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Collateral
Damage: Neo-Liberalism
By
Jeremy Brecher and Tim Costello
Even
as they were planning military action in Afghanistan, US
leaders were struggling with the contradictions of
capitalism. One can almost hear them sighing, ah, if only we
could bomb the recession!
Capitalism
is an amazingly dynamic system, but it has some flaws. We're
seeing one of them as millions of people in the US and
around the world lose their jobs as a result of global
recession.
In
orthodox economic theory, the market automatically assigns
human and material resources to meet human needs.
Unfortunately, the history of capitalism indicates
otherwise. Capitalism's amazing growth spurts have been
punctuated by recessions, depressions, and long periods of
stagnation. While every such period has its own specific
causes, underlying them all is the fact that in a capitalist
system production is conducted not to meet human needs but
to make profit for private enterprises. No matter how great
the unmet needs, people will be laid off and production
facilities closed down when conditions make them
unprofitable.
Over
the centuries, capitalist societies developed a wide range
of non-market structures that reduced the gyrations of boom
and bust. 19th century banking crises led to the development
of central banks like the US Federal Reserve Board to
control money and credit. The Great Depression led to the
use of low interest rates and government budget deficits to
"prime the pump" of stagnating economies -- generally known
as "Keynesian" policies after their famous advocate the
British economist John Maynard Keynes. Even minimum wage
laws and trade unions were seen by progressive economists as
non-market means to correct the downward spiral of
capitalist crises.
While
conservatives regularly attacked Keynesian policies, in
practice they generally turned to them when economies went
south. Back in the recession of the early 1970s, President
Richard Nixon, a life-long conservative Republican,
astonished many when he declared himself a Keynesian. He cut
interest rates, let Federal budget deficits soar, and
imposed wage and price controls. But the notorious
"stagflation" -- a continuation of inflation even in times
of recession -- intensified. Long-term profits fell steeply
worldwide.
Enter
neo-liberalism, aka the global free market. Economists,
corporate leaders, pundits, and politicians joined in a
soaring chorus demanding a return to their imagined
Victorian capitalism of world markets unrestricted by social
legislation or government regulation. They called this
fast-forward to the past "globalization."
Now,
faced with the prospect of a global recession, the whole
pack suddenly turns back to Keynes's classic formula for
economic stimulus. Federal Reserve Chairman Alan Greenspan
cuts interest rates to their lowest levels in 40 years.
Greenspan and former Clinton Treasury Secretary Robert Rubin
meet with leaders of Congress and agree on a target of $100
billion in deficit spending. President Bush, no doubt hoping
to preempt Democratic exploitation of "another Bush
recession," chimes in with tax cuts for the non-wealthy (as
well as the wealthy), extended unemployment compensation,
and payments for impacted state governments. Sometimes the
cost of sticking to your principles is just too high. Sic
transit gloria neoliberalism.
While
the forces of global recession have been gathering at least
since the Asian financial crisis of the late 90s, it was
masked by the bubble economy in the US. But that was
punctured well before the September 11 attacks. The
atmosphere of national crisis that followed September 11
allowed US political elites to switch from neoliberalism to
Keynsianism with a speed that would otherwise have been
unimaginable.
There's
a problem: In the era of globalization, traditional
Keynesian stimulus has proved to be of limited value.
Governments abandoned Keynesianism in the 1970s largely
because in the global economy its policies produced
paradoxical effects: Stimulus to the national economy
generated imports instead of jobs. The same is even more
likely to be true today. The economic stimulus measures
being pursued so far are likely to have a trivial effect in
the face of a global downturn.
Recession
causes vast suffering to people who lose their jobs. It also
intensifies competition among workers, driving down wages
and conditions. In a global economy, it does this globally.
Workers around the world are being told that only those who
accept lowest wages and social protections will keep their
jobs. (Increasingly China is setting the standard for to
which others must conform if they wish to retain jobs and
investment.) Recession intensifies the race to the bottom.
The
end of capitalism's period of manic expansion and the coming
of global recession creates a new context for the efforts of
workers and social movements in the U.S. and worldwide. In
the past, periods of economic downturn have had
contradictory effects, promoting both social reaction and
social progress. While it is far too early to predict the
effects of today's global recession, it is by no means too
early to begin trying to discuss constructive responses from
social and labor movements and the left.
While
the terrorist attacks of September 11 and the US retaliatory
attacks have left the movement against corporate-sponsored
globalization understandably stunned, the emerging global
recession makes the need for such a movement -- and its
potential for worldwide popular support -- greater than
ever. But the next phase of its development is less likely
to start from a renewal of large protests at elite
international gatherings than from grassroots resistance to
a recession-intensified race to the bottom.
While
"the era of 'big government is over' is over," the new turn
toward Keynesianism is not necessarily progressive. For
decades, the US used Cold War military spending to "prime
the pump." Bush busted the deficit with spending for the
"War on Terrorism" -- and for Star Wars weapons in space.
But
elites embrace of Keynesianism reframes public debate. The
issue ceases to be whether government should intervene in
the economy, and becomes in what way and in whose interest
it should do so. Indeed, Keynesianism, in spite of its
benefits for the orderly management of capitalism, is
ideologically dangerous for elites precisely because it
poses such questions. We can begin posing such questions
today:
•
In a neo-liberal conception, government should tax
business and the wealthy as little as possible so they
will invest and accumulate wealth that then will "trickle
down" to the rest of society. But now President Bush
proposes a tax cut for low-income people who were
neglected in his previous tax cut, partially on the
grounds that they are most likely to spend the money the
fastest, thus expanding demand. If so, shouldn't we
address the broader issues of the maldistribution of
income in the US and worldwide? Underlying the emerging
global recession is the redistribution of income from
poor to rich that has marked the era of globalization.
One reason for global recession is that most working
people around the world are paid to little to purchase
what they produce. Shouldn't we apply Bush's logic to the
whole global distribution of wealth and income?
•
In a neo-liberal conception, social welfare is a tax on
enterprise that should be eliminated, leaving individuals
to provide for themselves through their individual labor
and effort. But now President Bush and Congress are
preparing to extend unemployment benefits. If that's ok,
then isn't time we started talking about rebuilding
welfare, health insurance, and the rest of the social
safety net?
•
In a neo-liberal conception, countries that run deficits
in their budgets and pile up foreign debts should be
forced to raise interest rates, balance their budgets,
and impose austerity on their people. But now the US, the
world's largest debtor with the world's largest trade
deficit, is deliberately slashing interest rates and
expanding budget deficits in order to stimulate its
economy and create employment. Why shouldn't Argentina,
Mexico, the Philippines, South Africa, and other
countries around the world be allowed to do the same? And
if the IMF, on US prompting, can provide debt relief to
Pakistan, despite its failure to meet its economic
commitments, because it helps the "war on terrorism," why
can't the international community do the same for poor
countries around the world whose people are starving by
the millions due to structural adjustment austerity
programs?
•
In a neo-liberal conception, the development of industry
should be left to the wisdom of the market. Nothing is
more anathema than the idea that the government should
"pick winners and losers." Now the US government is
providing tens of billions of dollars for the airline
industry. Not only that, it is establishing a government
board, headed by until-now ultra-freemarketeer Alan
Greenspan, with the power to decide which airlines it
will subsidize and which ones it will force to merge.
(Officials piously chanted that the board will not pick
winners and losers). If the government can do that to
keep airlines from going bankrupt, why shouldn't it
establish public boards with a few tens of billion
dollars to save workers jobs, or to fund community-based
investments, or to rebuild the economy on a low-carbon
basis to reduce global warming, or to develop and supply
technology to provide solar energy and safe water to
people around the world?
And
one more thing. Maybe there is a way to bomb the recession.
With the approach of winter, unemployed Americans are
threatening to swamp soup kitchens and food pantries. Now
that US leaders have decided it's ok for Afghanistan, maybe
we should beg them to begin bombing the US with food as
well.
Jeremy
Brecher and Tim Costello are co-authors with Brendan Smith
of Globalization from Below and the producers of the video
documentary Global Village or Global Pillage?
[www.villageorpillage.org].
Emanzipation
Humanum,
version 10.2001, Criticism, suggestions as to form and
content, dialogue, translation into other languages are all
desired
http://emanzipationhumanum.de/english/resist02.html
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