PHA-Exchange> History of neo-liberalism

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From: Nance <nance at aids-bells.org>

A SHORT HISTORY OF NEO-LIBERALISM : TWENTY YEARS OF ELITE ECONOMICS
AND EMERGING OPPORTUNITIES FOR STRUCTURAL CHANGE
by Susan George

CONFERENCE ON ECONOMIC SOVEREIGNTY IN A GLOBALISING WORLD BANGKOK, 
24-26 MARCH 1999

(excerpts)
In 1945 or 1950, if you had seriously proposed any of the ideas and
policies in today's standard neo-liberal toolkit, you would have been
sent off to the insane asylum.  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. However incredible it may sound 
today, the IMF and the World Bank were seen as
progressive institutions.  When they were created at Bretton Woods in 
1944, their mandate was to help prevent future conflicts by lending for 
reconstruction and development and by smoothing out temporary balance 
of payments problems. They had no control over individual government's 
economic decisions nor did their mandate include a licence to intervene 
in national policy.
The other major item on the agenda was to get world trade
moving--this was accomplished through the Marshall Plan which
established Europe once again as the major trading partner for the US. 
Over 50 yrs ago,the scholar Karl Polanyi made this amazingly prophetic 
and modern statement: "To allow the market mechanism to be sole 
director of the fate of human beings and their natural 
environment...would result in the demolition of society".
The whole point of neo-liberalism is that the market mechanism should 
be allowed to direct
the fate of human beings. The economy should dictate its rules to
society, not the other way around. And just as Polanyi foresaw, this
doctrine is leading us directly towards the "demolition of society".

So what happened? Why have we reached this point half a century after
the end of the Second World War?  The short answer is "Because of the
series of recent financial crises, especially in Asia". But the 
question we are really asking is "How did neo-liberalism ever emerge 
from its ultra-minoritarian ghetto to become the dominant doctrine in 
the world today?" Why can the IMF and the Bank intervene at will and 
force countries to participate in the world economy on basically 
unfavourable terms?  Why is the environment on the edge of collapse and 
why are there so many poor people in both the rich and the poor 
countries at a time when there has never existed such great wealth? 
One explanation for this triumph of neo-liberalism and the economic,
political, social and ecological disasters that go with it is that
neo-liberals have bought and paid for their own vicious and regressive
"Great Transformation". They have understood, as progressives have not,
that ideas have consequences. Starting from a tiny embryo at the
University of Chicago with Milton Friedman at its nucleus, the neo-
liberals and their funders have created a huge international network of
foundations, institutes, research centers, publications, scholars,
writers and public relations organizatiions to develop, package and 
push their ideas and doctrine relentlessly.
They have built this highly efficient ideological cadre because they
understand what the Italian Marxist thinker Antonio Gramsci was talking
about when he developed the concept of cultural hegemony. If you can
occupy peoples' heads, their hearts and their hands will follow. The 
ideological and promotional work of the right has been absolutely 
brilliant. They have spent hundreds of millions of dollars, but the 
result has been worth every penny to them because they have made neo-
liberalism seem as if it were the natural and normal condition of 
humankind. No matter how many disasters of all kinds the neo-liberal 
system has visibly created, no matter what financial crises it may 
engender, no matter how many losers and outcasts it may create, it is 
still made to seem inevitable, like an act of God, the only possible 
economic and social order available to us.
This vast neo-liberal experiment we are all being forced to live under 
has been
created by people with a purpose. Once you grasp this, once you
understand that neo-liberalism is not a force like gravity but a
totally artificial construct, you can also understand that what some 
people have created, other people can change. I'm all for grassroots 
projects, but I also warn that these will collapse if the overall 
ideological climate is hostile to their goals.
So, from a small, unpopular sect with virtually no influence,
neo-liberalism has become the major world religion with its dogmatic
doctrine, its law-giving institutions and perhaps most important of 
all, its hell for sinners who dare to contest the revealed truth. 
In 1979, the year Margaret Thatcher came to power and undertook the
neo-liberal revolution in Britain. The Iron Lady was herself a disciple
of Friedman and had no qualms about expressing her convictions. She was 
well known for justifying her programme with the single word TINA, 
short for There Is No Alternative.  The central value of Thatcher's 
doctrine and of neo-liberalism itself is the notion of competition--
competition between nations, regions, firms and of course between 
individuals. Competition is central because it separates the fit from
the unfit. It is supposed to allocate all resources, whether physical,
natural, human or financial with the greatest possible efficiency.
In sharp contrast, the great Chinese philosopher Lao Tzu said: "Above 
all, do not compete". The only actors in the neo-liberal world who seem 
to have taken his advice are the largest actors of all, the ansnational 
Corporations. The principle of competition scarcely applies to them; 
they prefer to practise what we could call Alliance Capitalism. It is 
no accident that, depending on the year, two-thirds to three-quarters 
of all the money labeled "Foreign Direct Investment" is not devoted to 
new, job-creating investment, but to Mergers and Acquisitions which 
almost invariably result in job losses.
For the neo-liberal, the market is so wise and so good that like God, 
the Invisible Hand can bring good out of apparent evil. "Don't worry 
about those who might be left behind in the competitive struggle. 
People are unequal by nature, but this is good because the ontributions 
of the well-born, the best-educated, the toughest, will eventually 
benefit everyone. Nothing in particular is owed to the weak, the poorly 
educated, what happens to them is their own fault, never the fault of 
society. If the competitive system is given vent, society will be the 
better for it". Unfortunately, the history of the past twenty years 
teaches us that exactly the opposite is the case.
In Britain, now, one person in four,and one child in three is 
officially poor. This is the meaning of survival of the fittest: people 
who cannot heat their houses in winter, who must put a coin in the 
meter before they can have electricity or water.
Another implication of competition as the central value of neo-
liberalism is that the public sector must be brutally downsized
because it does not and cannot obey the basic law of competing for
profits or for market share. Privatisation is one of the major economic
transformations of the past twenty years. 
Neo-liberals define anything public as ipso facto "inefficient".
So what happens when a monopoly is privatised? Quite normally, the new 
capitalist owners tend to impose monopoly prices on the public, while 
richly remunerating themselves. Prices end up higher than they ought to 
be and service to the consumer is not necessarily good. Privatisation 
can also be used to break the power of the trade unions. To neo-
liberals, fewer workers is always better than more because workers
impinge on shareholder value. As for other effects of privatisation, 
they were predictable and
predicted. The managers of the newly privatised enterprises doubled or 
tripled their own salaries. The government used taxpayer money to wipe 
out debts and recapitalise firms before putting them on the market to 
make them more attractive to prospective buyers.