Is neoliberalism dead?

Submitted by martin on 6 June, 2010 - 2:02 Author: Martin Thomas

Review of The Enigma of Capital: and the crises of capitalism, by David Harvey (Profile Books) and Meltdown: the end of the age of greed, by Paul Mason (Verso).

Paul Mason's book, written in February 2009, is the best (and best-written) narrative I've read of the world financial meltdown of September 2008.

Mason goes for journalistic sharpness rather than academic hedging-of-bets, and concludes unequivocally: "Whatever you think about it, the neoliberal experiment is over".

He collects shocked comments from capitalist strategists from the midst of the meltdown. He thinks those point to a much more regulated capitalism, and one in which "organised labour is set for a comeback". "Those who want to impose social justice and sustainability on globalised capitalism have a once-in-a-century chance".

David Harvey's book, also scintillating, reckons however that "there is no evidence that [neoliberalism] is dead".

Harvey's book concludes with a call for "revolution" to "dispossess" the capitalist class. In a lecture at the London School of Economics (LSE) on 26 April, he explained that for him "revolution" is "co-revolution", a "slow movement across the spheres [of social activity]" in which the organised working class plays no very central role.

Harvey is a well-known academic writer, author of The Limits to Capital (1982) and The Condition of Postmodernity (1990). Mason is a BBC journalist, but with a back-story in active Marxist politics.

Harvey has the advantage that he finished writing in October 2009, eight months after Mason. Those eight months, and the eight months since, help Harvey's argument that neoliberalism will continue rather than Mason's that it is dead.

More extreme doctrinal forms of neoliberalism, such as "rational expectations" and the "efficient market hypothesis", have been discredited. However, the main capitalist government strategists of the last thirty years have not been rigidly tied to such doctrines.

They have privatised industries and services, battered workers' organisations, slashed welfare, skewed tax policies to favour the rich, and reduced barriers to trade and capital flows between states: in short, they have re-geared capitalist governments to making their countries good sites for global capital to operate in, rather than to building discrete national industrial bases.

But they have never, except perhaps in short periods of political excitement, abjured the insights brought to bourgeois economics by John Maynard Keynes. They have modified, and sometimes reduced, government regulation of economies, but never rejected it.

The panic of September 2008 brought a flood of "socialism for the bourgeoisie" by way of governments buying out or subsidising banks and other financial institutions which would otherwise have collapsed. But it could do that without destroying neoliberalism.
The banks still operate in global financial markets. In Greece, in Spain, in Britain, governments are pushing more neoliberal policies, more privatisation, more welfare cuts, more worker-battering, etc.

Obama's administration in the USA twitches in the opposite direction. But its measures on health insurance and financial regulation are still well within the bounds of neoliberalism.

As long as the world-market orientation of the main capitalist governments remains, none of the capitalist governments providing a home base for a big global financial centre can go back to focusing on the construction of a national industrial base without great risk of being overwhelmed by the sharper global competition which has reshaped capitalism since the mid-60s.

Harvey argues that there may be no capitalist way out of this crisis "apart from reversion to fictitious capital manipulation"; however, today's capitalism swims in "fictitious capital manipulation" and is not at all "apart from" it. The broad limits of "neoliberalism" are elastic, and there is room both for it to "absorb" emergency measures like those of September 2008 and, conversely, for working-class and other struggles to resist cuts, defend welfare, and impose greater constraints of capital.

Harvey's book orbits round three different accounts of the global economic crisis that opened in 2007. The three exist more or less side-by-side throughout the book, and Harvey seems tentatively to endorse all three without teasing any one through in detail.

None of the three accounts is focused inside the financial markets, whose follies are well described, without heavy theory, in Mason's book.

Harvey's first argument is that the markets for property and for land, and the construction industry, are central to capitalism, and yet peculiarly susceptible to speculative capitalist "overproduction", and to creating depressive debt burdens on capitalism: thus the origins of the current crisis in the US mortgage market. He suggests that an archetype of crisis is provided by the crash in Paris in 1868, after Haussman's building boom.

Only the most tentative suggestion of this argument can be found in Harvey's larger and earlier book, The Limits of Capital, but it deserves thought. In 2004, total non-financial assets in the UK were estimated at about £6000 billion. Of that total, £3427 billion was residential buildings, £624 billion commercial and industrial buildings, and only £425 billion plant and machinery.

In his LSE lecture, Harvey called his second and third arguments "underconsumptionist". He was defying the well-established Marxist argument (to which Harvey himself has assented in previous books) that crisis must be seen as overaccumulation rather than underconsumption.

The keeping-down of wages - in absolute terms, as in the USA, or at least relative to profits, as in other countries - has led to insufficient demand, says Harvey. The problem was covered over, for a while, by expanding consumer credit, but was bound to explode as soon as the intricate and delicate process of credit expansion hit a blockage.

Harvey refers back to Paul Baran's and Paul Sweezy's once-famous 1966 book, Monopoly Capital, which saw the critical problem for US capitalism then as a shortage of openings to invest its plethoric surpluses.

Capital has solved similar problems in past eras, he says, by "spatial fixes" - by opening up markets and industries in new geographical areas - but in today's fully-capitalist world there are no new frontier areas to provide such "fixes".

I think the second and third of Harvey's arguments are wrong. Capital is by no means solely dependent on wage-earner demand to find markets for its products. The capitalist class, and even more so a large class of flunkeys, "professionals", and managers clustered round capital, provide large markets with their luxury consumption - larger in recent, in proportion to investment, in recent decades and in many countries. The critical determinant of insufficient effective demand is probably still capitalism's periodic sharp drops in demand for investment goods.

Where can a plethora of surplus come from, if not high rates of profit? And were rates of profit really low, before the 2007-8 crash? There is debate about this, but a recent survey by Michel Husson ( convinces me that rates were high.

Capital will spread geographically if it can, and not only or even mainly as a "fix" in response to crises. Overseas investment, the "spatial fix", has never really been a product of domestic gluts. In Britain before World War One, for example, the peaks of overseas investment coincided with the peaks, not the troughs, of domestic investment.

Capital can also continue to spread "upwards" even if it can't spread "outwards". A city like London, for example, has looked almost "full up" with everything capital could sell at many previous points in its history. Yet capital continues to sell more and more.

There surely are ecological limits to the expansion. But not geographical. And for now capital presses on towards the ecological limits undaunted, quite ready to crash into them full-speed.

Harvey discusses ecological limits at some length in The Enigma, but tends towards an emphasis on capital's still-strong ability to circumvent and modify such limits.

The basic thesis of an uninvestible glut of surpluses gains plausibility from the observation that capitalists have been "investing" more and more in financial markets rather than in expanding production.

But there is an element of optical illusion here. To some degree a whirl of financial transactions can keep value "super-hoarded", outside of production. But if the basic Marxist idea of new value being created in production is true, in the end all the financiers draw their revenues from value created in production - and there has been a large pot to draw from.

In his earlier chapters, Harvey sets issues in a crisp class framework - "whether we can get out of this crisis in a different way [than neo-liberalism] depends very much upon the balance of class forces" (emphasis added). He distinguishes carefully between class and populist revolt.

He recognises lucidly that much populist revolt - even revolt sincerely aimed against the bankers and business elite just as working-class socialist revolt is - can be reactionary. Unlike those who see political Islam as a progressive anti-imperialist force, he brackets "religious fundamentalism" with fascism.

The lucidity fades as Harvey approaches the end of the chapter. By the last page he has come to write: "Perhaps we should just define the movement, our movement, as anti-capitalist or call ourselves the Party of Indignation, ready to fight and defeat the Party of Wall Street and its acolytes and apologists everywhere, and leave it at that".

A version of this approach was popular in the late 1960s, summed up in the slogan: "In fighting anywhere we are fighting everywhere".

Indeed. But... not necessarily effectively, and not necessarily even on the right side.


Submitted by davidosler on Sun, 06/06/2010 - 19:41

Check out Andrew Gamble's 'The Spectre at the Feast', which to my mind has the edge on Paul's book as an explanation of the crisis. Much more political economy context and a better overview of what lead up to these events.

I was a bit disappointed with Paul's conclusions, too. Rather Keynesian/reformist for someone from his particular political stable.

Submitted by martin on Sun, 06/06/2010 - 21:44

Andrew Gamble's book is worth reading. It surely has more "political economy context" than Mason - one of its six chapters is a quick whiz through theories of crisis, the crisis after 1929, and the crises of the 1970s.

I'm not sure that either of Gamble or Mason gets as far, or pretends to get as far, as a full "explanation of the crisis". Both books are useful: all I'd say is that Mason's is well-written, un-academic, unpretentious, and packs in a lot of information.

Gamble's conclusion on the future of neo-liberalism is more hedged-about than either Harvey's or Mason's.

"Before the crash of 2008 neo-liberalism, as a doctrine and as a project, had already mutated. After the crash it... will probably mutate some more".

Reviewing responses to the crisis in his final chapter, Andrew Gamble seems to reckon that the "regulatory liberals" have the best chance of prevailing in capitalist government circles; but these are strategists at the more-regulated end of the neoliberal spectrum, rather than radical opponents.

Martin Thomas

Submitted by davidosler on Mon, 07/06/2010 - 14:08

Just writing from memory, Paul ends up on a similar note, does he not? Regulation, not the revolutionary overthrow of capitalism, is the way forward.

What's more, Gamble might just be right in counselling caution. We don't know the outcome of this story yet.

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