[OPE-L] Wallerstein Commentary, "2008: The Demise of Neoliberal Globalization'

From: Gerald Levy (glevy@LAGCC.CUNY.EDU)
Date: Fri Feb 01 2008 - 08:53:20 EST

"2008: The Demise of Neoliberal Globalization"

The ideology of neoliberal globalization has been on a roll since the
early 1980s. It was not in fact a new idea in the history of the
modern world-system, although it claimed to be one. It was rather the
very old idea that the governments of the world should get out of the
way of large, efficient enterprises in their efforts to prevail in
the world market. The first policy implication was that governments,
all governments, should permit these corporations freely to cross
every frontier with their goods and their capital. The second policy
implication was that the governments, all governments, should
renounce any role as owners themselves of these productive
enterprises, privatizing whatever they own. And the third policy
implication was that governments, all governments, should minimize,
if not eliminate, any and all kinds of social welfare transfer
payments to their populations. This old idea had always been
cyclically in fashion.

In the 1980s, these ideas were proposed as a counterview to the
equally old Keynesian and/or socialist views that had been prevailing
in most countries around the world: that economies should be mixed
(state plus private enterprises); that governments should protect
their citizens from the depredations of foreign-owned quasi-
monopolist corporations; and that governments should try to equalize
life chances by transferring benefits to their less well-off
residents (especially education, health, and lifetime guarantees of
income levels), which required of course taxation of better-off
residents and corporate enterprises.

The program of neoliberal globalization took advantage of the
worldwide profit stagnation that began after a long period of
unprecedented global expansion in the post-1945 period up to the
beginning of the 1970s, which had encouraged the Keynesian and/or
socialist views to dominate policy. The profit stagnation created
balance-of-payments problems for a very large number of the world's
governments, especially in the global South and the so-called
socialist bloc of nations. The neoliberal counteroffensive was led by
the right-wing governments of the United States and Great Britain
(Reagan and Thatcher) plus the two main intergovernmental financial
agencies - the International Monetary Fund and the World Bank, and
these jointly created and enforced what came to be called the
Washington Consensus. The slogan of this global joint policy was
coined by Mrs. Thatcher: TINA, or There is No Alternative. The slogan
was intended to convey to all governments that they had to fall in lin
e with the policy recommendations, or they would be punished by slow
growth and the refusal of international assistance in any
difficulties they might face.

The Washington Consensus promised renewed economic growth to everyone
and a way out of the global profit stagnation. Politically, the
proponents of neoliberal globalization were highly successful.
Government after government - in the global South, in the socialist
bloc, and in the strong Western countries - privatized industries,
opened their frontiers to trade and financial transactions, and cut
back on the welfare state. Socialist ideas, even Keynesian ideas,
were largely discredited in public opinion and renounced by political
elites. The most dramatic visible consequence was the fall of the
Communist regimes in east-central Europe and the former Soviet Union
plus the adoption of a market-friendly policy by still-nominally
socialist China.

The only problem with this great political success was that it was
not matched by economic success. The profit stagnation in industrial
enterprises worldwide continued. The surge upward of the stock
markets everywhere was based not on productive profits but largely on
speculative financial manipulations. The distribution of income
worldwide and within countries became very skewed - a massive
increase in the income of the top 10% and especially of the top 1% of
the world's populations, but a decline in real income of much of the
rest of the world's populations.

Disillusionment with the glories of an unrestrained "market" began to
set in by the mid-1990s. This could be seen in many developments: the
return to power of more social-welfare-oriented governments in many
countries; the turn back to calling for government protectionist
policies, especially by labor movements and organizations of rural
workers; the worldwide growth of an alterglobalization movement whose
slogan was "another world is possible."

This political reaction grew slowly but steadily. Meanwhile, the
proponents of neoliberal globalization not only persisted but
increased their pressure with the regime of George W. Bush. Bush's
government pushed simultaneously more distorted income distribution
(via very large tax cuts for the very well-off) and a foreign policy
of unilateral macho militarism (the Iraq invasion). It financed this
by a fantastic expansion of borrowing (indebtedness) via the sale of
U.S. treasury bonds to the controllers of world energy supplies and
low-cost production facilities.

It looked good on paper, if all one read were the figures on the
stock markets. But it was a super-credit bubble that was bound to
burst, and is now bursting. The Iraq invasion (plus Afghanistan plus
Pakistan) are proving a great military and political fiasco. The
economic solidity of the United States has been discredited, causing
a radical fall in the dollar. And the stock markets of the world are
trembling as they face the pricking of the bubble.

So what are the policy conclusions that governments and populations
are drawing? There seem to be four in the offing. The first is the
end of the role of the U.S. dollar as the reserve currency of the
world, which renders impossible the continuance of the policy of
super-indebtedness of both the government of the United States and
its consumers. The second is the return to a high degree of
protectionism, both in the global North and the global South. The
third is the return of state acquisition of failing enterprises and
the implementation of Keynesian measures. The last is the return of
more social-welfare redistributive policies.

The political balance is swinging back. Neoliberal globalization will
be written about ten years from now as a cyclical swing in the
history of the capitalist world-economy. The real question is not
whether this phase is over but whether the swing back will be able,
as in the past, to restore a state of relative equilibrium in the
world-system. Or has too much damage been done? And are we now in for
more violent chaos in the world-economy and therefore in the world-
system as a whole?

by Immanuel Wallerstein

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Becky Dunlop, Secretary
Fernand Braudel Center

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