A BRIEF HISTORY OF NEOLIBERALISM by David Harvey
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Neoliberalism has left an indelible, smoldering mark on our world for the last thirty years. Eminent Marxist geographer David Harvey, author of A Brief History of Neoliberalism (Oxford, 2005), spoke earlier this year to Sasha Lilley, of the radical radio program Against the Grain, about the origins and trajectory of the neoliberal creed.
SL: Could you give us a working definition of “neoliberalism” — a term that’s particularly confusing to people in the US who associate liberalism with socially progressive policies?
DH: There are two things to be said. One is, if you like, the theory of neoliberalism and the other is its practice. And they are rather different from each other. But the theory takes the view that individual liberty and freedom are the high point of civilization and then goes on to argue that individual liberty and freedom can best be protected and achieved by an institutional structure, made up of strong private property rights, free markets, and free trade: a world in which individual initiative can flourish. The implication of that is that the state should not be involved in the economy too much, but it should use its power to preserve private property rights and the institutions of the market and promote those on the global stage if necessary.
SL: Talk about the intellectual origins of neoliberal thought associated with the Austrian economist Friedrich von Hayek.
DH: Liberal theory goes back a very long way, of course, to the 18th century: John Locke, Adam Smith, and writers of that sort. Then economics changed quite a bit towards the end of the 19th century and neoliberalism is a really revival of the 18th century liberal doctrine about freedoms and individual liberties connected to a very specific view of the market. And the leading figures in that are Milton Friedman in this country and Friedrich Hayek in Austria. In 1947 they formed a society to promote neoliberal values called the Mont Pelerin Society. It was a minor society but it got a lot of support from wealthy contributors and corporations to polemicize on the ideas it held.
SL: Did this group see their role as promoters of these ideas in the political realm?
DH: They took the view that state interventions and state domination were something to be feared. And they weren’t only talking about fascism and communism, but they were also talking about the strong welfare state constructions that were then emerging in Europe in the postwar period and also talking about any kind of government intervention into how the market was working. They saw their role as very political, not only against fascism and communism, but also against the power of the state, and particularly against the power of the social democratic state in Europe.
SL: The welfare state was characterized by a compact of sorts between labor and capital, the idea of a social safety net, a commitment to full employment — you call this “embedded liberalism.” Up until the 1970s it was supported by most elites. Why was there a backlash against the welfare state and the push for a new political economic order in the 1970s that gave rise to the political implementation of neoliberal thought?
DH: I think there were two main reasons for the backlash. The first was that the high growth rates that had characterized the embedded liberalism of the1950s and 1960s — we had growth rates of around 4 percent during those years — those growth rates disappeared towards the end of the 1960s. That had a lot to do with the stresses within the US economy, where the US was trying to fight a war in Vietnam and resolve social problems at home. It was what we call a guns and butter strategy. But that led to fiscal difficulties in the United States. The United States started printing dollars, we had inflation, and then we had stagnation, and then global stagnation set in in the 1970s. It was clear that the system that had worked very well in the 1950s and much of the 1960s was coming untacked and had to be constructed along some other lines. The other issue which is not so obvious, but the data I think show it very clearly, is that the incomes and assets of the elite classes were severely stressed in the 1970s. And therefore there was a sort of class revolt on the part of the elites, who suddenly found themselves in some considerable difficulty, for economic as well as for political reasons. The 1970s was, if you like, a moment of revolutionary transformation of economies away from the embedded liberalism of the postwar period to neoliberalism, which was really set in motion in the 1970s and consolidated in the 1980s and 1990s.
SL: What do you think was the underlying reason for the falling rate of profit in the 1970s, the symptoms of which you’ve just described?
DH: There were a number of other reasons connected with it. The postwar compromise had certainly empowered labor and labor organizations and therefore labor contracts were relatively favorable for those who were in the privileged unions and again that put certain stresses in the system. That is, if wages go up, profits tend to go down. So there was an element of that in the situation in the 1970s as well. In many ways the neoliberal argument that the labor market should be flexible and open and free of any union constraints became very appealing in the 1970s, as you can imagine.
SL: The intellectual fathers — and I think they were primarily fathers — of neoliberalism clustered around monetarist Milton Friedman at the University of Chicago had a chance to put their ideas into action following the US-backed coup against the socialist Allende government in Chile in 1973. I wonder if you could tell us about this — the first application of neoliberalism to a country’s economy.
DH: This arose after the coup against the socialist, democratically elected government under Salvador Allende and Pinochet and the others were faced with the dilemma of how to reconstruct the economy along lines that would revive it. For a couple of years they didn’t know what to do and then Pinochet turned to a business elite in Chile that had been very important in the coup, and who had established relationships with economists who were Chilean but who had been trained in Chicago under Milton Friedman. Those economists came into government in 1975 and completely restructured the government under neoliberal lines, which meant privatization of all state assets except — in the Chilean case — copper, opening the country to foreign investment, not preventing any repatriation of profits out of the country. So it just opened the country to foreign capital and opened everything to the privatization, including, interestingly in the Chilean case, the privatization of social security, which we have been hearing about in this country over the last year.
SL: What were the consequences for both the Chilean people and the accumulation of capital in Chile following those reforms?
DH: It went very well for a few years and then ran into serious problems in 1982. But when I say it went very well, it went very well for the political and economic elite. It was one of those situations where the country seemed to do well, but the people were doing very badly because of course after the coup all labor organizations had been destroyed, all social welfare structures had been dismantled. For the general population things did not go very well, but for elite they went very well, and for foreign investors things went very well for few years. And then they ran into a serious crisis and it was at that point that they started to realize that neoliberal theory in its pure form didn’t necessarily work that well. And there were some major adjustments that occurred in the theory after that, which led into a different kind of neoliberalization practice.
SL: A second example of the application of at least some of the ideas associated with neoliberalism came about in New York City in the mid-1970s which then provided lessons for neoliberalism. Tell us about New York City’s fiscal crisis and how it was resolved, as it were.
DH: In the New York case, the city was heavily indebted for a variety of reasons which are rather complicated to go into. And at a certain point in 1975, the investment bankers in the city decided not to roll over the debt, that is, they decided not to fund New York City debt any more. Now, I don’t think this was an application of neoliberal theory; I think it was the way in which the investment bankers were beginning to think about the city. And it was a kind of major experiment, in which the investment bankers took over the budgetary structure of the city. It was a financial coup as opposed to a military coup. And they then ran the city the way they wanted to do it and the principles they arrived at was that New York City revenues should be earmarked so that the bondholders were paid off first and then whatever was left over would go to the city budget. The result of that was that the city had to lay off a lot workers, had to cut back on municipal expenditures, had to close schools and hospital services, and also had to make user charges on an institution like CUNY, which up until that point was tuition-free. What the bankers did was to discipline the city along ways which I think they didn’t have a full theory for, but they discovered neoliberalism through their practice. And after they had discovered it, they said, ah yes, this is the way in which we should go in general. And of course this then became the way that Reagan went and then it became, if you like, the standard way the International Monetary Fund starts to disciple countries that run into debt around the world.
SL: You argue that a major shift in political economic practices, such as neoliberalism, could not come about — at least in democracies like the US and United Kingdom — without some degree of consent, not just from traditional elites but also the middle classes. How was this consent engendered in the 1970s?
DH: There was a concerted program that worked at a number of levels. To me, the beginning point was a memo that Lewis Powell, who became Supreme Court justice shortly afterwards, sent to the American Chamber of Commerce in 1971. What he said, in effect, was that the anti-business climate in this country has gone too far, we need a collective effort to try to turn it around. After that we see the formation of a whole set of think tanks, the massing of money by various organizations to try to influence public policy and to do it through the media, do it through think tanks. We also see the formation in 1972 of something called the Business Roundtable, which was a very influential organization. They were very concerned to try to roll back that legislation which had emerged during the 1960s and early 1970s that set up things like the Environmental Protection Agency, OSHA, consumer protection, and all of those sorts of things. And of course they gained considerable influence in the press through the Wall Street Journal and business pages and business schools and the like, and through their think tanks they started to influence public opinion. But then they also needed to be able to get a hold of the political process. This was a very interesting process where the Political Action Committees that got set up in the 1970s were very active and there was a tremendous formation of them and they started to get together collectively to fund the Republican Party. So what we see is the corporate takeover of the Republic Party along neoliberal lines, conservative lines, rather than the liberal Republicans like the Rockefellers, who were the old style Republicans. There was a takeover by Reagan and people like that in the 1970s of the Republican Party. But then the Republican Party needed a mass base and one of the things that then happened was that they turned to the Christian Right, and remember it was Jerry Falwell in 1978 who formed the Moral Majority, and there was a coalition that then emerged, a popular base amongst the evangelical Christians on the one hand and then tremendous corporate funding of the political process on the other hand, which made the Republican Party solidly behind the neoliberal agenda.
SL: You write that a fundamental feature of neoliberalism is the disciplining and disempowerment of the working class. Paul Volcker, who headed up the Federal Reserve first under Carter and then under Reagan, played a pivotal role in doing this in the United States. Describe for us the conditions in the US in the 1970s — the array of class forces, so to speak, at that time — and how Paul Volcker played a crucial role in shifting the balance of power.
DH: There had been, during the late 1960s and throughout the 1970s, a steady process of deindustrialization, that is, the loss of manufacturing jobs. It was a slow process and in many areas of the country that process was held back by an increase in public expenditures. This was true, for instance, in New York City. Manufacturing jobs had been drained away but public service jobs were booming. And that meant that public funding was needed for that. The federal government — the Federal Reserve — had a policy that full employment was a very worthwhile, very important objective of public policy. What Paul Volcker did in 1979 was to reverse that, to say, we’re no longer interested in full employment; what we’re interested in is control of inflation. He brought inflation down quite savagely in about three or four years, but in the process he generated massive unemployment. And massive unemployment of course was disempowering for workers and at the same time the deindustrialization that I mentioned accelerated. So there was quite a massive loss of industrial jobs, manufacturing jobs, in the early 1980s. And of course that means less union power. If you close down the shipyards and the steel industry lays off people, then you have fewer people in the unions. The loss of jobs in the unionized sector disempowered the unions at the same time unemployment was rising; unemployment disciplines the labor force to accept lower paying jobs if necessary. So Volcker’s shift away from full employment strategy at the Federal Reserve to control inflation, no matter what the impact on unemployment, was a major shift in public policy and which we still implement.
SL: That attack on unionized employment was epitomized by British Prime Minister Margaret Thatcher, whose Conservative Party came to power in May of 1979. Thatcher famously said that “there is no such thing as society, only individual men and women.” I wonder if youcould talk about the politics in the UK in the mid and late 70s, the power of the unions and the way that elites responded to that power — and what Thatcher did in response.
DH: The unions in Britain, of course, were very strong and there was a very large public sector. Embedded liberalism in Britain involved the nationalization of coal, steel, transportation, telecommunications, and the all rest of it. The unions were relatively strong in the 1970s but again there was a lot of economic pressure in Britain and it ran into very serious problems in the mid-1970s. The Labour government really didn’t have a good way to solve them. So the Labour government started to push for austerity in the public sector. The result of that was a huge wave of public sector strikes in 1978 and that created considerable discontent in the country in general. Margaret Thatcher came to power with a mandate really to control union power, and that is what is what she effectively did by an almost pure neoliberal strategy. Most famously of course, she took on the most powerful union in British history, both politically and sentimentally, which is the miners’ union. There was a huge strike in 1984 which she fought through to victory for herself. That was, if you like, the beginning of the end of the real strong power of the labor movement. After that she privatized steel, she privatized automobiles, she privatized coal mining, she privatized pretty much everything in the British economy at some point. She wanted to privatize national health, but she never managed quite to do that.
SL: She also attacked municipal government, which was a stronghold of the left in the UK.
DH: She faced significant opposition to her program by the fact that most of the large city governments were controlled by the Labour Party. And the Labour Party was not going to play ball with her program at that level. So when she started to cut funds to the local municipalities, what they did was to increase the local taxation and still keep their programs in place. What she then did was to cap the amount of local taxation they could take and that way she was involved in this huge struggle with Labour governments. In Liverpool, for example, the council there refused to cap their expenditures or their taxes and she had to have them put in jail for disobeying the national law. So there was a huge struggle on a municipal level. Eventually she reformed — tried to reform — all local finances around something called the poll tax and there was again huge resistance to this, so there was struggling going on over municipal financing in Britain in the 1980s under Margaret Thatcher as she tried to impose her will on recalcitrant municipal governments.
SL: You write of the years 1979 to 1980 as a key moment for the ascendancy of neoliberalism, the Volcker shock that you spoke of earlier, the rise of Margaret Thatcher, take place during this time. Another event took place around those years, in 1978 in fact: the Chinese Communist Party under the leadership of Deng Xiaoping embarked on a path of economic liberalization that ultimately massively transformed the Chinese economy. You argue this event was connected in its own way to the rise of neoliberalism — how so?
DH: I think what we have to look at here is a concordance of events. It’s hard to see the reforms in China were triggered by events in Britain or events in the United States. Nevertheless, the liberalization in China set China off into a market-based kind of socialism, which then found a way to integrate into the global economy in ways that I think would not have been possible in the 1950s or 1960s. Because neoliberalization, in so far as it opens up the market, globally as well as within nations, in so far as it did that, it gave the Chinese an opportunity to suddenly venture into the global market in ways that could not easily be controlled from elsewhere. I think the reforms in China were initially meant to try to empower China in relationship to what was going on in Taiwan, Hong Kong, Singapore. The Chinese were very aware of these developments and wanted to compete in some ways with those economies. Initially, I don’t think the Chinese wanted to develop an export-led economy, but what their reforms led to was the opening up of industrial capacity in many parts of China, which then found themselves able to market their commodities on the world stage, because they had very cheap labor, very good technology, and a reasonably educated labor force. Suddenly the Chinese found themselves moving into this global economy, and, as they did so, they gained much more in terms of foreign direct investment, so suddenly China started getting involved in this neoliberalization process. Whether it was by accident or design, I don’t really know, but it certainly has made a huge difference to how the global economy is working.
SL: Break down the chain of events that helped facilitate the process of developing countries becoming beholden to institutions like the IMF and the World Bank which dictated neoliberal policies, starting with the OPEC oil crisis of the early 1970s and the petrodollars that were produced by those countries in the Middle East that had oil.
DH: There’s a very interesting story to be told about that and I’m not sure it has been fully elaborated upon yet. With the OPEC oil price hike in 1973, a vast amount of money was being accumulated by the Saudis and other Gulf states. And then the big question was: well, what’s going to happen to that money? Now, we do know that the US government was very anxious that that money be brought back to New York, to be circulated back into the global economy via the New York investment banks, and persuaded the Saudis to do that. Why the Saudis were persuaded to do it remains a bit of a mystery. We know from British intelligence sources that the US was actually prepared to invade Saudi Arabia in 1973, but whether the Saudis were told: recycle the money through New York or you get invaded . . . who knows? Now, the New York investment banks then had vast amounts of money. Where were they going to invest it? The economy wasn’t doing very well at all in 1974-75, as, all over, it was in depression. [Citibank head] Walter Wriston came up with the following comment, that the safest place to invest the money is in countries, because countries can’t disappear — you always know where they are. And so they started to make the money available to many countries like Argentina, Mexico, Latin America was very popular, but also places like Poland even. They lent a lot of money to those countries. That worked out quite well for a while, but then in 1982 there was this general fiscal crisis, particularly after Volcker had raised the interest rate. What this meant was that the Mexicans who had borrowed money at 5 percent were now having to pay it back at 16 percent or 17 percent, and they found they couldn’t do it. Mexico was about to go bankrupt in 1982. That was the point at which neoliberalism kicked in. The US, via the International Monetary Fund and the US Treasury, said: we’ll bail you out, but we’ll bail you out on condition that you start to privatize and open up the country to foreign investment and start to adopt a neoliberal stance. Initially the Mexicans really didn’t do that very much, but by the time you get to 1988 they start to do it sort of big time. But here’s the interesting thing: it’s unreasonable to think that actually the US imposed neoliberalization on Mexico. What happened was that the US was putting noeliberalizing pressures on Mexico and an elite inside of Mexico seized the opportunity to say: yes, that’s what we want. So it was a coalition between the elite in Mexico and the US Treasury/IMF that put together the kind of neoliberalization package that came to Mexico in the late 1980s. And actually if you look at the pattern, it’s very rare for there to be a straight imposition of neoliberalizing policies through the IMF or the US. It’s nearly always an alliance between an internal elite, as it had been in Chile, and US forces that put this thing together. And it’s the internal elite who are as much to blame for neoliberalization as the international institutions.
SL: That point turns on its head a lot of the assumptions the left tends to make about neoliberalism being imposed on countries by the United States. One of the cases where this also was illustrated was Sweden, which had one of the most socialistic welfare states, and where ruling elites forced through neoliberal policies.
DH: There was a really serious threat to the ownership structure in Sweden during the 1970s, in effect, there was a proposal to buy out ownership entirely and turn it into a sort of worker-owned democracy. The political elites in Sweden were horrified by this and fought a tremendous battled against it. The way they fought was partly, again, through ideological mechanisms. The bankers controlled the Nobel Prize in economics, that went to Hayek, went to Friedman, that went to all the neoliberal figures to try to give legitimacy to all the neoliberal arguments. But then also the Swedes organized themselves as a confederacy of industrial magnates, organized themselves, built think tanks and the like. And every time there was any kind of crisis or difficulty in the Swedish economy, and all of these economies run into difficulties at some point or other, they would really push the argument: the problem is the strength of the welfare state, it’s the huge expenditures of the welfare state. But they never actually managed to make it work too well. So they came up with the interesting strategy of going into the European Union, because the European Union had a very neoliberal structure — through the Maastricht Treaty — so the Swedish Confederation persuaded everyone they should go into Europe, and then it was the European rules that allowed the more neoliberal policies to be introduced into Sweden in the 1990s. It hasn’t gone very far in Sweden because the unions are still very strong and the political history is very strong over social democracy and the like. But, nevertheless, there has been a process towards a limited neoliberalization in Sweden as a result of the activities of these political elites and their strategy of taking Sweden into Europe.
SL: You write that neoliberalism play two roles: either to restore high rates of profitability for capitalism or to restore the power of the capitalist ruling class. Explain that distinction for us and why they don’t necessarily go together.
DH: The first burst of neoliberalization in the 1970s and early 1980s occurred in a situation of very low rates of capital accumulation, and therefore the general argument was made that we need to change the way the economy is organized in order to get growth back on track. That was the general argument that was made. Now, the difficulty was, that actually the first part of the Reagan administration was in serious economic crisis, Margaret Thatcher didn’t do very well in terms of transforming the economy there, and as I mentioned in the Chilean case, things didn’t work out too well in Chile either by the time you get to the early 1980s. Neoliberalism was not doing very well in its pure form, in terms of regenerating capital accumulation, but what it was doing very well was redistributing wealth towards the upper classes. You see in all of the data now, that from the late 1970s onwards, those countries that turned towards neoliberalization actually achieved tremendous increases in the wealth of the elites. In this country, for example, the top one percent tripled its share of the national income from about 1970 to say 2000. And of course it’s doing even better now under the tax rules that the Bush administration is implementing. Mexico was another case where in a short period after neoliberalization, suddenly fourteen or so people appeared on the Forbes billionaires list globally — suddenly billionaires erupted in Mexico. The market shock therapy that was given to Russia after the collapse of the wall ended up with seven oligarchs controlling about 50 percent of the economy. So wherever neoliberalization moves, you see this tremendous concentration of wealth and power occurring in the top echelons. It actually occurs in the very, very top echelons — in the 0.01 percent. For instance, there was a little piece in the New York Times the other day that said: what’s happened to the four hundred richest people in this country over the past twenty years? And it turns out they were worth $600 million a piece in constant dollars back in about 1985 and they are now worth something like $2.8 billion. They have quadrupled their wealth over this period. What neoliberalization has been very good at is restoring or reconstituting class power in a very narrow band of the political economic elite.
SL: You argue that neoliberalism functions by redistributing wealth, as you’ve just said, rather than generating it in the first place, what you call “capital accumulation by dispossession” rather than accumulation by the expansion of wage labor. Can you explain for us some of the many forms that accumulation by dispossession can take?
DH: Accumulation by dispossession is to me a very important concept. And it doesn’t simply apply in the periphery of the global capitalist economy. For example, in Mexico, the reform of the land system there, privatizing land, has forced many peasants off the land. The result is the land has gone into few people’s hands. So you get concentration of wealth and power in agriculture in Mexico going on very fast and the creation of a landless proletariat as a result. Now, in this country we have analogous things going on in terms of what’s happening to family farming. That lot of family farmers can no longer make it and they’re being taken over by agribusiness. One of the mechanisms there, of course, is through indebtedness, that people borrow, they get into debt, they can’t pay off their debts, and in the end they have to sell out sometimes at rock bottom prices. Accumulation by dispossession takes many local forms. I think, for example, the whole use of eminent domain in this country to dispossess people of their housing is a very good example of this. But then also we have the loss of pension rights. People who thought they had very good pensions with United Airlines suddenly find they don’t because the company went bankrupt and then shed its pension obligations. The same thing happened through Enron and the like. So there’s a tremendous amount of dispossession of wealth and assets going on around the world. And then when you ask yourself the question, how is it, for instance, that healthcare has become less and less affordable in this country, more and more people are being dispossessed of the right to healthcare? You ask yourself the question, who is getting rich in this situation? Well, it’s those very, very small elite who are getting so much money they don’t know what to do with it. You look at the Wall Street bonuses, or something of that kind, you say, how come they’re getting bonuses of millions of dollars when people are losing their healthcare? And I want to say we have to connect those things. Things are going on in this country where people are being dispossessed, and things are going on in China where people are being dispossessed of their rights, there’s dispossession going on in Africa, as people are being deprived of their resources, the genetic materials which are around them are being patented by corporations. There’s a general kind of process of dispossession going on which I think is very important to look at politically and to resist politically as much as we can.
SL: Dispossession, at least on a global scale, makes one think of empire. What is the relationship between neoliberalism and imperialism?
DH: Imperialism today is very different from the sort of imperialism that existed at the end of the 19th century, say in Britain and France, and so on. Imperialism today does not work through actual active control of territories. The single exception to that, of course, is the venture in Iraq, which is rather different; it’s a sort of reversion to an ancient style of imperialist venture. But what this means is that, for instance, the US is an imperialist country, it has an imperialist agenda, and the way it has sought to gain its power is by a double strategy. First you try to gain power by economic influence, by economic power, by economic institutions, so that the fact that the United States controls the International Monetary Fund and the World Bank, the fact that it can actually work through those institutions, that it can exercise immense economic influence and power, is one of the means by which US imperial strategies operate. The US can force markets open in countries, through things like the WTO, through things like bailing out Mexico or bailing out South Korea. So the economic influence is very important. The other strategy, which has been longstanding in US imperial history, is to find a local strong person — usually a man, a strong man — who will do your bidding and you will support him and you will give him assets and give him military assistance. This is what they did in Nicaragua in the 1920s and 1930s and they found Somoza — the older Somoza. This is what they did with the Shah of Iran in the coup that deposed a democratically elected government. This is what they did in Chile with Pinochet, again deposing a democratically elected government. The US has had this indirect form of imperialism through these two mechanisms of vast economic power and also through these characters who are supported through the coups that the US supports. So this has been the US imperial strategy. Now, it connects to neoliberalization in the following way: that when the investment bankers in New York got all that money in the mid-1970s and started investing it in say Mexico and so on, it became very important that whoever was in government in Mexico was friendly to the United States. If they were not friendly to the United States and also if Mexico got into debt, then of course you could use your economic power to make sure that you had a friendly government there. So neoliberalization connects to this imperial strategy in very specific ways. In particular now, it’s very mixed in with the way in which financial institutions operate.
SL: We’ve seen a bit of a shift in US policy with the rise of neoconservatism, which is epitomized by the architects of the invasion of Iraq. These neoconservatives differ from neoliberals to the extent that they appeal to a need for order and morality, rather than individualism, freewheeling cultural expression, and the chaos that the market can bring. So would it be fair to say that neoconservatives are in still favor of the market, have a great deal in common with neoliberals, but just want a greater degree of social control?
DH: I think that’s the way I would put it. I think that neoliberalism is a pretty contradictory form, it’s not stable, and so there’s a tremendous volatility that occurs through neoliberalization. That volatility means there’s a good deal of insecurity and a good deal of uncertainty, and I think out of that comes a wish to somehow or other get on top of the market monster and impose some order on it from the center, and to do it by military force if necessary. I think the neoconservatives have taken that view very strongly. And I think they have also taken the view that the market ethic, in so far as it’s an anything-goes ethic in itself, also needs to be countered by the imposition of some kind of moral purpose upon what this is all about. The neoconservatives are very much in favor of the market, it’s not as if Bush and Cheney and Wolfowitz are not in favor of market processes or restoration of class power, or anything of that kind, they’re very much in favor of it. But they recognize that the neoliberals’ way of doing it is unstable and therefore it needs some sort of control. They’re in a way control freaks sitting on top of this neoliberalism agenda — or trying to sit on top of it and as I think we see they’re not being very successful.
SL: You write about the Hungarian economic historian Karl Polanyi who represents a counterpoint to neoliberal economists like Hayek. Polanyi wrote in his book The Great Transformation about a process that he called “the double movement,” how when market forces are unleashed on a society eventually they fray the social order to such a point that elites may call for social welfare provisions and restraints on the market, as happened after the upheavals of the great depression and World War II. Do you see any potential amongst elites for that sort of counter-movement?
DH: I think there are signs. You look at the politics of George Soros or somebody like that who seems to me to be moving a little bit in that direction. Even some of the economists who were very strongly in the neoliberal camp at one time, I think of Joseph Stiglitz and Jeffrey Sachs, are now calling for a more institutional approach to how the world economy is going to be orchestrated. They’re not neocons. They’re trying to come up with some sort of institutional framework that is going to be more about social justice and more about poverty, questions of that kind. I don’t agree with the way they’ve set this up, but I think it’s interesting to see how public opinion and some thinking in these circles is beginning to move towards an alternative economic and political framework that can do a better job of creating greater equality in the global system in the future. So there’s a movement away from neoliberal orthodoxy right now in certain circles, and I think that movement away is also supported by certain of the political and economic elites.
SL: You argue that US military hegemony and the deficit spending that has accompanied it — not very neoliberal in fact, although Reagan did the same — has put the US in a vulnerable position. Explain that vulnerability and whether you see this as imperiling the current political economic order on a global scale.
DH: If you look at the position of the US say in the late 1960s, around 1970, it was dominant in the world of production, it was dominant technologically, it was dominant with respect to global finance, and it was dominant militarily. What has happened under neoliberalization is the US has lost a lot of its dominance in the world of production. Production, its capacity, has disappeared to places like China and the rest of East and Southeast Asia. It’s not totally lost it, of course. Technologically the United States still has tremendous power, but that is slipping away very steadily particularly towards East Asia. If you look at the world finance, yes, the US was very powerful in the world of finance in the 1980s and early 1990s. But now you look at the huge deficit that the US has both in terms of its internal budget but also its indebtedness to the rest of the world, and you see that the US is not in such a good position financially. We’re actually at a cusp right now: the amount of money the US is going to have to pay out to the rest of the world, in order to fund its debt, is equal to the amount of money that is flowing in from its global operations. So it’s no longer a positive thing for the United States to be that. The only thing that the United States has got left where it’s really dominant is in terms of its military capacity. But here we also see a limitation, because what Iraq shows is that the United States can dominate from 30,000 feet up but it’s not very good at dominating on the ground, it doesn’t know how to dominate on the ground. So the US has a rather more limited position than many people like to think, right now, which is not to say that it’s subservient to the rest of the world, but it’s no longer as dominant as it once was. And I think that also the huge deficits which the US is now running, in relation to the rest of the world but also internally, are indeed a threat to global stability. And this is being said by Paul Volcker and quite conservative people like that and even being said by International Monetary Fund economists, so there is a threat here because I think the US is playing with fire in terms of its current policies.
SL: How might the pressures building up with respect to the US’s economic position play out in the next few years?
DH: Well, if I knew that, I’d know where to invest my money! But I’m not sure I’m able to do that. I think that there’s going to have to be a major structural adjustment internal within the US. What I did in the book, for example, was to look through the criteria that usually apply to an economy before the IMF steps in and does a structural adjustment. And the United States is doing pretty badly on most of those criteria. So that would mean that in the normal course of events, the IMF would discipline the United States. Well, of course, the US is the IMF, so the problem is that it is not disciplining itself. But the market forces may discipline them, and if the market forces discipline them, then we’re going to have some very serious problems. I don’t know how that’s going to occur, but almost certainly I think it will occur through some sort of shift in how people are investing in the United States and funding the US deficit from abroad.
SL: I’d like to spend the rest of the time we have remaining talking about both what the left can learn from the rise of neoliberalism and problems with the ways the left forms its opposition to it. You make a very interesting argument about how the contradictions of the New Left, following the explosions of social protest in the 1960s and 70s, to some degree allowed for the rise of neoliberal ideas.
DH: The movements of the 1960s can be broadly divided into, for instance, the student movement, which was after much greater liberty, much greater freedom from corporate domination and state domination, and of course was very much against the war policies of the US government and the way in which global capitalism was destroying the environment and so on. So there was that wing of the movement. And then the other wing of the movement was, of course, organized labor and the groups around what you might call more traditional working class organization. The movements of the 1960s had that dual character. During the 1960s they could sort of combine rather uneasily around the idea that individual liberty and freedom and social justice and sustainability and the like were things we were all collectively concerned with. But in some instances there were real schisms within that movement. I think what happened in the 1970s is that when the neoliberal move came in, the idea erupted that, okay, neoliberalism will give you individual liberty and freedom, but you just have to forget social justice and you just have to forget environmental sustainability and all the rest of it. Just think about individual liberty and freedom in particular, and we’re going to meet your desires and your interests through the individual liberties of market choice — freedom of the market is what it’s all about. In a sense, there was a response by neoliberals to the sixties movement by saying, we can respond to that aspect about what the sixties was about, but we cannot respond to that other aspect. And I think therefore what we see is a movement in the 1970s where many people who were active in the 1960s were co-opted into the neoliberal train of thinking and neoliberal ways of consumerism as part of how neoliberalization established itself. It is a very broad way of looking at it, but I tend to think that that is what happened. That then leaves us with the question right now, what are we going to do about social justice, what are we going to do about equality, what are we are going to do about environmental sustainability, all those things that neoliberalism cannot confront.
SL: Well, one answer to that today on the left has been to use lawsuits. You’re critical of this kind of approach that dominates much of the left and particularly emanates from non-governmental organizations or NGOs. I wonder if you can explain your critique both of the legalistic framework of universal human rights and of non-profits as the agents of change.
DH: I’m not against much of that, I think some of that is okay, but it has limited purchase because it’s trying to fight neoliberalism with neoliberalism’s own tools. It’s attempting to roll back a market ethic by a logic of individual rights, when the market ethic is based on the logic of individual rights. When you start to look at the details, what you find is that, first off, the NGOs are not democratic institutions. There are good NGOs and there are bad NGOs, there is a vast array of NGOs doing very different things. The problem with the rights discourse is that as soon as you get into the judicial world, you find yourself having to actually try to prove things through the law, and the law is not exactly an unbiased institution. It has certain kinds of ways of looking at private property and individuals and so on. For example, I think it’s wonderful that in New York City, in Rockefeller Center, there is this bronze plaque where Rockefeller writes his personal credo. And his personal credo says he believes in the supreme worth of the individual. Well, all of us should know that legally the corporation is an individual. So maybe we should go out there and say, do you realize that what Rockefeller means here is that he believes in the supreme worth of the corporation? And so when I go into court and I take on a corporation, there is an asymmetry of power in this whole system. And this even works at the world level. For instance, if the state of Chad doesn’t like the fact that the United States is disobeying WTO rules in its subsidies to the cotton farms of this country, Chad has to mount a case against the United States, but in order to do this, it needs at least a million dollars. But the budget of Chad is very small, so a million dollars out of the budget Chad is huge, whereas a million dollars out of the budget of the US is almost nothing. So Chad cannot afford to actually mount a campaign against the United States in the WTO and claim its rights under the WTO. This is the sort of problem we run into at all levels: as soon as you go into the legal system there is an asymmetry of power and the like. While I’m not against some of those things that are going on through the pursuit of human rights, what I’m saying is that there is limited purchase to that. What we have to look at is construction of alternative forms of social and political organization, social solidarities, and we have to really reevaluate what is meant by democracy and what is really meant by freedom. I don’t think the world is free if there’s no healthcare. I don’t think the world is free if we have to pay immense amounts for what should be public education. I think the current questions are what is freedom, what is democracy, how social solidarities can be built — those are the issues we should really be concentrating upon in terms of left politics.
SL: Moving away from the idea of universal human rights, which in your book you mention have been used to justify all sorts of imperial excursions, I wonder if, on the other hand, you don’t think there is equally the danger of the left celebrating fragmentation, in effect making a virtue out of weakness by elevating the notion of a multiplicity of struggles, which a lot of times is connected to the idea of changing society without taking power. Doesn’t this approach in some ways parallel neoliberalism with its celebration of diffuse difference?
DH: Yes, I object very much to that angle of left thinking these days that says, let us just simply rely upon all the local, specific movements here, there, and everywhere, to somehow or other generate a complete change in the world without confronting state power. I think this plays into the hands of the neoliberal ethic, and I think it plays into the hands of the neocon use of neoliberal tactics in its own pursuit of power. I think that it is disempowering for the left to take that line of approach. But again I think we also do have to recognize — and this is what I really am concerned about in my book and elsewhere — a tremendous diversity of struggles which are going on out there: struggles against dam construction in India, or the struggles of the landless peasant movements in Brazil, the struggles going in Bolivia, the struggles going on in Venezuela, the struggles going on in Sweden, the struggles going on in Paris right now. All of these struggles are very specific and we have to acknowledge their diversity and appreciate their diversity. I don’t think it’s a matter of saying to people, forget your specific struggles and join the universal proletariat in motion; I don’t think that’s what it’s about at all. What we have to do is to find a way of politically uniting those struggles, and that’s why I think something like the concept of neoliberalism and its penchant for accumulation by dispossession provide a kind of vocabulary to start to bring together those struggles around a more general kind of theme. So that an Iowa farmer who’s just lost his farm can understand how a Mexican peasant feels, can understand how the struggles going on in China are parallel, so we start to see a certain unity in all of the struggles, at the same time as we acknowledge their specificity.
SL: Taking the example you gave of the Iowa farmer and the Mexican peasant: on the one hand, you could say that we need an umbrella that can unite people as disparate as these groups across the world. But then doesn’t that gloss over the divisions that exist, say, when the Mexican peasant ends up as a farm worker and works on the farm of that Iowa farmer. Can’t the attempt to have this broad umbrella of movement of movements make for strange alliances on the left?
DH: It can and indeed I’m not arguing for a nostalgia for things past, that nothing should change — the famous Maoist adage that you can’t make an omelet without breaking eggs. And so any kind of revolutionary movement has to be prepared I think to undertake some major transformations. But one of the things I think is interesting is that a lot of movements that are peasant movements or something of that kind are not against modernization, are not against transformation. What they are interested in is that they get some benefits from it. And if you look at the dispossession of the Mexican peasant or even the dispossession of the Iowa farmer, it’s one thing to say that the reorganization of society is such that you have to give up your traditional ways of doing things and doing things in a very different way, it’s one thing to say that. It’s another thing to say, you’re going to give up all your rights and you’re going to lose to the point that you just become a disposable person. And I think the struggles going on, for instance, the landless peasant movement in Brazil or the movements against the Narmada dam in India, are not on the part of people who do not want change. They are people who want change, who are interested in modernization, interested in new technologies, interested in doing things in a different kind of way, interested in decent healthcare and decent education, and things of that kind. But what they are concerned about is that they are losing everything or being deprived of things in such a way that they do not get any benefits at all from it. And that is what encourages me to think that there is more unity here than simply people saying, I want to defend my ancient ways and I don’t want to be disturbed. Actually you find very little of that going on. That is a sort of romantic construction which it seems to me is present in certain segments of the left, rather than actually amongst populations themselves. I think a lot of populations want development, they want development on their terms, they want development that benefits them and not the corporations and not the elites around Wall Street.
SL: Right, but zeroing in on the issue of class, which obviously plays a very important role in your argument, you’re talking about alliances of people, who, while they may have similar interests in opposing, say, the influence or domination of corporations, may not have the same class interest amongst themselves.
DH: Well, you don’t build a movement based on the divisions, you try to build a movement which incorporates difference, at the same time as it tries to recognize that in order to get something to happen, we have to transcend those divisions. For example, in this country, I think if you asked the question, who would benefit from a universal healthcare system? I think the answer would be, it would go across all groups — men and women, gays and straights, ethnic minorities, religious groups of different kinds — so you have a universal project, which is a universal healthcare system, within which there would be a variety of problems about how you designed it. You could design it to be sensitive to difference, but nevertheless the universality of it is something that seems to me could come out of many, many different groups getting together and saying, yes, we’ll get behind that. Then you would need a political movement, a political organization, around universal healthcare, which means a political party that is going to advocate it in some way, bring it through Congress, pass legislation, which you would not get from remaining fragmented. And it’s that kind of transcendence of the particularities and the willingness to move to the universal level which seems to me to be absolutely crucial in politics right now, which a lot of the left is reluctant to do.
Sasha Lilley produces Against the Grain. With a background in international development studies and intellectual history, Sasha is particularly concerned with political economy in the developing world and the agrarian question both past and present. She also works as a staff writer at CorpWatch. Among other ventures, she has worked as a journalist in Cuba, researched nationalism and the Holocaust in the Belorussian State Archives in Minsk, and tracked the arms industry in Britain.