A Primer on Neoliberalism

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First, a distinction is made between political and economic liberalism. Then, neoliberalism as an ideology for how to best structure economies is explained. Lastly, for important context, there is a quick historical overview as to how this ideology developed.

There is an important difference between liberal politics and liberal economics. But this distinction is usually not articulated in the mainstream. Liberalism can refer to political, economic, or even religious ideas. It is presented to poor and working people as progressive compared to conservative or Right wing. Economic liberalism is different. Conservative politicians who say they hate liberals — meaning the political type — have no real problem with economic liberalism, including neoliberalism.

The web site, Political Compass , also highlights these differences very well. They show Left and Right as an economic scale, with Authoritarian and Libertarian making up the political scale, crossing the economic scale resulting in quadrants:. In addition, they note that, despite popular perceptions, the opposite of fascism is not communism but anarchism ie liberal socialism , and that the opposite of communism i.

This is made clear by another chart they have:. Bush was note that wide:. By contrast, neo-liberals, opposed to such moral leadership and, more especially, the ensuing demands on the tax payer, belong to a further right but less authoritarian region.

Paradoxically, the "free market", in neo-con parlance, also allows for the large-scale subsidy of the military-industrial complex, a considerable degree of corporate welfare, and protectionism when deemed in the national interest. These are viewed by neo-libs as impediments to the unfettered market forces that they champion.

What the above highlights then, is that in some countries, discourse on these topics may appear to fit into left-right balance, but when looked at a more global scale, the range of discourse may be narrow. Economic issues such as globalization, especially as it affects third world countries as well as those in the first world, require a broader range of discussion. Neoliberalism, in theory, is essentially about making trade between nations easier.

It is about freer movement of goods, resources and enterprises in a bid to always find cheaper resources, to maximize profits and efficiency. To help accomplish this, neoliberalism requires the removal of various controls deemed as barriers to free trade, such as:. The goal is to be able to to allow the free market to naturally balance itself via the pressures of market demands; a key to successful market-based economies.

As summarized from What is Neo-Liberalism? A brief definition for activists by Elizabeth Martinez and Arnoldo Garcia from Corporate Watch, the main points of neoliberalism includes:. The underlying assumption then is that the free markets are a good thing. They may well be, but unfortunately, reality seems different from theory.

For many economists who believe in it strongly the ideology almost takes on the form of a theology. However, less discussed is the the issue of power and how that can seriously affect, influence and manipulate trade for certain interests. One would then need to ask if free trade is really possible. From a power perspective, free trade in reality is seen by many around the world as a continuation of those old policies of plunder, whether it is intended to be or not.

However, we do not usually hear such discussions in the mainstream media, even though thousands have protested around the world for decades. Today then, neoliberal policies are seeing positives and negatives. Under free enterprise, there have been many innovative products.

Growth and development for some have been immense. Global inequalities on various indicators are sharp. Joseph Stiglitz, former World Bank Chief Economist to , Nobel Laureate in Economics and now strong opponent of the ideology pushed by the IMF and of the current forms of globalization, notes that economic globalization in its current form risks exacerbating poverty and increasing violence if not checked , because it is impossible to separate economic issues from social and political issues.

One cannot separate economics, political science, and history. Politics is the control of the economy. History, when accurately and fully recorded, is that story. In most textbooks and classrooms, not only are these three fields of study separated, but they are further compartmentalized into separate subfields, obscuring the close interconnections between them.

The history of neoliberalism and how it has come about is worth looking at first, however, to get some crucial context, and to understand why so many people around the world criticize it.

The modern system of free trade, free enterprise and market-based economies, actually emerged around years ago, as one of the main engines of development for the Industrial Revolution. Adam Smith, who some regard as the father of modern free market capitalism and this very influential book, suggested that for maximum efficiency, all forms of government interventions in economic issues should be removed and that there should be no restrictions or tariffs on manufacturing and commerce within a nation for it to develop.

For this to work, social traditions had to be transformed. Free markets were not inevitable, naturally occurring processes. They had to be forced upon people. John Gray, professor of European thought at the London School of Economics, a prominent conservative political thinker and an influence on Margaret Thatcher and the New Right in Britain in the s, notes:.

Mid-nineteenth century England was the subject of a far-reaching experiment in social engineering. Its objective was to free economic life from social and political control and it did so by constructing a new institution, the free market, and by breaking up the more socially rooted markets that had existed in England for centuries.

The free market created a new type of economy in which prices of all goods, including labour, changed without regard to their effects on society. In the past economic life had been constrained by the need to maintain social cohesion.

It was conducted in social markets — markets that were embedded in society and subject to many kinds of regulation and restraint.

The goal of the experiment that was attempted in mid-Victorian England was to demolish these social markets, and replace them by deregulated markets that operated independently of social needs.

A detailed insight into this process of transformation is revealed by Michael Perelman, Professor of Economics at California State University. In his book The Invention of Capitalism Duke University Press, , he details how peasants did not willingly abandon their self-sufficient lifestyle to go work in factories. This mercantilism had its roots in the Middle and Dark Ages of Europe, many hundreds of years earlier and also parallels various methods used by empires throughout history including today to control their peripheries and appropriate wealth accordingly.

Smith argues, even though it is claimed to be Adam Smith free trade, neoliberalism was and is mercantilism dressed up with more friendly rhetoric, while the reality remains the same as the mercantilist processes over the last several hundred years: The powerful throughout the past centuries not only claimed an excessive share of the wealth of nature which was properly shared by all within the community, through the unequal trades of mercantilism they claimed an excessive share of the wealth on the periphery of their trading empires.

Adam Smith describes mercantilism for us:. It discourages the exportation of the materials of manufacture [tools and raw material], and the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations [cities] in all foreign markets: It encourages the importation of the materials of manufacture, in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities.

William Appleman Williams describes mercantilism at its zenith: The world was defined as known and finite, a principle agreed upon by science and theology. Hence the chief way for a nation to promote or achieve its own wealth and happiness was to take them away from some other country.

When the injustice of mercantilism was understood, it became too embarrassing and was replaced by the supposedly just Adam Smith free trade. But free trade as practiced by Adam Smith neo-mercantilists was far from fair trade. Adam Smith unequal free trade is little more than a philosophy for the continued subtle monopolization of the wealth-producing-process , largely through continued privatization of the commons of both an internal economy and the economies of weak nations on the periphery of trading empires.

So long as weak nations could be forced to accept the unequal trades of Adam Smith free trade, they would be handing their wealth to the imperial-centers-of-capital of their own free will.

In short, Adam Smith free trade, as established by neo-mercantilists, was only mercantilism hiding under the cover of free trade. Free trade formed the basis of free enterprise for capitalists and up until the Great Depression of the s was the primary economic theory followed in the United States and Britain. But from a global perspective, this free trade was accompanied by geopolitics making it look more like mercantilism.

For both these nations as well as others to succeeded and remain competitive in the international arena, they had a strong foundation of imperialism, colonialism and subjugation of others in order to have access to the resources required to produce such vast wealth. Smith notes above, this was hardly the free trade that Adam Smith suggested and it seemed like a continuation of mercantilist policies. However, even during its prevalent times before the Second World War, neoliberalism had already started to show signs of increasing disparities between rich and poor.

Because of the Great Depression in the s, an economist, John Maynard Keynes, suggested that regulation and government intervention was actually needed in order to provide more equity in development. This led to the Keynesian model of development and after World War II formed the foundation for the rebuilding of the U. S-European-centered international economic system. The Marshall Plan for Europe helped reconstruct it and the European nations saw the benefits of social provisions such as health, education and so on, as did the U.

As Susan George notes , when these institutions were created at Bretton Woods in , their mandate was to help prevent future conflicts by lending for reconstruction and development and by smoothing out temporary balance of payments problems.

This is very different from what they are doing today. At least in the Western countries, at that time, everyone was a Keynesian, a social democrat or a social-Christian democrat or some shade of Marxist. The idea that the market should be allowed to make major social and political decisions; the idea that the State should voluntarily reduce its role in the economy, or that corporations should be given total freedom, that trade unions should be curbed and citizens given much less rather than more social protection — such ideas were utterly foreign to the spirit of the time.

Even if someone actually agreed with these ideas, he or she would have hesitated to take such a position in public and would have had a hard time finding an audience. However, as elites and corporations saw their profits diminish with this equalizing effect, economic liberalism was revived, hence the term neoliberalism. Except, that this new form was not just limited to national boundaries, but instead was to apply to international economics as well.

Starting from the University of Chicago with the philosopher-economist Friedrich von Hayek and his students such as Milton Friedman, the ideology of neoliberalism was pushed very thoroughly around the world. Even before this though, there were indications that the world economic order was headed this way: The want for access to cheap resources to continue creating vast wealth and power allowed the imperial empires to justify military action, imperialism and colonialism in the name of national interests , national security , humanitarian intervention and so on.

In fact, as J. The wealth of the ancient city-states of Venice and Genoa was based on their powerful navies, and treaties with other great powers to control trade. This evolved into nations designing their trade policies to intercept the wealth of others mercantilism. Occasionally one powerful country would overwhelm another through interception of its wealth though a trade war, covert war, or hot war; but the weaker, less developed countries usually lose in these exchanges. It is the military power of the more developed countries that permits them to dictate the terms of trade and maintain unequal relationships.

As European and American economies grew, they needed to continue expansion to maintain the high standards of living that some elites were attaining in those days. This required holding on to, and expanding colonial territories in order to gain further access to the raw materials and resources, as well exploiting cheap labor. Those who resisted were often met with brutal repression or military interventions. This is not a controversial perception.

President Woodrow Wilson recognized this in the early part of the 20th century:. Since trade ignores national boundaries and the manufacturer insists on having the world as a market, the flag of his nation must follow him, and the doors of the nations which are closed against him must be battered down.

Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process. Colonies must be obtained or planted, in order that no useful corner of the world may be overlooked or left unused. Richard Robbins, Professor of Anthropology and author of Global Problems and the Culture of Capitalism is also worth quoting at length:.

The Great Global Depression of that lasted essentially until was the first great manifestation of the capitalist business crisis. The depression was not the first economic crisis [as there had been many for thousands of years] but the financial collapse of revealed the degree of global economic integration, and how economic events in one part of the globe could reverberate in others.

The Depression of revealed another big problem with capitalist expansion and perpetual growth: Given this situation, if you were an American or European investor in , where would you look for economic expansion? The obvious answer was to expand European and American power overseas, particularly into areas that remained relatively untouched by capitalist expansion — Africa, Asia, and the Pacific.

Colonialism had become, in fact, a recognized solution to the need to expand markets, increase opportunities for investors, and ensure the supply of raw material. In Rhodes said:. I was in the East End of London yesterday and attended a meeting of the unemployed.

I listened to the wild speeches, which were just a cry for bread , bread, and on my way home I pondered over the scene and I became more than ever convinced of the importance of imperialism. The Empire, as I have always said, is a bread and butter question. If you want to avoid civil war, you must become imperialist. As a result of this cry for imperialist expansion, people all over the world were converted into producers of export crops as millions of subsistence farmers were forced to become wage laborers producing for the market and required to purchase from European and American merchants and industrialists, rather than supply for themselves, their basic needs.

World War I was, in effect, a resource war as Imperial centers battled over themselves for control of the rest of the world. World War II was another such battle, perhaps the ultimate one. However, the former imperial nations realized that to fight like this is not the way, and became more cooperative instead. The Soviet attempt of an independent path to development flawed that it was, because of its centralized, paranoid and totalitarian perspectives , was a threat to these centers of capital because their own colonies might get the wrong idea and also try for an independent path to their development.

Because World War II left the empires weak, the colonized countries started to break free. In some places, where countries had the potential to bring more democratic processes into place and maybe even provide an example for their neighbors to follow it threatened multinational corporations and their imperial or former imperial states for example, by reducing access to cheap resources.

As a result, their influence, power and control was also threatened. Often then, military actions were sanctioned. To the home populations, the fear of communism was touted, even if it was not the case, in order to gain support. The net effect was that everyone fell into line, as if it were, allowing a form of globalization that suited the big businesses and elite classes mainly of the former imperial powers. Hence, there is no surprise that some of the main World War II rivals, USA, Germany and Japan as well as other European nations are so prosperous, while the former colonial countries are still so poor; the economic booms of those wealthy nations have been at the expense of most people around the world.

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