ‘Contention and Ambiguity: Mining and the Possibilities of Development’, Development and Change, Vol. 39, No. 6, pp. 887–914. Bridge, G. (2004) ‘Mapping the Bonanza: Geographies of Mining Investment in an Era of Neoliberal Reform’, The Professional Geographer, Vol. 56, No. 3, pp. 406–21. Burneo, M. L. (2007) ‘Comunidades, Estado y minería: el proyecto Río Blanco y la consulta vecinal’, Pueblos, No. 29, pp. 13–15. Bury, J. (2004) ‘Livelihoods in Transition: Transnational Gold Mining Operations and Local Change in Cajamarca, Peru’, Geographic Journal, Vol. 170, No. 1, pp. 78–91. —— (2007) ‘Neoliberalismo, minería y cambios rurales en Cajamarca’, in Bebbington, A. (ed.) Minería, movimientos sociales y respuestas campesinas: una ecología política de transformaciones territoriales, IEP and CEPES, Lima. García A. (2008) ‘El perro del hortelano’, El Comercio, Lima, 28 October. Gwynne, R. and Kay, C. (eds) (2004) Latin America Transformed: Globalization and Modernity, second edition, Oxford University Press, New York NY. Hall, G. and Patrinos, H. A. (2005) Indigenous Peoples, Poverty and Human Development in Latin America: 1994–2004, World Bank, Washington DC. Hinojosa, L. (2007) ‘In the Name of the Environment: the Political Economy of Socio-Environmental Conflicts in Altiplano Mining Areas of Bolivia’, TCD Andes Working Paper, . Keenan K., de Echave, J. and Traynor, K. (2002) ‘Mining and Communities: Poverty Amidst Wealth’, PERI and CSE Conference Paper Series No. 3, University of Massachusetts, Amherst MA. Lara C. and Silva, C. (2009) ‘Los posibles impactos en inversiones y servicios del acuerdo de asociación entre la Unión Europea y la Comunidad Andina de Naciones’, unpublished report, Santiago de Chile. Puplava, J. and King, E. (2004) ‘Open the Checkbook – Buy the Ounces – a Fundamental and Technical Review’, Financial Sense, . Roca Servat, D. (2009) ‘The Realm of Private Governance: Mining Corporations and Local Communities in Peru’, conference paper, LASA2009, Rio de Janeiro. 11–14 June. The Economist (2009) ‘Blood in the Jungle’, 11 June. World Bank (2005) Equity and Development. World Development Report 2005, World Bank and Oxford University Press, Washington DC.
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13 Defeating Neoliberalism: a Marxist Internationalist Perspective and Programme JEAN SHAOUL
Numerous writers have drawn attention to the rise of neoliberalism, the particular forms it has taken in different countries, and its broader social, economic and political effects, all of which are evident in this book (see, for example, earlier chapters by Birch and Mykhnenko; Birch and Tickell; Jessop; Swain et al., this volume). Neoliberalism is associated with a range of economic and financial policies that started in the late 1970s and were aimed at rolling back the gains made by the working class in the advanced capitalist countries in the post-war period. These included the elimination of the Keynesian welfare state and the social safety net (see MacLeavy, this volume); the end of any commitment to full employment and of state subsidies for industry; flexible labour markets with the concomitant destruction of trade union and democratic rights in order to drive down wages and conditions; the privatization of state-owned enterprises; the outsourcing of the delivery of public services; the introduction wherever possible of user charges for public services; and the private financing of public infrastructure. In the so-called developing countries, aid and loans were made conditional upon the adoption of these and similar policies that became known as the ‘Washington Consensus’ (see van Waeyenberge, this volume). This wholesale break-up of the welfare state and the sale of stateowned enterprises and assets are part of an ongoing process whereby the social and public services pass into the private sector through buyouts, subcontracting, concessions, and sale and lease-back operations. Increasingly such goods and services are then integrated into the wider international economy as they are taken over by the transnational corporations. In other words, the social welfare functions of the nation state are being integrated into the world economy, but
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for the benefit of capital, not labour or the population at large. Neoliberalism, and the intellectual theories that justified the turn to private ownership and the free market, thus provided the ideology and mechanisms to accomplish an international market for goods and services that were either produced by national monopolies or not traded at all, and a new source of profit for capitalist enterprises. It was one of the mechanisms by which the world economy has become integrated on an unprecedented scale in a process now known as globalization. Neoliberalism is also associated with de-industrialization and the turn to financialization, the accumulation of capital based upon asset trading as opposed to production of goods and services (see Tyfield; Lohmann, this volume). Together, these policies have led to an unceasing assault on working people, their jobs and the social wage in both the advanced capitalist countries and less developed countries. They have given rise to explosive social tensions in the United States, Europe and around the world as evidenced by occupations, strikes and demonstrations as a result of increasing social polarization, especially evident in the current financial crisis. Such struggles reflect the growing hostility to the domination of transnational corporations and financial institutions over the lives of working people and society as a whole. However, if such opposition to neoliberalism is to be successful, it is important to understand what it is, what has caused it, and how it has led to a breakdown of not only the financial but also the economic system, giving rise to the very real threat of a Great Depression and war. The central argument of this analysis is that the root causes of neoliberal policies, so detrimental to the working class, lie within the working of the economic system itself and not simply an ideological sea change that occurred in isolation from the changes in the structure of the international economy. It characterizes neoliberalism as a response by corporate bosses and owners to the failure of the post-war settlement that was based upon national regulation. In the advanced capitalist countries, capital accumulation became increasingly dependent not on production but trading in financial assets. Far from resolving the problems of capital accumulation, economic growth and global poverty, such policies have only exacerbated them. Furthermore, in the interest of not letting a crisis go to waste, the ruling elites in the US, UK and Europe are implementing measures that will restructure the financial 240
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and economic system in the interest of the financial oligarchy and consolidate the power of the few at the expense of working people and the rural poor all over the world. Such an analysis is crucial for understanding and identifying what must be done, the socialist reorganization and control of the economy, and the means by which it can be achieved. This chapter will consider each of these issues in turn.
Neoliberalism: a Response to Developments within the Economic System While there have been many reviews of neoliberalism (see Birch and Mykhnenko; Swain et al., this volume), Beams (2008) is one of the few to have traced its source and development to the workings of the capitalist economic system itself. It is pertinent here to summarize briefly the purpose of a capitalist enterprise: its mission is not simply to make an absolute level of profit but a level of profit proportional not to sales but the amount of capital employed. This is typically 10–15 per cent, and must always be higher than the prevailing interest rate, since this represents the basic return that is available to the providers of finance. As the amount of capital employed in an enterprise increases, so must the profit. The cash surplus is that which remains from sales revenues after all external goods and services and the internal costs of the workforce have been paid. In the final analysis, that cash surplus or surplus value – the basis of profit – represents the surplus labour extracted from the workforce, which produced the goods and services and without which value could not be created. A number of commentators have argued that neoliberal policies are the outcome of a ‘free market’ ideology, but it is more accurate to consider them as an expression of the crisis of the profit system as a whole. The ideological sea change – known as the New Right Agenda, or neoliberalism – that took place in the mid-1970s (see Birch and Tickell, this volume) has been presented as simply a policy shift and could by implication therefore be reversed by another policy change. But in fact it reflected the response of business leaders and their governments to two interrelated changes that had taken place in the world economy: the end of the post-war boom as reflected in the collapse of the 1944 Bretton Woods Agreement and the downturn in the rate of profit. 241
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The Bretton Woods Agreement, a crucial part of the post-war arrangements to restore world trade, production, investment and employment, and thereby restabilize capitalism, established the US dollar as the world currency, fixing the value of national currencies to the dollar at the rate of $35 as the set value of an ounce of gold. Its very success in restoring world trade and investment was at the expense of the US’s balance of trade, which, combined with the cost of the Vietnam War, led to a huge outflow of dollars that far exceeded the amount of gold in the US vaults. From the perspective of economic orthodoxy, the logical ‘solution’ would have been to impose a recession in the US to reduce the balance of payments deficit and/or terminate the Vietnam War. Neither was politically acceptable to the ruling elite there. Instead, President Nixon severed the link between the dollar and gold in August 1971 and instituted the floating dollar regime, thereby devaluing the dollar and leaving the holders of dollars overseas to shoulder the cost. This marked the end of the Bretton Woods system of regulating the world economy. The collapse of Bretton Woods signified that the global expansion of capital could no longer be contained within a system of national regulation: the very same problem preceding the First World War. This gave rise to a major downturn in trade and recession. No national currency could underpin the world economy. It marked the end of the post-war boom or so-called golden age, which had in the final analysis been based upon US economic hegemony. The resulting global mobility of capital also spelt the end of the programme of Keynesian national regulation that formed the basis of the post-war welfare state, and the state-owned enterprises and services. While Keynesian measures were applied to the recession of 1974–5, they served to worsen the situation and stoke inflation. The downturn in the rate of profit in the 1960s and 1970s was the driving force for several interrelated processes: the globalization of production in order to lower costs and the development and application of new technologies of production (such as computers and telecommunications). Restraints on the movement of capital were lifted, enabling corporations to establish production plants overseas to access lower wage platforms, bring in international finance, and buy financial assets overseas. Changes in technology enabled ever-fewer productive units to supply a world market. Together these processes have been responsible for a transformation of the structure of the capitalist economy. 242
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But at the same time, the enormous technological innovations in the production process based on the computer chip, instead of resolving the falling rate of profit, enormously intensified the crisis of the profit system. The essence of this new technological regime was the replacement of value-creating labour by capital equipment in the production process. Consequently, rather than alleviating the tendency of the rate of profit to fall, it has worked to exacerbate it, as Armstrong et al. (1984) perceptively showed a quarter of a century ago. While this consequence was and is largely invisible in the public debates, it lay at the heart of the policy shift and neoliberalism. The falling rate of profit relative to the amount of capital employed (even though the absolute amount of profit may rise in particular industries or companies) lay behind the successive waves of mergers and cross-border acquisitions in the 1980s and 1990s, as corporations sought to cut costs and sell off surplus assets, thereby reducing the amount of capital employed.
Financialization: the New Mode of Capital Accumulation The falling rate of profit in basic industry and manufacturing also led to parallel processes. First, there was a shift out of manufacturing in advanced capitalist countries such as the US and Britain in the 1980s in a process that led to severe de-industrialization. De-industrialization was accomplished by interest rates rises to record levels – and thus the increasing value of the national currency, making the price of manufactured goods uncompetitive on the world markets. Such policies were legitimized under the rubric of ‘beating inflation’. Second, there was a turn to financial engineering or financialization, representing a new regime of capital accumulation based not on the production of value but on the expansion of finance capital and the buying and selling of financial assets. The end of fixed currencies in 1973, which enormously increased the risks arising from international trade, provided an important stimulus to the growth of financial derivatives. These derivatives sought to eliminate the risk of price changes between the time when a contract was signed and the commodity was delivered, and had existed for a long time. However, new financial derivatives were developed that sought to insure against exchange rate and other financial risks and were traded on newly established markets such as the Chicago Mercantile Exchange and the Chicago Options Exchange. These 243
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derivatives soon became an important source of speculation: for example, the value of over-the-counter agreements had grown from almost nothing in 1973 to $683.7 trillion in 2008 (BIS 2008), an amount equal to more than ten times the value of global GDP. Similarly, foreign exchange transactions grew from $14 billion a day in 1973 to $1.26 trillion in 1995. While in 1973 world trade in goods and services had accounted for 15 per cent of these transactions, by 1995 it had declined to just 2 per cent. Later, such derivatives and other financial assets including mortgages, rental income, credit card debt and utility revenues were increasingly bundled together and securitized as repayments for long-term loans. As well as the enormous growth in financial derivatives, the new regime gave rise to various asset bubbles financed by debt: the share price bubble, the dot.com bubble and the housing bubble. Bryan and Rafferty (2006) explain the significance of derivatives in that they not only ‘bind’ assets in the present to assets in the future, but also ‘blend’ assets, allowing investors to hedge against adverse movements in one financial asset and take advantage of the relative movement between various classes of assets. That is, derivatives blend the characteristics of different asset forms, ‘commensurating the values of different financial assets’, thereby enabling finance capital to assume a more universal character. While they have become a vehicle for massive speculation that has precipitated the collapse of the global financial system, speculation was not their primary or original purpose. Or to put it another way, as Marx (1961) explained, while credit originates as ‘the humble assistant of accumulation’, it soon becomes a new mechanism of competition and ‘the centralization of capitals’. Banks and other financial institutions sought to increase their lending via a process known as securitization, whereby their loans to individual home-owners, capitalists and corporations were bundled together to pool their uneven risk profile, sold on as ‘securitized bonds’, and serviced with the income from their associated loan portfolio. The proceeds were in turn used to finance new mortgages and loans, enabling banks to turn over their capital faster and increase their profits. Increasingly, mortgages, known as the subprime mortgages, were sold to people on low incomes on the assumption that house prices would continue to rise. They did, until workers, whose wages were not rising and who had exhausted all their means of increasing their income, were unable to keep up with 244
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their repayments, triggering a default, a collapse in house prices and the breakdown of the entire financial system. Further impetus to financialization as a new mode of capital accumulation came from the decision by the US Federal Reserve Board to lift the controls on the movement of capital and later reduce interest rates. This enabled a vast increase in the export of finance capital to low-wage platforms, most notably China, the Far East and later Russia and Eastern Europe, where the level of wages was one third that of the US. This huge expansion in the working class, and thus the amount of surplus value that could be extracted by capital, provided a new basis for capital accumulation: the surplus value extracted in China was then distributed to other fractions of capital in the form of licence fees, rents and interest to banks and financial institutions. Peter Mandelson, when European Trade Commissioner, illustrated this point very graphically when he observed that a Chinese firm manufacturing an iPod receives only $4 for a product retailing at $290 in the US. The shift from manufacturing to financialization can be gauged by the following statistics and examples. Whereas in 1982 the profits of US financial corporations accounted for 5 per cent of total US corporate profits after tax, this had risen to 41 per cent in 2007. Similarly, in Britain, the financial sector became the most important profit-generating sector in the economy, with one in ten Londoners working in the City of London. According to Epstein and Power (2003), the share of national income going to the finance sector ‘dramatically increased’: between the 1960s and 1970s and the 1980s and 1990s, this rose by 143 per cent in the UK, 92 per cent in the US, 1112 per cent in South Korea and 155 per cent in France. Moreover, the trade in derivatives and financial assets was not confined to the financial corporations. Even non-financial corporations turned to trade in financial assets and securities to increase their profits, taking out loans to do so. Increasingly, they set up banks or joint ventures with banks to provide the credit for their customers to buy their goods and services. Corporations such as General Motors made more money out of their financial arms than they did from selling their cars. This shift to financialization marked a qualitative change in the economies of the US and Britain and was fuelled by a vast increase in debt. US debt rose from 163 per cent of GDP in 1980 to 346 per 245
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cent in 2007. Household debt rose from 50 per cent of GDP in 1980 to 100 per cent in 2007. In the financial sector, debt rose from 21 per cent of GDP in 1980 to 83 per cent in 2000 and 116 per cent in 2007. In addition to the switch to this new form of capital accumulation, the owners of capital also sought to increase their share of the value created by the working class in the production process. Under conditions where the overall surplus value was expanding, as in the twenty-five years after the Second World War, capital was able to tolerate the welfare state and even welcome the nationalization of basic industries. Such policies provided a means of containing and regulating the class struggle since the government as owner was able to pay higher wages and improve working conditions in countries like Britain, while the welfare state meant that employers did not have to make extensive provision for health insurance and retirement for its workforce as employers in the US did in the period of the long boom. Nationalization shifted the cost of investment in capital-intensive industries onto the taxpayers while enabling their former owners to reinvest the proceeds from compensation in more profitable ventures. At the same time the nationalized industries and services could be run in ways that constituted a subsidy to industry. Indeed, the nationalizations in the 1940s were justified with claims of the increased efficiency that would flow from the restructuring and increased investment that only government could provide (Millward 1999). But under conditions where the tendency is for surplus value to decline, deductions in the form of corporate taxation to finance social welfare became increasingly intolerable. One of the responses of the ruling elites everywhere was to attempt to claw back a portion of the surplus value previously appropriated by the state in the form of social welfare provision to the working class, since any reduction in tax payable – or, more importantly, tax actually paid – represents an attempt to increase their profit or the rate of return on capital employed. Corporations and mega-rich insisted upon, and got, a reduction in business taxes and their own personal tax at the expense of ordinary people, contributing to the continuing fiscal crisis of the state. They have legally or otherwise minimized their tax payments by relocating their activities to off-shore tax havens and devising other tax dodges; for example, unpaid tax by the rich and major corporations costs every British worker at least £1,000 a 246
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year. Governments everywhere clawed back the billions lost in such tax cuts via regressive taxes on the consumption of basic goods and services that have hit the poorest families the hardest. Corporate refusal to pay tax is not just a British but a universal phenomenon. A report by Christian Aid (2008) argues that illegal tax evasion by companies is depriving the world’s poorest countries of US$160 billion a year. The sums lost globally due to tax evasion, which is illegal, are approximately equal to nearly one and a half times the amount of foreign aid given to poor countries. Adding in tax avoidance, which is entirely legal, this would be several times greater than all foreign aid. Similar considerations lie behind the erosion of pension provision, be it by the employer or by the state (since employers must either contribute directly to the state pension provision or indirectly via taxation), and other social insurance provisions. All welfare provision represents in the final analysis a deduction from the surplus value extracted from the working class and realized for the capitalist corporations and their owners in the form of profit. Furthermore, the 40 per cent or so of GDP that did not directly yield a profit must now be opened up via privatization, ‘partnerships’, outsourcing, and all the rest, to private profit, representing 30 years of ongoing assault on the social position of the working class as capital seeks to overcome the pressures on the rate of profit. Hence the continuous rounds of privatizations, cost cutting and austerity budgets. As soon as one round of cuts is completed, another begins. This is because while all these measures benefited some social layers at the expense of the many (see Duménil and Lévy 2003), they failed to establish a new equilibrium based on the expansion of the mass of surplus value. Indeed, the last 30 years have been marked by crises: to name but a few, the collapse of the US savings and loans industry in the 1980s; the 1987 stock market crash; the Swedish and Japanese banking crises in the early 1990s; the 1994 Mexican peso crisis; the 1997 Asian crisis; the Russian crisis and the collapse of Long Term Capital Management in 1998; and the collapse of the dot.com bubble and the Argentinean economy in the early 2000s. The driving force behind all these developments is the requirement for new sources of profit and a reduction in restrictions imposed upon the corporations’ activities by national governments as they undertake the production of and investment in goods and 247
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services on an international scale. Transnational corporations (TNCs) seek to extend and deepen their global reach at the expense of the universal right to water, sanitation, transport, energy, health care and education, and basic democratic rights. But the creeping privatization espoused by all governments, the international financial institutions, the European Union, and the TNCs, also express more fundamental processes – the inherent drive of the productive forces to break free of the constraints of the outmoded nation state system.
The Financial and Economic Crisis of Neoliberalism In August 2007 the financialization bubble burst. The problems started with US sub-prime mortgages, which were loans to the poorest members of American society whose income was stagnant or declining in real terms and who were increasingly reliant upon personal debt to fund their living costs. The sub-prime mortgage collapse has given rise to a credit squeeze that has led to the collapse of major banks and engulfed the entire $57 trillion US financial system and global financial markets. Furthermore, it has precipitated an economic collapse in world trade and economic growth that threatens the livelihoods of millions of workers and their families around the world. The attempts by governments to ‘do whatever it takes’ to bail out the banks for their reckless and criminal activities, and prop up the financial system – with successive rounds of previously unimaginable sums of money – will consolidate the power of the largest financial institutions and squeeze out the smaller players, and threaten national insolvencies and austerity. In effect, the banks and financial institutions have privatized the US and UK Treasury with not even the pretence of consulting the broad mass of the people who must pay for it, whilst failing to ensure accountability for the billions if not trillions of public monies. The cost will be borne by the working class, via massive cuts in public expenditure and tax rises to make way for the interest charges needed to service their government’s borrowing to prop up the banks. Nothing exposes more graphically the diametrically opposed interests of the two classes. But such measures are doomed to fail, as many of the financial commentators have noted. This is because they do not address the source of the problem: that the crisis is the expression of the 248
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fundamental laws of capitalism and that the claims on the surplus produced by the working class are many times larger than the mass of surplus value. To give but one example, the value of the assets (the loan portfolio) of just four of the British high street banks in the eye of the storm is three times Britain’s annual GDP. The solution, from the capitalists’ perspective, lies in increasing the exploitation of the working class in order to expand the amount of surplus value and by forcing out, bankrupting and eliminating whole swathes of capital, thereby wiping out their claims on the surplus value and restoring the returns to those sections of capital that remain. In other words, a vastly intensified repeat of the policies of the last 30 years is required. However, such policies can never be implemented democratically or peacefully. Hence the curtailment of civil liberties in most industrial democracies, which has been legitimized by the ‘war on terror’, will be used to intimidate and prevent classbased opposition to such policies. It is this which underlies above all the turn to militarism and new forms of colonialism to control access to vital resources in the Middle East, Central Asia, Africa and the Arctic.
Defeating Global Capitalism: Challenges and Lessons This analysis therefore raises important questions about the character of any oppositional movement against such control by the giant corporations. While there has been widespread opposition over the last ten years to the policies of the international financial institutions of global capitalism, the opposition has largely taken the form of opposition to globalization or neoliberalism as opposed to global capitalism. Furthermore, it was unclear on what basis they were opposing global capital (or globalization?) and neoliberalism (as a form of capitalism or capitalism itself?); whether they agreed with each other; and, crucially, to whom or to which social layers they were speaking: international institutions, governments, trade and labour leaders, or the broad mass of the world’s population? In other words, there has been a basic confusion that has identified ‘globalization’ with ‘global capitalism’, neoliberalism as ‘bad capitalism’ and the Keynesian welfare state as ‘good capitalism’. While globalization – the increasingly global character of the production and exchange of goods and services – is in itself a progressive development, the destructive consequences flow not from globaliza249
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tion as such but from the subordination of all economic life to the anarchic pursuit of profit, based upon national forms of political organization. What is required, in short, is a recognition that the enemy is not globalization or neoliberalism but capitalism. Thus, the real question is not how to return to some mythical golden age of national economic life such as the immediate post-war period, with the concomitant demands for Keynesian economic prescriptions and regulation, but who will control the global economy and in whose interests it will be run. It is impossible to succeed against neoliberalism if the contest is isolated from any wider social and political struggle of the working class. An examination of the past century shows that whatever gains were made were by-products of major political and social struggles of the working class, struggles that were led by socialists against the existing opportunist leaderships. As Rosa Luxembourg pointed out a hundred years ago, Work for reform does not contain its own force, independent from revolution. During every historic period, work for reforms is carried on only in the direction given to it by the impetus of the last revolution, and continues as long as the impulsion of the last revolution continues to make itself felt. (Luxembourg 1988: 49)
Just consider the origins of the nationalized industries and the welfare state in Britain. They were the product of a big movement in the working class. The British ruling class, acutely conscious of the Russian Revolution in 1917 and the revolutionary upheavals in Europe that followed the Russian Revolution and the First World War, grudgingly allowed a reformist Labour government, in the period following the Second World War, to nationalize coal, rail and other basic industries, and to grant welfare reforms: social insurance, education, healthcare and social housing. It was acting in response to the threat of revolution posed by the sustained upsurge of the working class and the oppressed masses internationally in the mid- to late 1940s, and the need to re-stabilize and restructure bankrupt British capitalism. The nationalizations of basic industries were not socialist measures but were bound up with the need for coordination and planning to better serve the needs of industry. Conversely, the subsequent privatization of the state-owned enterprises was bound up with the decline of the nationally regu250
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lated economy. To cite but one example, the nationalized railways. The decline of mass industrial manufacturing, the disappearance of the nationally based coal industry and the transfer of freight to road transport meant that industry bosses no longer had a significant stake in the railways: nationalization had lost its raison d’être. Rail thus became a target for privatization. The subsidies that had once been given to the public monopolies were now to be given on an even greater scale to private sector corporations, marking a new stage in the decline of British capitalism and the ongoing assault on the working class. But as well as these economic factors, there was another significant factor. The erosion of the welfare state and the sale of the nationalized industries not just in Britain but all over the world in the last thirty years have been directly bound up with the absence of any politically conscious movement in the working class. The socialist conceptions that animated large sections of workers in the aftermath of the Russian Revolution came under sustained attack from Stalinism, labour reformism and trade unionism, which together attacked genuine socialism and, above all, internationalism, about which the radical left has been largely silent. The shifts in the economic base of society in the 1960s and 1970s outlined above did not go unopposed. The period 1968 to 1975 was one of immense revolutionary struggles, starting with the events in France in May 1968, and including the civil rights struggles and mass opposition to the Vietnam War as well as major industrial struggles in North America, the bringing down of the Labour government in Britain and the dictatorships in Greece, Spain and Portugal. But in each and every case, these struggles were betrayed by their social democratic and Stalinist leaderships, which were in turn supported by various radical groups. They all opposed the need for a new leadership politically independent of the old national and chauvinistic bureaucracies that dominated the working class, and a socialist and internationalist perspective to overthrow capitalism. Instead, they promulgated the belief that these organizations could be pressured to the left. The defeat of these struggles between 1968 and 1975 and the restabilization of capitalist rule were therefore crucial political factors in the resurgence in the power of the ruling elites, temporarily on the back foot after the Second World War. Furthermore, in each and every case, these old organizations subsequently moved even 251
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further to the right and themselves played key roles in implementing neoliberal policies. Their (former) radical supporters likewise followed suit and moved further to the right.
The Way Forward No Marxist analysis would be complete without elaborating a perspective for the working class. The defence of jobs, wages and essential services entails the conscious recognition that capitalism, not the increasingly global character of modern society or neoliberalism, is the real enemy. Global capitalism – the subordination of humanity to the profit interests of a few hundred giant transnational corporations – cannot be fought by seeking to return to a historically outmoded system of relatively isolated and unintegrated national economies. The point is not to reject the advances of science and technology or to retain local, small scale production, but to wrest control of the enormous productive forces created by human labour from the TNCs and nation states, and place them under the common ownership of all humanity, with their development subordinated in a rational and planned way to human needs. Socialism requires the development of a conscious political movement of the working class, capable of challenging the very basis of the profit system itself. Such a movement must be armed with a scientific socialist perspective and firmly grounded in the strategic experiences of the twentieth and twenty-first centuries. It implies a very definite social orientation and programme – that of revolutionary scientific socialism as opposed to the dominant, politically liberal programe of national reformism – which is why the traditional organizations of the working class and intellectuals have been unable so far to mount any effective opposition to the neoliberal agenda. The crucial questions confronting workers today arise from the break between the existing parties of the working class – the Labour Party in Britain and social democratic or socialist parties in Europe – and their radical supporters, and corresponding rejection of the notion that real social and political change can be brought about by the parliamentary system. This means developing a genuine socialist and internationalist movement that can articulate and fight for its own independent interests, using the World Socialist Web Site (www.wsws.org) as its vehicle, and building sections of such an international movement in each country. In the US, Canada, Britain, 252
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Germany, Australia and Sri Lanka, the party pledged to such a perspective and programme is the Socialist Equality Party (SEP). The SEP proposes militant industrial action based upon the independent interests of the working class. Workers should answer the attempts of big business and government to make the working class pay for the capitalist crisis by reviving the militant traditions of an earlier period that have been suppressed by the trade union bureaucracy. Workers should form independent and democratic rank-and-file factory, workplace and neighbourhood committees to organize opposition to the banks, corporations, and governments, through demonstrations, factory occupations and strikes. This must be done independently of the pro-capitalist unions, which for decades have promoted the myth that the interests of workers can be advanced through the Labour Party, which has upheld the interests of the corporations and the banks no less assiduously than its Conservative predecessors. Industrial action must reject class collaboration in favour of a new political strategy: the building of a mass party of the working class to fight for the independent interests of working people. The SEP urges the rejection of the capitalist market and revival of an international socialist movement of the working class. Workers in Britain and throughout the world are facing the consequences of an economic system whose central principle is the pursuit of private profit – regardless of its consequences for society as a whole. The socialist reorganization of the economy includes the nationalization of the banks and basic industry, placing them under public ownership and the democratic control of the working population, and their operation based on social need, not private profit. In every country, workers face a similar future: rising unemployment, declining wages, economic depression. A revived political movement of the working class must have as its aim the fight for a workers’ government, a government of, by and for the working class. The crisis of capitalism is a global crisis and the response of the working class to this crisis must be a global response.
References Armstrong, P., Glyn A. and Harrison J. (1984) Capitalism since World War II: the Making and Breakup of the Great Boom, Fontana Paperbacks, London. Bank for International Settlements (BIS) (2008) ‘Semi-annual Statistics on
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Over the Counter (OTC) Positions in the Global OTC Derivatives Market’, Basel, Switzerland, November. Beams, N. (2008) The World Economic Crisis: a Marxist Analysis, (accessed 23 July 2009). Bryan, D. and Rafferty, M. (2006) ‘Financial Derivatives: the New Gold?’, Competition and Change, Vol. 10, No. 3, pp. 265–82. Christian Aid (2008) Death and Taxes: the True Cost of Tax Dodging, Christian Aid, London. Duménil, G. and Lévy, D. (2003) ‘Costs and Benefits of Neo-Liberalism: a Class Analysis’, in Epstein, G. (ed.) Financialization and World Economy, Edward Elgar, London. Epstein, G., and Power, D. (2003) Rentier Incomes and Financial Crises: an Empirical Examination of Trends and Cycles in Some OECD Countries, Department of Economics and Political Economy Research Institute (PERI), University of Massachusetts, Amhurst, MA. Luxemburg, R. (1988) Reform or Revolution? Pathfinder Press, New York NY. Marx, K. (1961) Capital, Volume I, Lawrence and Wishart, London. Millward, R. (1999) ‘State Enterprise in Britain in the Twentieth Century’, in Amatori, F. (ed.) The Rise and fall of State Owned Enterprises in the Western World, Cambridge University Press, Cambridge.
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CONCLUSION • The End of an Economic Order? VLAD MYKHNENKO AND KEAN BIRCH
What let the world down last autumn was not just bankrupt institutions but a bankrupt ideology. What failed was the Conservative idea that markets always self-correct but never self-destruct. What failed was the right-wing fundamentalism that says you just leave everything to the market and says that free markets should not just be free but values-free. (Gordon Brown, British Prime Minister, speech at the 2009 Labour Party Annual Conference) As it has been shown in the past, unleashed money-capital possesses immense self-destructive power. It remains to be seen whether this will be repeated in the global financial dislocation that has followed the US sub-prime mortgage defaults and, if called upon, whether states will be able to rescue capitalism. And, in doing so, will they again unwittingly create the conditions that sustain the ideological misconception that there exists an ‘invisible hand’ and that it is best able to regulate humanity’s economic affairs? (Geoffrey Ingham, Capitalism, 2008: 226)
The Beginning of the End for Neoliberal Ideology. . . As we enter the third year of the global financial and economic crisis, we begin to assess its preliminary outcomes, sense a number of possible longer-term scenarios for capitalism, and enact a variety of viable alternatives. There are two broad conclusions which can be drawn from the current crisis. First of all, neoliberalism has selfdestructed. The thirty-year long global march of the free-market ideology has come to an abrupt end with the shrinkage of moneycredit that began in August 2007. The global financial and economic crises have painfully revealed that the long boom in the heartland of global financial capitalism was propelled by consumerled indebtedness. We can now see that global financial capitalism
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was the ultimate neoliberal innovation enabled by the preceding waves of economic deregulation and liberalization. As the first two waves of the current crisis (financial and economic) have begun to generate the third wave of rising levels of unemployment, we are able to estimate the extent of the havoc caused by this unleashed power of money-capital. Over the 2007–10 period, direct monetary losses from the current crisis have resulted in global write-downs held by banks and other financial institutions of $3.4 trillion (€2.3tn; £2.1tn), with more than half of these losses still to be realized at the time of writing (IMF 2009b: 5). Total support for the financial system from the governments and central banks around the world – the cost of the global bail-out – has amounted to $10.8 trillion (€7.4tn; £6.8tn) in government credit guarantees, ‘toxic’ asset purchases, central bank liquidity, and other measures (BBC News 2009a). In a summary news headline, the ‘crisis cost us $10,000 each’, with UK residents having to lose $50,000 (£31,250) per head for the dubious privilege of hosting the world’s major financial centre (Schifferes 2009). In terms of change in global output, real GDP decelerated from 5.2 per cent in 2007 to 3 per cent in 2008, before contracting by 1.1 per cent in 2009. The IMF optimistically expects the global economy to grow by 3.1 per cent in 2010, yet the bulk of the recovery would be driven by China, India, and other so-called emerging market economies, with more uncertainty and unemployment in the West (BBC News 2009d; Giles 2009c; IMF 2009f). So far, the first global economic recession since the Great Depression of the 1930s has already destroyed at least 50 million jobs around the world, at least half of them in the supposedly advanced economies (Wachman 2009a; Groom 2009a; Pimlott and Farchy 2009; Seager 2009) and pushed another 90 million people in the global South into ‘extreme poverty’, defined by the World Bank as living on less than $1.25 a day (Giles 2009b). In addition to the gigantic monetary, output and employment damage inflicted by the current crisis, it has had profound ideological ramifications. The massive socialization of private losses by the all-too-visible hand of major Western governments has exposed the role of the state and class power relations in underpinning capitalism as a system of continuous accumulation of capital for private gain (see Gowan 2009). The rapid action by the major governments worldwide in a bid to save giant transnational corporations from the financial meltdown 256
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has ultimately shattered the ideological disguise carefully constructed by the twentieth-century neoliberal doctrinaires. In a startling admission, a leading ideologist of neoliberalism has confirmed: ‘Another ideological god has failed. The world of the past three decades has gone’ (Wolf 2009b). At the time when editorials of the Financial Times, the world’s major financial capitalist newspaper, regularly condemn ‘the system’s structural failure’ (Editorial 2009a; Editorial 2009b; Editorial 2009c), and the IMF (2009c) sings various governments’ praises for ‘wide-ranging, coordinated public intervention’ that has supported demand and rescued financial markets from themselves: it seems all too clear that the neoliberal economic ideology is finished. And with the hopes of a swift recovery dashed by every new release of depressing employment data (Groom 2009b; Hughes and Rappeport 2009; IMF 2009d; Rappeport 2009; Rappeport et al. 2009), many more years of pain to come ought to undermine the remaining support for the political creed which has so spectacularly crashed.
. . . and Western Hegemony This book has generally supported the argument made forcefully by David Harvey (2005) and the late Peter Gowan (2009) that the neoliberal economic order which emerged after the dismantlement of the Bretton Woods System (1944–76) was built to serve the interests of a ‘New Wall Street System’ and heralded the rise of a new Western imperialism geared towards accumulation by dispossession (cf. Choonara 2009). Therefore, the second conclusion we are able to draw is that the fall of neoliberalism ought to cause irreparable damage to the new imperialism and end US hegemony in international affairs. Protesting against the approaching ‘all about oil’ Anglo-American invasion of Iraq in 2003, Harvey made a poignant observation: As occurred in Britain at the end of the preceding century, the blockage of internal reform and infrastructural investment by the configuration of class interests during these years also played a crucial role in the conversion of US politics towards a more and more overt embrace of imperialism. It is tempting, therefore, to see the US invasion of Iraq as the equivalent of Britain’s engagement in the Boer War, both occurring at the beginning of the end of hegemony. (Harvey 2005: 180–1)
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As the current crisis has unfolded, the USA and its Western allies have found themselves confronted with an emergent multi-polar world. The once almighty Group of Seven (G7) major capitalist economies (Canada, France, Germany, Italy, Japan, the UK, and the USA) has become another victim of the global financialeconomic crisis (Giles 2009d) to clear the way for a Group of Twenty (G20) – a new top gathering which includes, besides the old ‘advanced industrialized nations’ of the now defunct G7, the EU and the ‘emerging market economies’ of Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey. The arrival of new and resurgent contesting powers has been a widely discussed topic of the late 2000s. However, the current ‘crisis in the heartland’ of the Euro-Atlantic world has rendered the West’s relative decline inevitable (see Gowan 2009). As the present volume has shown, the innovations of financial capitalism – the hallmark of the now discredited Anglo-Saxon liberal market economics – have sown the seeds for its downfall. Despite all the noise made by the die-hard right-wing economists (for a review, see Krugman 2009) about structured finance as the major contributor to ‘the global boom over the past three decades’ (Becker and Murphy 2009) and ‘free-market capitalism as the most effective means to maximize material wellbeing’ (Greenspan 2009) which ‘gave growing numbers rewarding lives’ (Phelps 2009), the writing has been on the wall for the old economic order for some time. As clearly shown by Robert Brenner (2009: 2), ‘the fundamental source of today’s crisis is the steadily declining vitality of the advanced capitalist economies over three decades, business-cycle by business-cycle, right into the present’. Indeed, according to our own calculations (on the basis of IMF 2009g), the average annual real GDP growth rates for the advanced economies were steadily declining from 3.1 per cent in the 1980s, to 2.7 per cent in the 1990s, and eventually to 1.8 per cent in the 2000s. In the G7 economies, real GDP growth was even slower, falling annually on average from 3.0 per cent (in the 1980s) to 2.5 per cent (1990s), and to 1.5 per ccnt (2000s). Thus, besides totally bankrupting some small states like Iceland and Latvia, and eventually causing a worldwide recession which has so far permanently wiped out about 10 per cent of global output, the neoliberal economic order has in fact hardly been an era of exuberant wealth creation even in the core 258
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of the capitalist world economy! In the meantime, it is ‘emerging and developing economies’, and in particular ‘developing Asia’ with its state-owned banks and ‘plain vanilla’ financial products, which has progressively accelerated over 1980–2009 at annual average rates of 6.7, 7.2, and 8.0 per cent per decade respectively (see also Oakley and Waldmeir 2009). In September 2009, during a global economic summit in the city of Pittsburgh, the US administration formally announced the birth of the new international economic order, in which the G20 had to take on a role as a new permanent ‘premier forum’ for coordinating the world economy (Editorial 2009d). The acknowledgement by the richest nations of North America and Western Europe that they no longer had a monopoly of wisdom on what is good for the global economy would be followed by a formalized power shift of voting rights in the International Monetary Fund towards rapidly growing nations, particularly China (BBC News 2009b; Guha 2009b; IMF 2009e), and then a potentially large-scale restructuring of both the IMF and the World Bank (Beattie 2009; Ebrahim 2009). According to most current analyses, the old European powers have been firmly marginalized (Rachman 2009; Stephens 2009b), whilst ‘Asian capitalism’ and China have emerged as the most significant winners from the 2007–9 crisis (Acharya 2009; Mahbubani 2009). As the developed world’s ‘teachers have made big mistakes, any visitor to Asia will recognize the West’s reputation for financial and economic competence is in tatters, while that of China has soared. The wheel of fortune is turning’ (Wolf 2009e). Rather symbolically, in September 2009 the UK’s largest bank HSBC announced the relocation of its headquarters back to Hong Kong (Jenkins and Tucker 2009). On 29 September, Jeffrey Sachs (2009), one of the pioneers of neoliberal revolution, claimed that ‘the G1’ (the USA) had waned in its ‘economic leadership’ and finally ‘passed on the baton’ to the G20. A few days afterwards, Robert Zoellick, the president of the World Bank, confirmed the profound change in global power relations in which ‘the US economic power is declining’ in a multi-polar economy (BBC News 2009e). All one can currently hear is ‘the crunching and grinding of geopolitical plates’ (Stephens 2009a). The US invasion of Iraq looks ever more likely as the equivalent of Britain’s fated commitment to the Boer War. 259
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Picking through Neoliberal Wreckage: towards a New ‘Old Morals Capitalism’? Having considered the broader, long-term picture of ideological and geopolitical transformations, we can turn towards more immediate concerns by deducing a potential trajectory of the current global financial-economic crisis from the information available to us at present. Up to now the mainstream of international politics has responded to the 2007–9 crisis in three interrelated ways. First, there has been a social representation of the current conjuncture as a crisis in capitalism and not of the system per se (see Barber 2009a; Freeland et al. 2009; Kennedy 2009; Sorrell 2009; Quinlan 2009). Time and again the public at large is pressurized into believing that, in the words of a long-standing Left-basher, a bit more socially responsible capitalism ‘is the best we can do and, at least for now, our governments’ central duty is to try to keep it that way. For this may be as good as it gets’ (Lloyd 2009b). Second, and closely connected with the previous statement, there has emerged a sense of moral panic. A moral failure is said to have preceded the financial meltdown (Weitzner and Darroch 2009). ‘Let’s tell the truth – we all borrowed too much. We are all in this together’, confessed the UK shadow Chancellor of the Exchequer to his party conference in October 2009 (Osborne 2009). The failure of the ‘new economy’ has been typically blamed on ‘greedy’ bankers, crackpot stockbrokers, and ‘naive’ government ministers (Preston 2008; cf. Mason 2009). The ‘out-of-touch’ ‘bonus culture’ of the super-rich managers has been severely criticized (Guerrera 2009). The Church of England has declared that the City of London (as the country’s financial services centre) must ‘repent’ (Murphy 2009). Pope Benedict XVI has condemned ‘immoral’ capitalism’s ‘grave deviations and failures’, calling for a return to ethics (Caldwell 2009; Dinmore 2009). To rediscover the ‘catechism of a system that endures’, Samuel Brittan (2009a) of the Financial Times has recommended turning to the lateGeorgian values of the novelist Jane Austen. In a more straightforward fashion, Gordon Brown (2009), Britain’s Prime Minister, speaking to the British Labour Party, has helpfully spelt out some of those ‘basic values’ that ‘bankers had lost sight of’, including ‘not reckless risk-taking’ but ‘effort, merit and hard work’; ‘not just selfinterest’ but ‘self-discipline, self-improvement, and self-reliance’; and not just caring for ourselves but caring for each other. ‘Better’, 260
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‘tighter’, ‘global’ public regulation of international money-capital markets has been actively called upon to punish the unrepentant bankers and to end ‘the oligarchy of financial capitalism’ (see Augar 2009; Bonino 2009; Chakrabortty 2009; Freeland et al. 2009; Kaufman 2009; Lagarde 2009; Lawson 2009; Rogoff 2009; Wolf 2009a; Wolf 2009g). Third, the cry for a new ‘good old morals’ capitalism built around essentially Victorian puritan values has come, intriguingly, amidst the emerging fourth wave (past financial, economic, and unemployment stages) of the current crisis – that of public deficit spending. The return of governments worldwide to the once ‘old-fashioned’ Keynesian fiscal demand management, unprecedented monetary easing, bail-outs and ‘rescue’ nationalizations, has come at a tremendous price (BBC News 2009c; Brittan 2009b; Shiller 2009; Wolf 2009d). As one editor has put it: Banks incurred large losses. But the celebrants of capitalism turned into wards of the state, socializing shareholders’ and creditors’ exposure. Add the fiscal stimulus states had to put in place, and much of the cost of the crisis shows up as public debt. Who ends up paying depends on political choices: if austerity, then taxpayers and those reliant on public spending; if inflation, savers; if – in extremis – default, once trusting creditors. (Editorial 2009e)
Pro-corporate commentators have been quick to figure out who was going to pay for the economic wreckage of neoliberalism: ‘The painful truth is that the incomes of taxpayers were put at the disposal of the financial sector’s creditors. Desperate times; desperate measures. What makes the decision quite unbearable is that it was, in my view, also correct’ (Wolf 2009f). All the major Western rightwing parties – be they Angela Merkel’s Christian Democrats of Germany or David Cameron’s Conservatives of Britain – have fully agreed on the ‘need for fiscal prudence’, opening the way for a new ‘age of austerity’ (Barber 2009b; Elliott 2009; Milne 2009c). Thus, the new ‘moral capitalism’ in the making would definitely be ‘tougher’ – but could it be ‘fairer’, as claimed? The evidence on any substantial financial sector reform, which inevitably lies at the heart of the new fairer ‘moral capitalism’, has so far been lacking. On the contrary, there has been a lot of evidence about corporate ‘business as usual’, with executive pay and bonuses rising (Farrell 2009; Finch 2009; Finch and Bowers 2009), 261
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and the financial ‘masters of the universe reborn’ (Groom 2009c; Guha 2009a; Heaney 2009; Mathiason 2009; Wachman 2009b; Wolf 2009c). Then again, what has become clearer is the real and actual beginning of ‘austerity’ for the majority of taxpayers on middle and modest incomes. The new ‘old morals capitalism’ will be incapable of delivering ‘fairer outcomes’ despite all the assurances (Osborne 2009; cf. Brown 2009). The upcoming decade of ‘savage’ cuts in public spending, lower living standards, higher taxes for all (except those who can avoid them), and further privatizations of public property (Booth 2009; Braithwaite and Clover 2009; Giles 2009a; Parker and Timmins 2009; Pickard and Plimmer 2009; Sherwood et al. 2009; Travers 2009) will undoubtedly be a decade of intense industrial confrontation and social struggle. The spectrum of progressive political forces – the Left – in all of its many incarnations (pragmatic-reformist, socialist revolutionary, libertarian-anarchist, populist, and green), is bound to be in the van of the political struggle for social justice, jobs, livelihoods, and against environmental catastrophe. So far, the academic and popular/populist left-wing literature has already begun to provide some contemporary answers to the many pressing questions faced today by the majority of people worldwide (see Elliott and Atkinson 2008; Mason 2009; McMurtry 1998; Preston 2008; Shutt 2009; Shutt 2010; Turner 2009). We hope that this book contributes in its own way to these issues. At the same time, the mainstream political Left has suffered in ‘the squeezed middle’ of fiscal stimuli and rescue nationalizations (Barker and Mallet 2009; Lloyd 2009a; Lloyd 2009c). It has been unable, by and large, to gain from the current crisis of capitalism, much to the glee of the right-wing press and their electorate (Chaffin 2009a; Chaffin 2009b; Boland et al. 2009; Peel 2009; cf. Milne 2009b). The complexity and magnitude of the current crisis, combined with rising fears over social stability and personal security amongst the people at large, pose a considerable communication and perception challenge for the Left in terms of providing viable, constructive alternatives to new/old capitalism in the ‘age of austerity’ (Milne 2009a). As this volume has shown, we all have our work cut out. Yet, for once, we should agree with Martin Wolf (2009b): where we end up, after this financial tornado, is for us to seek to determine.
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References Acharya, S. (2009) ‘Asia Rises, One Economic Giant at a Time’, The Financial Times, 28 July. Augar, P. (2009) ‘Insiders Cannot Provide Answers on Finance’, The Financial Times, 19 July. Barber, L. (2009a) ‘Capitalism Redrawn: the Old Model Is Tarnished’, The Financial Times: The Future of Capitalism, 12 May. —— (2009b) ‘Merkel Victory Strengthens Centre-Right in EU’, The Financial Times, 28 September. Barker, A. and Mallet, V. (2009) ‘Centre-Left Leaders Rally Faithful’, The Financial Times, 29 September. Beattie, A. (2009) ‘Doubts Remain over Global Power of IMF’, The Financial Times, 3 October. Becker, G. and Murphy, K. (2009) ‘Do Not Let the “Cure” Destroy Capitalism’, The Financial Times: The Future of Capitalism, 12 May. Boland, V., Steen, M. and Escritt, T. (2009) ‘Far Right Exploits Rising Insecurity’, The Financial Times, 8 June. Bonino, E. (2009) ‘What Did We Really Learn from the Economic Crisis?’, The Financial Times, 28 September. Booth, R. (2009) ‘Tories Adopt Budget Airline Service Model: London Borough’s Radical No-Frills Approach Could Drive Cameron Policy’, The Guardian, 28 August. Braithwaite, T. and Clover, C. (2009) ‘Moscow Plans to Privatise Public Assets’, The Financial Times, 21 September. Brenner, R. (2009) ‘What Is Good for Goldman Sachs Is Good for America: the Origins of the Current Crisis’, Centre for Social Theory and Comparative History, UCLA, 18 April, . British Broadcasting Corporation (BBC) (2009a) ‘Follow the Money’, BBC News, 10 September, . —— (2009b) ‘Emerging Economies Get New Role’, BBC News, 25 September, . —— (2009c) ‘G20: Economic Summit Snapshot’, BBC News, 24 September, . —— (2009d) ‘More US Jobs Lost than Expected’, BBC News, 2 October, . —— (2009e) ‘US Economic Power “Is Declining”’, BBC News, 4 October, . Brittan, S. (2009a) ‘A Catechism for a System That Endures’, The Financial Times: The Future of Capitalism, 12 May. —— (2009b) ‘The Key to Keynes’, The Financial Times, 22 August.
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Brown, G. (2009) ‘Speech at the 2009 Labour Party Annual Conference’, 27 September, Brighton, UK, . Caldwell, C. (2009) ‘Mixing Morals and Money’, The Financial Times, 10 July. Chaffin, J. (2009a) ‘Right Set to Gain Lion’s Share of Seats’, The Financial Times, 8 June. —— (2009b) ‘Socialists across Continent Left Licking Wounds’, The Financial Times, 8 June. Chakrabortty, A. (2009) ‘This Unexpected Radical Shows Up an Abject Failure to Tame the Banks’, The Guardian, 28 August. Choonara, J. (2009) ‘Marxist Accounts of the Current Crisis’, International Socialism, No. 123, . Dinmore, G. (2009) ‘Pope Condemns Capitalism’s “Failures”’, The Financial Times, 7 July. Ebrahim, A. (2009) ‘The World Bank Must Fix Its Business Model’, The Financial Times, 5 October. Editorial (2009a) ‘Lessons for Capitalism’s Future’, The Financial Times: The Future of Capitalism, 12 May. —— (2009b) ‘Shareholder Value Re-Evaluated’, The Financial Times: The Future of Capitalism, 12 May. —— (2009c) ‘The Consequences of Bad Economics’, The Financial Times: The Future of Capitalism, 12 May. —— (2009d) ‘G20 Takes Charge’, The Financial Times, 27 September. —— (2009e) ‘Picking through Economic Wreckage’, The Financial Times, 5 October. Elliott, L. (2009) ‘The Dawning of the Age of Austerity’, The Guardian, 24 August. Elliott, L. and Atkinson, D. (2008) The Gods That Failed: How Blind Faith in Markets Has Cost Us Our Future, The Bodley Head, London. Farrell, G. (2009) ‘TARP Banks Award Billions in Bonuses’, The Financial Times, 30 July. Finch, J. (2009) ‘M&S Boss Warns Gordon Brown Against Attack on Free Market’, The Guardian, 30 September. Finch, J. and Bowers, S. (2009) ‘Executive Pay Keeps Rising. Special Report: In FTSE’s Worst Ever Year, Top Directors Received InflationBusting Hikes’, The Guardian, 14 September. Freeland, C. and others (2009) ‘Thoughts on a Crisis’, The Financial Times: The Future of Capitalism, 12 May. Giles, C. (2009a) ‘Brown’s Talk of Higher Spending Hides Huge Cuts’, The Financial Times, 17 September. —— (2009b) ‘A Pattern Emerges’, The Financial Times, 21 September. —— (2009c) ‘IMF Warns of Further Recession Risks’, The Financial Times, 30 September.
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—— (2009d) ‘Crisis Bookends Life of G7’, The Financial Times, 2 October. Gowan, P. (2009) ‘Editorial: Crisis in the Heartland. Consequences of the New Wall Street System’, New Left Review, New Series, No. 55 (January–February), pp. 5–29. Greenspan, A. (2009) ‘We Need a Better Cushion against Risk’, The Financial Times: The Future of Capitalism, 12 May. Groom, B. (2009a) ‘OECD Warns 25m Jobs at Risk from Crisis’, The Financial Times, 16 September. —— (2009b) ‘Jobless Hits Highest Level since 1995’, The Financial Times, 17 September. —— (2009c) ‘Rising City Job Openings Signal Hiring Upturn’, The Financial Times, 17 September. Guerrera, F. (2009) ‘A Need to Reconnect’, The Financial Times: The Future of Capitalism, 12 May. Guha, K (2009a) ‘Bankers Fight Back against Regulatory Overkill’, The Financial Times, 2 October. —— (2009b) ‘Financial Experts Back IMF Overhaul’, The Financial Times, 5 October. Harvey, D. (2005) The New Imperialism, paperback edition, Oxford University Press, Oxford. Heaney, V. (2009) ‘Harsh Reality of Banking Reform’, The Financial Times, 21 September. Hughes, J. and Rappeport, A. (2009) ‘FTSE Falls through 5,000 on US Gloom’, The Financial Times, 3 October. Ingham, G. (2008) Capitalism, Polity Press, Cambridge. International Monetary Fund (IMF) (2009a) Global Financial Stability Report: Responding to the Financial Crisis and Measuring Systemic Risks (April 2009), IMF, Washington, DC. —— (2009b) Global Financial Stability Report: Navigating the Financial Challenges Ahead (October 2009), IMF, Washington, DC. —— (2009c) World Economic Outlook: Sustaining the Recovery (October 2009), IMF, Washington, DC. —— (2009d) ‘Rising Unemployment Marks Crisis Third Wave, Says IMF Chief’, IMF Survey Online, 5 September. —— (2009e) ‘G20 Backs Sustained Crisis Response, Shift in IMF Representation’, IMF Survey Online, 25 September. —— (2009f) ‘Global Recovery Under Way but Likely to Be Slow, Says IMF’, IMF Survey Online, 1 October. —— (2009g) World Economic Outlook Database (October 2009), IMF, Washington, DC. Jenkins, P. and Tucker, S. (2009) ‘HSBC to Move Chief Executive to Hong Kong’, The Financial Times, 25 September. Kaufman, H. (2009) ‘How Libertarian Dogma Led the Fed Astray’, The Financial Times, 27 April.
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Kennedy, P. (2009) ‘Read the Big Four to Know Capitalism’s Fate’, The Financial Times: The Future of Capitalism, 12 May. Krugman, P. (2009) ‘Saved by Big Government: Reagan Was Wrong’, The Guardian, 10 August. Lagarde, C. (2009) ‘The Crisis Demands We Finish What We Started’, The Financial Times, 7 October. Lawson, N. (2009) ‘Capitalism Needs a Revived Glass-Steagall Act’, The Financial Times: The Future of Capitalism, 12 May. Lloyd, J. (2009a) ‘Europe’s Left Is Failing to Gain from the Crisis’, The Financial Times, 19 April. —— (2009b) ‘Why Not Socialism?’, The Financial Times, 15 September. —— (2009c) ‘Europe’s Centre-Left Suffers in the Squeezed Middle’, The Financial Times, 2 October. Mahbubani, K. (2009) ‘Lessons for the West from Asian Capitalism’, The Financial Times: The Future of Capitalism, 12 May. Mason, P. (2009) Meltdown: the End of the Age of Greed. Verso, London. Mathiason, N. (2009) ‘Britain May Be Forced to Bail Out Offshore Tax Havens’, The Guardian, 14 September. McMurtry, J. (1998) The Cancer Stage of Capitalism. Pluto Press, London. Milne, S. (2009a) ‘The Cuts Agenda Is a Brilliant Diversion from the Real Crisis’, The Guardian, 16 September. —— (2009b) ‘If Labour Loses, It Will Be the Fruit of Its Fatal Faustian Pact’, The Guardian, 30 September. —— (2009c) ‘We Have Been Warned: the Nasty Party Is Still With Us’, The Guardian, 7 October. Murphy, M. (2009) ‘Archbishop Chastens City for Failure to Repent’, The Financial Times, 17 September. Oakley, D. and Waldmeir, P. (2009) ‘Developing Nations Shine in the Crisis Gloom’, The Financial Times, 27 July. Osborne, G. (2009) ‘We will lead the economy out of crisis: speech at the 2009 Conservative Party Annual Conference’, 6 October, Manchester, UK; . Parker, G. and Timmins, N. (2009) ‘Tories and Labour Match Talk of Cuts’, The Financial Times, 6 October. Peel, Q. (2009) ‘Global Insight: Europe’s Left Is Failing’, The Financial Times, 29 September. Phelps, E. (2009) ‘Uncertainty Bedevils the Best System’, The Financial Times: The Future of Capitalism, 12 May. Pickard, J. and Plimmer, G. (2009) ‘RAC Calls for Main Roads to be Privatised’, The Financial Times, 25 August. Pimlott, D. and Farchy, J. (2009) ‘Jobless Level Highest since 1995’, The Financial Times, 12 August. Preston, R. (2008) Who Runs Britain? Hodder, London.
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Quinlan, J. (2009) ‘The Perils of De-Globalisation’, The Financial Times, 21 July. Rachman, G. (2009) ‘Europe’s Plot to Take over the World’, The Financial Times, 6 October. Rappeport, A. (2009) ‘US Unemployment Rate Hits 9.8%’, The Financial Times, 2 October. Rappeport, A., van Duyn, A., and O’Connor, S. (2009) ‘US Job Losses Hit Recovery Hopes’, The Financial Times, 2 October. Rogoff, K. (2009) ‘Why We Need to Regulate the Banks Sooner, Not Later’, The Financial Times, 18 August. Sachs, J. (2009) ‘America Has Passed on the Baton’, The Financial Times, 29 September. Schifferes, S. (2009) ‘Crisis “Cost Us $10,000 Each”’, BBC News, 10 September, . Seager, A. (2009) ‘End of Recession? Not for the Unemployed’, The Guardian, 14 September. Sherwood, B., Timmins, N. and Barker, A. (2009) ‘Leading Tory Councils Plan Radical Cuts’, The Financial Times, 11 August. Shiller, R. (2009) ‘A Failure to Control Animal Spirits’, The Financial Times: The Future of Capitalism, 12 May. Shutt, H. (2009) The Trouble with Capitalism: an Enquiry into the Causes of Global Economic Failure, Zed Books, London. —— (2010) A World Without Profit: Possibilities for the Post-Capitalist Era, Zed Books, London. Sorrell, M. (2009) ‘The Pendulum Will Swing Back’, The Financial Times: The Future of Capitalism, 12 May. Stephens, P. (2009a) ‘Four Things You Must Know about the Global Puzzle’, The Financial Times, 24 September. —— (2009b) ‘Europe Loses Its Lisbon Hiding Place’, The Financial Times, 1 October. Travers, T. (2009) ‘Radical Rightwing Leaders Have the Wind in Their Sails’, The Guardian, 28 August. Turner, G. (2009) No Way to Run an Economy: How the World Slipped into Depression, Pluto Press, London. Wachman, R. (2009a) ‘Union Press G20 to End “Casino Capitalism”’, The Guardian, 1 April. —— (2009b) ‘Reborn Masters of the Universe’, The Guardian, 19 July. Weitzner, D. and Darroch, J. (2009) ‘Why Moral Failures Precede Financial Crises’, Critical Perspectives on International Business, Vol. 5, pp. 6–13. Wolf, M. (2009a) ‘Cutting Back Financial Capitalism is America’s Big Test’, The Financial Times, 14 April. —— (2009b) ‘Seeds of Its Own Destruction’, The Financial Times: The Future of Capitalism, 12 May. —— (2009c) ‘This Crisis Is a Moment, But Is It a Defining One?’, The
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Financial Times, 19 May. —— (2009d) ‘Why It Is Still Too Early to Start Withdrawing Stimulus’, The Financial Times, 8 September. —— (2009e) ‘Wheel of Fortune Turns as China Outdoes West’, The Financial Times, 13 September. —— (2009f) ‘Do Not Learn Wrong Lessons from Lehman’s Fall’, The Financial Times, 15 September. —— (2009g) ‘Why Narrow Banking Alone Is Not the Finance Solution’, The Financial Times, 29 September.
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Index
abortion, US opponents, 46 abstraction and commensuration, processes of, 90 Accetor Mittal, carbon trade division, 88 Acción Ecológica, 227, 232-3 accounting standards, climate applied, 82 Adam Smith Institute, UK, 26, 29, 37-9 ADEA, Peruvian eco-NGO, 230 affinity groups, 211-16 Afghanistan, US occupation, 13 African Development Bank, PBA system use, 98 agrofuels, ‘project-based’ credit, 83 aid, World Bank’s 1998 Assessing Aid, 96 AIDS, medicines patented, 64 AIG, insurance corporation, 15 Aims of Industry, UK, 29-30 Alinsky, Saul, 199 Allende, Salvador, 5 alternative political imaginaries, 116 Amadae, S., 159-60 American Enterprise Institute, 26, 50-1 American Legislative Exchange Council, 51 Andean mining: Chinese investment, 236; community conflicts with, 234 Anderson, Digby, 30 anti-communism USA, 45-7; McCarthyite, 157 anti-corruption, post-Soviet: discourse, 113, 117-18, 127; initiatives, 119, 127; professionals, 126 anti-road protest camps, 192 anti-welfare rhetoric, 141 Argentina, 258; 1999-2002 crisis/uprising, 9, 191, 247; 2001 class enquiries, 202 Armenia, output slump, 10
Armstrong, P., 243 Ascendant Copper Corporation, Canada, 232 Asia: Development Fund PBA system use, 98; growth rate, 258; ‘miracle’ economies, 102 Atlantic Council, 31 Atlantic Fordism, 172 ‘austerity’: competitive, 184; selective, 262 Australia, 258; neoliberal version, 137, 172 Austrian school, economics, 3 autonomist movements, 190 autonomy, ‘dole’, 197 Backhouse, R., 157-8 Bakhtin, M., 215, 218 balance of forces, class, 4, 24, 39, 173, 185 Bank of Sweden Prize, 50 banks: Asian state-owned, 259; Barclays, 87; global bail-out scale, 2, 248, 256, 261; HSBC, 15, 259; of China, 15; top twenty changes, 15 Barber, Benjamin, 194 Barclay, Harold, 190 Barclays Capital, carbon trading, 87 Barnett, Clive, 114 BASF, pharmaceutical corporation, 35 Basle Core Principles, 102 Bayh-Dole Act 1980, USA, 70-1 Beams, N., 241 Bear Stearns, ‘rescue’ of, 13, 15 Belgium, Ecuador mining, 232 Benedict XVI, Pope, 260 bilateral investment/trade treaties, 72-3 Bilderberg Group, 33-6
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THE RISE AND FALL OF NEOLIBERALISM binary thought, privileging of, 117 biological research, as nationa; asset, 70 ‘bioprospecting’/’biopiracy’, 64 biotechnology, 62, 64; corporate interests, 67; financial crisis impact, 73; startups, 69; ‘technology of the future’ rhetoric, 68; USA patentability established, 71 biotic carbon stores, proposed, 86 Blackburn, Robin, 12 blat, 119 Blaug, M., 156 Blumenthal, Sidney, 25 Blyth, Mark, 4 BNP Paribas, France, 13, 15; carbon trading, 87 Boal, Augusto, 209 Bolivia: extractive industries concessions, 226; GDP growth, 224; mining sector, 222-5; 1985 ‘stabilization’ programme, 9; post-neoliberal government, 236 Bono, 37 Bosnia Herzogovina, output slump, 10 ‘bossnapping’, France, 191 BP, 34 Brazil, 258; landless peasant movement, 191; TRIPs opposition, 66 Brenner, N., 6 Brenner, Robert, 258 Bretton Woods Agreement, dismantlement, 4, 11, 241-2, 257 ‘Bribe Payers Index’, Transparency International, 125 ‘BRIC’ countries, 74, 183, 258 British American Tobacco, 34 British Centre for Policy Studies, 26 Brittain, Samuel, 260 Brookings Institute, 121 Brown, Gordon, 260 Brown, Wendy, 43, 47, 137, 199 Bryan, D., 244 Brzezinski, Z., 37 Buckley, William, 47 budget deficits, monetarism overthrown, 16 Bush, George H.W., 48 Bush, George W., 46, 48, 54 Business Environment and Enterprise Performance Survey, 120 calculability ideals, expert ingenuity, 85-90
Callon, Michael, ‘overflows’ concept, 91 Cameron, David, 261 Camp for Climate Action, 192 Campus Watch, 53 Canada, neoliberal shift, 172 Cantor Fitzgerald, carbon trading, 87 capital accumulation, 176-7, 180; financial asset trading, 240; new possibilities for, 90 capitalism: adaptability, 179; ‘Asian’, 259; ‘moral’, 261; Rhenish, 174; social market model, 116; varieties of, 182, 185 carbon markets/trading, 7, 61, 77, 91; accounting ‘offsets’, 84; ‘assets’, 86, 88; commodity dealers, 88; credits, 83-4, 89; ‘equivalences’ abstract measurements, 82, 89; permits, 87; size of, 78; US-proposed system, 86 Carlsson, C., 194 Carlyle, Thomas, 153 carnivalesque hacking, 217 Carroll, W., 4 Carson, C., 4 Castree, N., 115 Cato Institute, 126 CBI (UK Confederation of British Industries), 28 Central Africa, forest land grabs, 86 Centre for Policy Studies, 29 ‘centres of persuasion’ neoliberal, 49, 51 centri sociali, Italy, 192 CEPA, Bolivian NGO, 227 Chan, Michelle, 88 Chang, H.-J., 114 Chevron, 85 Chicago, 172; Board of Trade, 78; Mercantile Exchange, 243; University economics school, 3, 119, 180, 185 Chile: Chicago boys/Pinochet era, 5, 8, 172-3 China, 256, 258-9; Construction Bank, 15; economic stimulus package, 14; external mining investments, 236; hydroelectric dams, 85; imports from, 13; low wage platform, 245; RWE chemical factory, 84; technology transfer demands, 74; unsustainable growth, 183 Christian Aid, 247 Church of England, 260
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INDEX CIA (Central Intelligence Agency), 28, 35 CIPCA, Peruvian NGO, 227 CISEP, Bolivian NGO, 227 Citigroup, 13, 15 citizenship, individual responsibility model, 7-8 City of London Polytechnic, 32 civil liberties curtailment, 249 civil society: international activist, 223, 230, 234 Claimants Unions, 192 Clandestine Insurgent Rebel Clown Army (CIRCA), 206-7, 209, 211-12, 215-17; ‘War on Error’, 214, 218 class inquiries, 1970s Italy, 202 climate: action camps, 189; carbon market response, 77; change, 202; ‘fictitious’ commodity, 79-81; greenhouse gas ‘safe’ level, 82; privatized, 78; technology transfer demands, 74 Clinton, Bill, 78 cliometrics, 162 CND (Campaign for Nuclear Disarmament), 32 Colander, D., 157, 160 Cold Warriors, US intellectual elite, 45 Columbia University, biomedical patents, 71 commodification, 12, 79-81 Common Cause Ltd, UK, 28 Common Place, Leeds social centre, 189 ‘commons’: building of, 196; defence of communal land, 231; intellectual, 184; private appropriation of, 61; reclaiming, 193 Compañía de Minas Buenaventura, Peru, 228 Compass, 52 competitiveness, ‘logic’ of, 7 CONACAMI organization, Peru, 227, 230-1 CONAIE movement, Ecuador, 227 CONAMAQ movement, Bolivia, 227 conditionality(ies): basic similarity of, 174; ‘selectivity’ version, 95; World Bank redefined, 94 Congress for Cultural Freedom, 35 Conservation International, 87 Constellation Energy, carbon traders, 87 consultants: carbon trading abstractions, 83; culture of, 105
Convexivity, 155 corporate lobbying organizations, 23-5 corporate-community power assymetries, 228; land acquisition mechanisms, 229 corruption, notion of, 113; ‘free-floating’ signifier, 127; ‘industry’, 117-18; ‘measuring’, 125; managers’ perceptions, 121; theorizing, 119 cost-benefit analysis, 77 Cotacachi-Intag, Ecuador, 232, 235 Council on Foreign Relations, USA, 25 ‘counter establishment’, 25 Countrywide, USA mortgage bank, 13 CPIA (Country Policy and Institutional Assessment), World Bank, 97, 107; empirical reality lack, 101; neoliberal norms, 98, 100, 102-3; ratings, 99 Credit Default Swaps, 11 Credit Suisse: EcoSecurities acquisition, 87; securitized carbon deal, 88 Critical Mass, protest tactic, 209 Crozier, Brian, 28-32 cultural activism, anti-capitalist, 208-9, 218-19; audience participation, 210 Cultural Warriors, USA, 46 ‘culture industries’, oligopolies, 63 Curtis, Lionel, 25 Czech Republic, 10 dam projects: ‘offsets’, 83; irrigation damage, 85 Davignon, Etienne, 35 de Sardan, J. P. O., 127 Debord, Guy, 207 debt: consumer-led, 8, 246, 255; Global South bondage period, 67; USA, 245 decision-making, market ‘superiority’, 63 Debt Sustainability Network, 98 DeCOIN, Ecuador eco-NGO, 232-3 democracy: direct, 195-6; representative, 194 Demos, 52 dependency culture, chimera of, 144 deregulation: labour market, 5, 7, 30, 37 derivatives, 11; carbon, 90 Deutsche Bank, carbon trading, 87 developing country policy analysis, World Bank undermined, 105 Diamond, S., 45 Diggers, 190 Dillon Reed, 13
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THE RISE AND FALL OF NEOLIBERALISM direct action, non-violent, 215 disciplinary apparatus, neoliberal state, 146 Ditchley Foundation, UK, 31 DNV, Norwegian carbon consultant, 86 Doha Declaration 2001, TRIPs limiting, 72 dollar-gold link, broken, 242 donor agencies/community: expatriate staff, 105; ‘pedagogical’ role, 96 dot.com bubble, 247 ‘dreampolitiks’, 207, 210, 218 Duménil, G., 4 Duncombe, Stephen, 199, 207, 209-10, 218 Dunkel, Arthur, 34 Earth First, 190 East Asia, ‘miracle’ economies, 102 Eastern Europe, post-Soviet: economic growth, 112-13; economic laboratory, 127; low wage platform, 245 EBRD (European Bank for Reconstruction and Development), 120, 123 Eco-NGOs, media offensives against, 2345 ‘ecological dominance’, notion of, 176-8, 180-4 economic crises, neoliberal scope, 175 economic exchange, ‘natural law’ of, 2 Economic League, UK, 28 economic sector state promotion, 101 economics: formalist revolution, 160; ‘imperialism’, 154, 166; informationtheoretic, 164; mainstream, 153; marginalist, 3, 155, 162; micro-macro split, 162, 165, 168; neo-classical, 116; supply-side, 4 ECOVIDA, Peruvian eco-NGO, 230 Ecuador: Accíon Ecológica, 227, 232-3; extractive industries concessions, 226; GDP growth, 224; mining sector conflicts, 222-3; oil sector, 225; postneoliberal government, 236 Eden, Douglas, 32 Egypt, RWE chemical factory, 84 elite(s): ex-Soviet indigenous, 112; policymaking, 24-6, 48-9; global, 189; profits taxes cut aim, 246; rent-seeking, 120; ruling, 240; state apparatus intellectuals, 52
enemies and allies, class, 200 Eni-Agip, 85; pollution rights validation, 86 Enron, 88 environmental justice movements, 91 equilibrium theory, economics, 156, 159, 162 ‘equivalents’, emissions reductions abstractions, 79-81; expert creation ingenuity, 85-7 Esping-Andersen, Gosta, 140 Eucalyptus plantation, as carbon credit, 84 European Commission, 37 European Round Table of Industrialists, 35 European Union: ETS, 83; financial assets-GDP ratio, 12; TACIS and PHARE programmes, 127; TRIPSplus protagonist, 74 Everett, J., 127 ex-USSR, economic development, 112; external experts, 119 extractive industries: Andes FDI, 222-6; export oriented, 226 Exxon, 34 factory occupations, Visteon, 191 Fannie Mae, 15 FDI (foreign direct investment) privileged, 224-5, 232 Federation of Women Peasant Vigilance Organization, 230 Feulner, Ed, 50 FINA, 35 Financial Times, editorials, 257 finance capital(ism), 1, 179; asset bubbles, 184; corporate profit share, 245; dominant position, 181; global assetsGDP ratio, 12; hyper-mobile, 176, 182; market collapse, 8, 57; overaccumulation, 180; universal character, 244; write-downs, 256; see also, banks ‘financialization’, 2, 11, 61, 67, 71, 164, 240, 243 ‘fiscal prudence’, demands for, 261 Fisher, Anthony, 27 fixed currencies system, 1973 break, 243 Flannery, Tim, 81 FOBOMADE, Bolivian NGO, 227 Food and Agriculture Organization, UN, 86
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INDEX Foot, Michael, 32 foreign exchange transactions, intensity of, 244 forests: carbon absorption uncertainty, 87; land grabs, 86 Fortis, 35; carbon trading, 87 fossil fuel dependence effects, 80-1, 202 Foucault, M., governmentality theory, 115 foundations, corporate sponsored, 25, 31 France: finance capital corporate profit share, 245; May 1968, 251 Frank, Thomas, 46 Fraser Institute, Canada, 126 Fraser, Sir Antony, 4 Freddie Mac, 15 free markets ideology, ‘spontaneous order’, 3 Freedom Association, 29 Freedom House, 122-3, 125; ‘Nations in Transit’ ratings, 126 Freiburg School, Germany, economists, 3 freakonomics, 153, 166-7 Friedman, Milton, 3-4, 9, 27, 50, 163 Friends of the Earth, 88, 227, 233 Frimpong-Ansah, J., 153 Fukuyama, Francis, 8 G8 2005 Gleneagles protests, 206, 208: camps, 189; clown groups presence, 211-12 G20, 258; April 2009 meeting, 189 Gaddy, Clifford, 121 Galbraith, J.K., 157 game theory, 165 GATS (General Agreement on Trade in Services), WTO, 66 GATT (General Agreement on Trade and Tariffs), 64; Uruguay Round, 34, 36 GDP growth rates, advanced economies’ decline, 258 General Electric, finance division, 88 General Motors, 34; financial arm, 245 generic drug manufacture, 68 Genetech, stock exchange listing, 71 Georgia, output slump, 10 Germany: Christian Democrats, 261; 1990s accumulation crisis, 11; Freiburg School, 3 Giroux, H., 207-8 Glimcher, P., 168 Global Greengrants Fund, 230, 233
global production networks, 62 Global South, 1979-80 balance of power away from, 67 global warming, commodity approach, 823 Goldman Sachs, 15, 78; carbon trading plans, 87 Gore, Al, 78 Gouldner, Alvin, 43 governance: ‘good’ ideology, 96, 126; new structures, 25 Gowan, Peter, 257 Gramsci, A., 52 Greece: dictatorship fall, 251; 2008-9 protests, 191 Green New Deal, 185 Group of Twenty, 258 GRUFIDES, Peruvian NGO, 227, 230 Gulf of Guinea Citizens Network, 86 Gwynne, R., 224 Hakim Bey, 215 Hall, Stuart, 2 happiness, economics of, 166 Hardt, Michael, 201 Harris, Lord Ralph, 26-7, 33 Hartman, Yvonne, 137, 140 Harvard University, 9, 82, 119; Institute for International Development, 127 Harvey, David, 1, 23, 39, 116, 257 Haseler, Stephen, 32 Hayek, Friedrich von, 3, 26-7, 38, 50, 54, 63, 136, 160 Healey, Denis, 32, 35 hegemony: concept of, 24; discourses of, 47; Marxist notions of, 115; USA, 181, 257 Hellman, Joel, 119-20 Heritage Foundation, USA, 4, 26, 32, 501, 122, 126 Hodgson, Godfrey, 46-7 Holloway, John, 193, 197-8 Hoskyns, John, 29 housing boom(s), 1-2 HSBC bank, 15; Hong Kong relocation, 259 human capital theory, 162 Hungary, IMF bail-out, 14 Huntington, Samuel, 36 IBM, 34
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THE RISE AND FALL OF NEOLIBERALISM ICC (International Chamber of Commerce), 33, 36; WTO lobbying, 34 Iceland: bail out, 14; bankruptcy, 258; neoliberal shift, 172; protests, 191 Ickes, Barry, 121 IKB Bank, Germany, 13 IMF (International Monetary Fund), 36, 112, 126, 257; growth forecasts, 256; Poverty Reduction and Growth facility, 98; voting rights system, 259 ‘imperfect competition’, 161-2; World Bank version, 101 import-substitution model, 173; prevention of, 114 incapacity benefits tightening, UK, 143 income support payments, UK, 141 India, 256, 258; economic stimulus package 14; technology transfer demands, 74; TRIPs opposition, 66; Uttaranchal dam project, 85 indigenous peoples, land-eco struggles, 222-3 individual responsibility, political discourse of, 145 Indonesia, 258; forest land grabs, 86; REDD schemes, 87 Industrial and Commercial Bank of China, 15 Industrial Research and Information Services Ltd, 28 inflation: monetarist obsession, 7; 1970s oil crisis, 50 innovation, patent policy impediment, 65 Institute for Economic Affairs (IEA), UK, 4, 26-7, 30, 33 Institute for European Defence and Strategic Studies, 32 Institute for Public Policy Research, 52 Institute for the Study of Conflict (ISC), UK, 28-9, 32 Intellectual Property Committee, corporate, 66 intellectual property rights, 7, 63; free trade link construction, 65; global economic restructuring role, 60-1 interest rates: low policies, 11; marketdetermined, 102; 1979-80 increase, 67; prevailing, 241; 2004-6 rise consequences, 13, 243 Intergovernmental Panel on Climate
Change (IPCC), 83-4 International Situationists, 190, 209 Inti Raymi gold mine, Bolivia, 233-4; compensatory mechanisms, 235 Iran, Revolution, 67 Iraq: Anglo-American invasion/occupation, 13, 56, 257, 259; ruling class ‘realist’ opposition, 24 Ireland: budget deficit, 16; financial assetsGDP ratio, 12 Italy, Berlusconi governments, 37 Ivens, Michael, 30 Japan, 183; critique of World Bank, 95; financial assets-GDP ratio, 12; International Corporation Agency, 232; 1990s accumulation/bank crisis, 11, 247 Jay, Peter, 27 Jenkins, Roy, 32 job losses, global scale, 256 Joe Coors, 52 John M. Olin Foundation, 52 Johnson, Richard, 146 Jolie, Angelina, 37 Joseph, Keith, 29 JP Morgan Chase, 15; Climate Care acquisition, 87 Juris, Jeffrey, 215 Kalecki, M., 158 Kaufmann, Daniel, 120 Kay, C., 224 Kenney, M., 70 Kesey, Ken, Merry Pranksters, 209 Keynes, J. M., 160; ‘fetish of liquidity’, 90; The General Theory, 38, 158 Keynesianism/era of, 3, 155, 161, 250, 261; ‘Atlantic Fordism’, 43; ‘culture industries’, 63; discrediting of, 4, 134; goals of, 136; golden age of, 1; irreducible uncertainty principle, 163; national regulation form, 242; neoliberal influenced, 157; 1970s crisis of, 60, 67, 167; proto version of, 147; 2008-10 version of, 14, 16, 56; USA version, 158; welfare state, 239, 249 Kissinger, Henry, 36 knowledge(s): -based economy (KBE), 60, 63, 184-5; carbon market redistribution, 89; expert claims, 117, 127;
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INDEX intellectual property rights, 175; mining companies assymetrical, 236; primitive accumulation of, 72; ‘scarcity’ construction, 63; World Bank ‘exercise’, 103; World Bank custodian self-image, 60, 96, 104-6 Koch Family Foundation, 52 Kommunalkredit, carbon trading, 87 Krastev, I., 119, 125, 127 Kristol, Irving, 45 Kropotkin, Peter, 190 Kyoto Protocol, 82; carbon market boost, 88; Clean Development Mechanism, 85; Emissions Trading Scheme, 78 Laboratory of Insurrectionary Imagination, 208 labour market: employment precacity, 141, 144; ‘flexibility’, 8, 134, 146, 173, 239; peripheral, 140; state facilitated ‘flexibility’, 135, 143; temporary, 133 Labour Party UK: Atlanticist tendency, 31; neutering of, 30, 32; New Labour, 52, 252, 260 laissez faire, state project, 77 Landreth, H., 157, 160 Larner, W., 44, 137 Latin America, structural adjustment, 8 Latvia: bail-out package, 14; bankruptcy, 258 Lawson, Nigel, 28 Lévy, D., 4 ‘left’, The: political, traditional models, 188 Lehman Brothers, 14-15 ‘less state’, misleading rhetoric, 136 ‘leverage’, 11 Leyshon, A., 12 liberalization, trade and capital, 5 life expectancy, 10 life sciences: developments in, 60; patenting, 71; US federal research funding, 70 Lisbon Agenda, 37 Lloyds TSB, bank, 15 local ‘ownership’ World Bank talk, 96 London School of Economics (LSE), 3, 27 Long Term Capital Management crisis, 247 ‘loot chain’, notion of, 125 low-wage platforms, 245
Luxemburg, Rosa, 153, 250 Machlup, Fritz, 3 Maclennan, Robert, 31 macroeconomics, IS/LM approach, 159 ‘Make Poverty History’ 2005 march, 207, 213, 216 Mandleson, Peter, 245 marginalism, economic, 154-5, 162 ‘market, the’: disembedded transactions, 177; fundamantalism, 30; imperfections approach, 165; /state misleading dichotomy, 77-8 marketization, social, 5 ‘marketplace of ideas’, 63 Marshall, Alfred, 154 Marx, Karl, 38, 90, 175, 181-2 mass media, 180; pro-corporate commentators, 260-1 Mayer, M., 196 MBIA, USA, 13 means testing, welfare benefits, 135, 139 media tactics, political activism, 199 medicines, patents, 64 mercantilism, financial, 184 mergers, corporate, 243 Merkel, Angela, 37, 261 Merrill Lynch (Bank of America), 37, 86, 261 methane: capture ‘offset’, 84; gas flaring, 85 Mexico, 258; 1994 peso crisis, 9, 247 Miliband, Ralph, 39 military-industrial complex, 47 Miller, Peter, 146 Minas Gerais, Brazil, activists, 84 Minera Yanacocha gold mine, Peru, 228-9 Mining and Communities network, 227 mining corporations: ‘enclave economies’, 229; media offensives by, 231, 234-5 Minsky, H., 179 Mirowski, P., 160 Mitchell, Timothy, 91 Mitsubishi, Bishi Metals subsidiary, 232-3 Mkandawire, T., 105 mobile phones, activist use, 214 modernity, conferring of, 127 Moldova, ‘transformational depression’, 9, 10 molecular biology research, as US national asset, 68
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THE RISE AND FALL OF NEOLIBERALISM Mondragon co-operative, 194 monetarism, 4; inflation focus, 7 monopoly, 157-8 Mont Perelin Society (MPS), 3-4, 26-30, 33, 38-9, 49-51 Monterrico Metals, 230; Peruvian subsidiary, 231 Morgan Stanley, carbon trading, 87 mortgages, 12, 244, 248 ‘movement of movements’, 190 Moyer, Bill, 200-1 Mudge, S., 45 mutual aid, 193-4
NGOs (non-governmental organizations): ‘excessive’ leadership instances, 236; international, 227; local community relations, 228 Nigeria, 86; Federal High Court, 85; oil emissions ‘equivalents’ ingenuity, 85 Nixon, Richard M., 51, 242 No Borders group, 192 non-linearity, fetish of, 91 Nordhaus, William, 158 Northern Rock, UK, 13, 15 ‘nowtopians’, 194 nuclear energy, ‘project-based’ credit, 83
National Association for Freedom, 32 national bailouts, IMF/EU, 14 nationalization, UK, 250-1; ‘rescue’, 261; subsidy justification, 246 Nature Conservancy, 87 Negri, Antonio, 201 neo-imperialism, neoliberalism as, 114 neoliberalism(s): Andean countries form, 224; Anglopohone versions, 44, 137; calculable world view, 91; ‘common sense’ claim, 2; crisis ‘blowback’, 1845; discourse deconstruction, 115; growth rates failure, 1; ideological origins, 2-3; intellectual history of, 116; intellectuals’ ‘war of position’, 55 interventionist, 163; legacy influence, 175; ‘naturalizing’, 43; political movements need, 45; political project, 6; reconstituted ‘green’, 219; social problems individualized, 48, 137; state project, 10, 77; varieties of, 6, 147, 172, 179; working class gains roll back, 114, 239 Nestlé, 34 Netherlands, aid criteria, 98 neuroeconomics, 168 New Century Financial, 13 New Classical Economists, 163-4, 168 New Deal for the Unemployed, New Labour programme UK, 142, 245-6 New Deal settlement, USA, 50; attacks on, 53 ‘new economy’, conceit of, 10 New Right Agenda, 241 New Zealand, neoliberal shift, 172 Newcombe, Ken, 78 Newmont Mining Corporation, 228, 233
Obama, Barack, 56, 78; healthcare plan opposition, 57 off-shore tax havens, 246 ‘offests’, climate benefit units, 83; ‘additionality’ judgments, 89; bundled assets, 88; expert creation ingenuity, 84; regressive redistribution tendency, 86 Ordo-liberal social market economy, 171, 185 ‘organic intellectuals’, neoliberal, 52-3, 56 organization, experimentation with forms, 195 ‘over-the-counter’ financial instruments, 11 ownership models, conflicts over, 226 Oxfam: America, 230-1; International, 227 Papua New Guinea, forest land grabs, 86 Paris: Club, 98; 1938 ‘neoliberal’ meeting, 171 participatory visioning, 201 patent(s): biotech attractive, 69; Global North agencies, 73; purpose redefined, 65; scope, 64; US law reform coalition, 70-2; Peck, Jamie, 6-7, 44-5, 114, 116, 179 Pelaez, E., 197 penal policies, Victorian, 145 pension provision, erosion, 247 People’s Global Action, 191 Performance Based Allocations, conditionality version, 96-7 Perle, Richard, 46 personnel interchanges, global elite, 34-5 Peru, 235; extractive industries concessions, 226; GDP growth, 224;
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INDEX international investment agreements, 225; June 2009 repression, 222, 236; mining disputes, 223 Pfizer, 66 pharmaceutical transnational corporations, 66; domestic power of, 67; 1970s profitability crisis, 68; profits size, 71; revenues of, 69; US trade policy dominance, 67 Pinochet, Augusto, 5, 8 Pirie, Madsen, 38-9 Pittsburgh summit 2009, 259 Poland, 10, 172; ‘shock therapy’, 9; ‘transformational depression’, 9 Polanyi, Karl, 45, 77, 90 ‘fictitious commodity’ concept, 79 Polanyi, Michael, 3 policy entrepreneurs, 55-6 policy-based lending, World Bank, 95 political activism, anti-capitalist: consensus decision-making, 212-13; cultural, see above; emotional content, 198, 214-15, 218; ghettoized danger, 199; professionalization danger, 197; tactical performance, 210 political inevitability, neoliberal claim, 43 politics: aestheticized, 208; of possibility, 198 pollution rights: ‘cap and trade’, 82; China selling, 85; 1970s USA, 78 Portugal, dictatorship fall, 251 ‘positive welfare’, rhetoric of, 138 post-war settlement, national regulation, 240 postmodernism, 168 poverty, individualized blame, 144 price mechanism, dual role, 179 privatization, 2, 5, 7, 135, 239, 247-8, 251, 262 production processes: ‘flexible’, 62; innovations, 243 profit: new sources of, 240; rate of, see below; taxes on, 246 Project for the New American Century, 46 Project Underground, 230 PRSPs (Poverty Reduction Strategy Papers), 98; policy diversity lack, 99 Public Choice Society, 159 public choice theory, 162 public-private partnerships, 5; training providers, 142
Pulido, Laura, 214 Purnell, James, 143 R&D costs, pharmaceuticals, 68-9 Rabobank, carbon trading, 87 race-to-the-bottom strategies, 7 Rafferty, M., 244 Rainforest Action Network, 233 RAND (Research and Development Corporation), 159 rate of profit: downturn, 241-3; global average, 176; pressures on, 247 rational choice, social sciences dominance, 159 rational expectations, theory of, 4, 163 Rave/free party culture, UK, 190, 192 Reagan, Ronald, 5, 48, 136, 163, 172 rebel clowns, 212 Recombinant DNA research: techniques, 69; public concern problem, 70 REDD carbon scheme, 86; indigenous peoples movements split on, 87 reductionism, economic, 154; microeconomic principles, 156 Rees Mogg, William, 27 ‘rent-seeking’, 120 Republican Study Committee, 51 research foundations, business financed, 46 ‘resistance’, theory, 115 resource colonialism, 249 Rio Banco project, Peru, 230 Rio Tinto, 34 riot police, mocking of, 216 Rist, P., 219 Rockefeller, David, 36-7 Rose, Nikolas, 146 Rougier, Louis, 3 Round Table group, 25 Royal Bank of Scotland, 15 Royal Institute for International Affairs (Chatham House), 25 Rüstow, Alexander, 171 ‘rule of law’, state responsibility, 6 ruling class, fractions of, 24 rural land struggles, 235; international support, 232; urban support, 226-9 rural land use, pro-corporate shift, 225-6 rural poverty, Andes countries, 224 Russia, 172, 258; ‘anti-corruption’ use, 113; coal mines, 84; low wage
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THE RISE AND FALL OF NEOLIBERALISM platform, 245; ‘shock therapy’, 9 Russian Revolution, impact of, 250-1 RWE, Germany, ‘offset’ projects, 83-4 Sachs, Jeffrey, 9 same-sex marriage, US opponents, 46 Samuelson, Paul, 156-8, 160-1; mathematics use, 162 San Francisco, Critical Mass origins, 209 Sandor, Richard, 78 Sarah Scaife foundation, 52 Sassen, Saskia, 12 Saudi Arabia, 258 Schumpeterian Workfare Post-National Regime (SWPR), 138-9, 147 ‘securitization’, 11-12, 87, 244 ‘seizure of presence’, 215 Seldon, Arthur, 27, 30 self-esteem ‘training’, 145 self-management, collective, 193, 196 self-suffiency, ideological emphasis, 133 Serco Civil Government, 146 shareholder value: dominance of, 182; World Bank realities, 104 Shell, 34, 85 Shleifer, Andrei, 119, 127 ‘shock therapy’, economic, 9, 112; anticorruption rationalization, 113 single parents, 135, 137 ‘skills’, aid industry, 96; ‘job search’, 145 slave rebellions, 190 Slovakia, 10 Slovenia, 10 small and medium farms, threatened, 226 Smith Institute, 52 Smith, Neil, 46 Social Affairs unit, UK, 30 social centres, UK, 189-92 social control, 140 social democracy: countering project, 27; European parties, 252; Nordic, 174 Social Democratic party, UK, 31-2 social enterprise, seduction of, 196 social marginality, new conceptions of, 145 social movement organizations (SMOs), 226; evaluation phases, 201-2; land use struggles support, 227 social-collectivist institutions, discrediting of, 134 Socialist Equality party, national organizations, 253
Société Générale de Belgique, 35 Soederberg, S., 106 South Africa, 183, 258 South Korea, 258; finance capital corporate profit share, 245; RWE chemical factory, 84 Soviet bloc, collapse, 117, 172 Spain: Aznar government, 37; dictatorship fall, 251 spectacles: ‘ethical’, 210; hijacking of, 209; of ‘terrorism’, 208; War on Terror dominant, 218 squatting, 192 stagflation/structural crisis 1970s, 4, 7 Stalinism, 251 Stanford University, biomedical patents, 71 state, the; ‘African vampire’, 153; calculation and regulation role, 77; ‘capture’ notion, 120, 125; corporate subsidizing, 147; economic role defined, 6; labour market underwriting, 140; market rule extension role, 45-6; neoliberal project, 10; private services involvement, 139; ‘rolling back’ of, 136; system, 248; Westphalian inter-system, 182 Stern, Nicholas, 86 Stiglitz, Joseph, 104; ‘Commission’, 107 strategic thinking, social movements need, 201 Strauss, Norman, 29 structural adjustment loans/policies, 8-9, 94-5, 173-5 student revolt, 1968, 28 ‘sub-prime carbon’, danger of, 88 sub-prime mortgage crisis, 57 subcultural spaces, limits of, 199 Sumitomo, carbon trading, 87 ‘Summit’ mobilizations, 191 Sun Tzu, The Art of War, 216 supermarket sit-ins, 191 supply-side policies, 134 surplus value: excessive claims on, 249; finance capital dependence on, 180 Sweden, 1990s bank crisis, 247 tactical media, 212 Tarshis, L., 157-8, 162 Taussig, M., 153 tax avoidance, 246-7; revenues, 13
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INDEX Tax Rate Committee, USA, 55 Thalidomide, regulatory costs increase impact, 68 Thatcher, Margaret, 5, 27, 36, 136, 163, 172; ‘Thatcherism’, 29 ‘There is No Alternative’, 1 ‘the corrupt’, essentialist definitions, 118 The Observer, ISC publicizing, 29 The State in a Changing World, 101 The Times, market fundamentalist, 27 ‘The Vaccuum Cleaner’, 208 Theodore, Nik, 116 think tanks, 4, 8, 24-6, 55-6; Atlanticist, 31; neoliberal-conservative, 47, 51; New Labour, 52; rationalizations, 54; role, 115; UK, 29-30, 52; ‘universities without students’, 53; USA, 44, 46 ‘Third Way’ ideology/policies, 164, 173-4; New Labour version, 138 Thrift, N., 12 Tickell, Adam, 6-7, 44-5, 114 time-space, compression/distantation, 1769 Tituaña, Auki, 233 trade unions, 251; attacks on, 30, 39, 141, 239 ‘transformational depression’, 9-10 transition economies, post-Soviet, 114; -neoliberal relation, 112; captor firms, 120 transnational capitalist class, emergent, 23 Transparency International, 122-3, 127; ‘Corruption’ perception, 125; founding of, 126 Trapese, group, 189 Treasury Department, USA, 55 tree planations, ‘offset’, 83 Trexler, Mark, 89 Trilateral Commission, 33, 35, 37 TRIMs (Trade-Related Investment Measures agreement), WTO, 66 TRIPS (Trade-Related Aspects of Intellectual Property Rights agreements), WTO, 60, 66, 69; innovation undermining, 72; negotiated, 66; neoliberal centrality of, 67; ‘plus’ provisions, 73; USA favouring, 65 Trotskyist internationalism, 45 Troubled Asset Relief Programme, USA, 14
Turkey, 258 UBS bank, Switzerland, 13 Uitermark, J., 217 UK (United Kingdom): aid criteria, 98; banks’ rescue package scale, 14; budget deficit, 16; Conservative party, 261; corporate tax refusal, 247; DfID, 127; economics, 156; ‘Euroscepticism’, 23; financial sector corporate profit share, 245; global securities market share, 12; manufacturing decline, 13, 243; neoliberal think tanks, 4; neoliberal version, 138, 171; New Labour, 52, 252, 260; Peru Support Group, 231; ruling class, 240, 250; taxpayer finance sector costs, 256; welfare state, 246 Ukraine: ‘transformational depression’, 9; bail-out package, 14 UN (United Nations), 85, 95 unemployment, 134; 1930s mass, 155; unemployed people as citizen consumers, 144 uneven development, dynamic of, 184 Unilever, 29, 34 universities: biotech departments, 69; developing world eroded, 105-6; Manchester, 3; patent reform interest, 70-1; USA life sciences departments, 68 USA (United States of America): Acid Rain Programme, 78; balance of class power shift 1979-80, 67; Balance of Trade, 242; Bayh-Dole Act 1980, 701; budget deficit, 16; Cold War policy, 160; conservative movement/coalition, 44, 46-8, 53; de-industrialization, 13, 243; debt, 246; Democrat Party, 30; domestic patent reform, 67-8; economic stimulus package, 14; economics curricula, 156-7; ‘exceptionalism’, 23; faux-Keynesian interventions, 56; Federal Reserve Board, 8, 13, 245; financial assetsGDP ratio, 12; financial sector support scale, 14; global securities market share, 12; Government Accountability Office, 85; hegemony, 181, 257; life sciences patent coalition, 72; neoliberal think tanks, 4, 47, 51; neoliberal
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THE RISE AND FALL OF NEOLIBERALISM version, 43, 171; New Deal, 3; originated assets write-down, 15; Overseas Private Investment Corporation, 225; right-wing foundations, 31; ruling elite, 240, 242; S&L crisis/scandal, 247; social sciences, 159; trade deficit, 13; Treasury, 55; TRIPs favoured, 65; universities budget strain, 69; USAID, 127 user charges, public services, 239 USSR (Union of Soviet Socialist Republics), demise, 8, 46, 67 utility theory, economics, 155, 166 Uzbekistan, 10 value: exchange logic, 179; use-exchange contradiction, 175-6, 182 Via Campesina, 191 Vietnam War, 251; economic impact, 242; opposition to, 28 virtual economies theory, 125 Vishny, Robert, 119 Vitol, energy speculator, 88 Von Mises, Ludwig, 3 wages, downward pressure, 134, 142, 173 Wagner, T., 181 Wall Street Journal, editorial position, 50 Walras, Léon, 161 War on Terror, climate of tension, 218 ‘Washington Consensus’, 7-8, 95, 100-2, 105, 119, 173, 239; Latin American crises, 9; World Bank apparent shift from, 94 Watson, Matthew, 2 Waxman-Markey Act, USA, 86 Weitzman, Martin, 82 welfare state, as safety net, 139 welfare: A.C. Pigou theorizing, 160; ‘dependency’ rhetoric, 135; microregulated, 145; state as safety net, 139; -to-work/workfare
programmes, 133, 135, 138-40, 142-3, 147 Wells Fargo, 15 Whitehorn, John, 28 Williams, Shirley, 31 Williamson, John, 8 WIPO (World Intellectual Property Rights Organization), 72-3 Wohlgemuth, M., 171, 185 Wolf, Martin, 262 Wolfensohn, James, 96, 104 Wolfowitz, Paul, 46 Working Tax Credit, UK, 141 World Bank, 6, 112, 120, 123, 126, 174, 259; Africa Report 1994, 96; aid practices, 102, 107; analytical clout, 103; Anti-Corruption in Transition, 121; ‘anti-poverty’ agenda, 127; carbon funds, 78; Country Policy and Institutional Assessment (CPIA), see above; development knowledge economies of scale, 104; ‘extreme poverty’ definition, 256; From Plan to Market 1996, 9; ‘governance’ promotion, 100-1; Institute, 122, 125; International Finance Corporation, 229; knowledge role/agenda/claims, 94-5, 99; local ‘ownership’ talk, 98; neoliberal agenda, 106 Multilateral Investment Guarantee Agency, 225; PRSPs, see above World Economic Forum, Davos, 33, 36 World Socialist Web Site, 252 world system theory, 182 World War II, UK impact, 250 WTO (World Trade Organization), 6, 34, 36, 64, 72; current round stalemate, 74; Seattle demonstrations against, 190; TRIPs, see above Zapatistas, 191, 197 Zoellick, Robert, 259
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