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Wednesday, December 22, 2010

Neoliberalism

Neoliberalism describes a market-driven approach to economic and social policy based onneoclassical theories of economics that stresses the efficiency of private enterprise,liberalized trade and relatively open markets, and therefore seeks to maximize the role of the corporate sector in determining the political and economic priorities of the state.

The term "neoliberalism" has also come into wide use in cultural studies to describe an internationally prevailing ideological paradigm that leads to social, cultural, and political practices and policies that use the language of markets, efficiency, consumer choice, transactional thinking and individual autonomy to shift risk from governments and corporations onto individuals and to extend this kind of market logic into the realm of social and affective relationships.

The definition of neoliberalism presented here is more abstract than usual - but it also suggests that neoliberalism has been underestimated. A widely quoted example of those 'usual definitions' is What is "Neo-Liberalism"? by Elizabeth Martinez and Arnoldo García:

Neo-liberalism is a set of economic policies that have become widespread during the last 25 years or so. Although the word is rarely heard in the United States, you can clearly see the effects of neo-liberalism here as the rich grow richer and the poor grow poorer....Around the world, neo-liberalism has been imposed by powerful financial institutions like the International Monetary Fund (IMF), the World Bank and the Inter- American Development Bank....the capitalist crisis over the last 25 years, with its shrinking profit rates, inspired the corporate elite to revive economic liberalism. That's what makes it 'neo' or new.

Neoliberalism

If Adam Smith returned and saw the more extreme aspects of neoliberalism, he would probably find them bizarre. Nevertheless, they derive from the ideas of early liberalism. The belief in the market, in market forces, has separated from the factual production of goods and services. It has become an end in itself, and this is one reason to speak of neoliberalism and not of liberalism.

A general characteristic of neoliberalism is the desire to intensify and expand the market, by increasing the number, frequency, repeatability, and formalisation of transactions. The ultimate (unreachable) goal of neoliberalism is a universe where every action of every being is a market transaction, conducted in competition with every other being and influencing every other transaction, with transactions occurring in an infinitely short time, and repeated at an infinitely fast rate. It is no surprise that extreme forms of neoliberalism, and especially cyberliberalism, overlap with semi-religious beliefs in the interconnectedness of the cosmos.

Some specific aspects of neoliberalism are:

  • A new expansion in time and space of the market: although there has been a global-scale market economy for centuries, neoliberals find new areas of marketisation. This illustrates how neoliberalism differs from classic market liberalism. Adam Smith would not have believed that a free market was less of a free market, because the shops are closed in the middle of the night: expansion of trading hours is a typically neoliberal policy. For neoliberals a 23-hours economy is already unjustifiable: nothing less than 24-hours economy will satisfy them. They constantly expand the market at its margins.
  • The emphasis on property, in classic and market liberalism, has been replaced by an emphasis on contract. In the time of Adam Smith, property conferred status in itself: he would find it strange that entrepreneurs sometimes own no fixed assets, and lease the means of production.
  • Contract maximalisation is typically neoliberal: the privatisation of the British railway network, formerly run by one state-owned company, led to 30 000 new contracts. Most of these were probably generated by splitting services, which could have been included in block contracts. (A fanatic neoliberal would prefer not to buy a cup of coffee, but negotiate separately for each microlitre).
  • The contract period is reduced, especially on the labour market, and so the frequency of contract is increased. A service contract, for instance for office cleaning, might be reduced from a one-year to a three-month contract, then to a one-month contract. Contracts of employment are shorter and shorter, in effect forcing the employee to re-apply for the job. This flexibilisation means a qualitatively different working life: many more job applications, spread throughout the working life. This was historically the norm in agriculture - day labour - but long-term labour contracts became standard after industrialisation.
  • Market forces are also intensified by intensifying assessment, a development especially visible on the labour market. Even within a contract period, an employee will be subject to continuous assessment. The use of specialised software in call centres has provided some extreme examples: the time employees spend at the toilet is measured in seconds: this information is used to pressure the employee to spend less time away from the terminal. Firms with contracts are also increasingly subject to continuous assessment procedures, made possible by information technology. For instance, courier services use tracking software and GPS technology, to allow customers to locate their packages in transit. This is a typical example of the new hyper-provision of business information, in neoliberal economies.
  • New transaction-intensive markets are created on the model of the stock exchanges - electricity exchanges, telephone-minute exchanges. Typical for neoliberalism: there is no relationship between the growth in the number of transactions, and the underlying production.
  • New forms of auction are another method of creating transaction-intensive markets. Radio frequency auctions, such as those for UMTS frequencies, are an example. They replaced previous methods of allocation, especially licensing - a traditional method of allocating access to scarce goods with no clear private owner. The complex forms of frequency spectrum auctions have only been developed in the last few years. Neoliberals now see them as the only valid method of making such allocations: they dismiss all other methods as 'beauty contests'.
  • Artificial transactions are created, to increase the number and intensity of transactions. Large-scale derivative trading is a typically neoliberal phenomenon, although financial derivatives have existed for centuries. It is possible to trade options on shares: but it is also possible to create options on these options. This accumulation of transaction on transaction, is characteristic of neoliberalism. New derivatives are created, to be traded on the new exchanges - such as 'electricity futures'. There is no limit to this expansion, except computer power, which grows rapidly anyway.
  • Automated trading, and the creation of virtual market-like structures, are neoliberal in the sense that they are an intensification of "transaction for transaction's sake". However, a world in which all entrepreneurial activity was automated would not be neoliberal, or liberal.
  • This expansion of interactivity means that neoliberal societies are network societies, rather than the 'open societies', of classic liberals. Formal equality and 'access' are not enough for neoliberals: they must be used to create links to other members of the society. This attitude has been accurately labelled 'connectionist'.
  • Because of contract expansionism, transaction costs play an increasing role in the neoliberal economy. All those 30 000 contracts at British Rail had to be drafted by lawyers, all the assessments have to be done by assessors. There is always some cost of competition, which increases as the intensity of transactions increases. Neoliberalism has reached the point where these costs threaten to overwhelm the existing economy, destroying any economic gains from technological change.
  • The growth of the financial services sector is related to these neoliberal characteristics, rather than to any inherent shift to service economies. The entire sector is itself a transaction cost: it was almost non-existent in the centrally planned economies. In turn, it has created a huge demand for office space in the world's financial centres. The expansion of the sector and its office employment are in direct contradiction of propaganda about 'more efficiency and less bureaucracy' in the free market.
  • The speed of trading is increased. Online market data is expensive, yet it is now available free with a 15-minute delay. The markets move so fast, that the data is worthless after 15 minutes: the companies can then give it away, as a form of advertising. Day-traders buy and sell shares in minutes. Automated trading programmes, where the computer is linked direct to the stock exchange system, do it in seconds, or less. It is this increased speed which has led to the huge nominal trading volumes on the international currency markets, many times the Gross World Product on a yearly basis.
  • Certain functions arise which only exist inside a neoliberal free market - 'derivative professions'. A good example is the profession of psychological-test coach. The intensity of assessment has increased, and firms now regularly use psychological tests to select candidates, even for intermediate level jobs. So ambitious candidates pay for training, in how to pass these psychological tests. Competition in the neoliberal labour market itself creates the market for this service.
  • The creation of sub-markets, typically within an enterprise. Sub-contracting is itself an old market practice, but was usually outside the firm. It is now standard practice for large companies to create competition among their constituent units. This practice is also capable of quasi-infinite extension, and its promotion is characteristic of neoliberalism. A few companies even required each individual employee to register as a business, and to compete with each other at the place of work. A large company can form literally millions of holdings, alliances and joint ventures, using such one-person firms as building blocks.
  • Supplier maximalisation: this extends the range of enterprises that compete for each contract. The ideal would be that every enterprise competes for every contract offered, maximising competition and market forces. In the case of the labour market, the neoliberal ideal is the absolutely flexible and employable employee, who can (and does apply) for every vacancy. In reality, an individual can not perform every kind of work - but there is a real development towards non-specialised enterprises, especially in the producer services sector. In neoliberalism, instead of the traditional 'steel tycoon' or 'newspaper baron' there are enterprises which "globally link people and knowledge, and cultures" or "advise and implement solutions to management issues". (In fact these are quotes from the accountants Price Waterhouse, but you can not guess this from the descriptions).

Neoliberalism is not simply an economic structure, it is a philosophy. This is most visible in attitudes to society, the individual and employment. Neo-liberals tend to see the world in term of market metaphors. Referring to nations as companies is typically neoliberal, rather than liberal. In such a view Deutschland GmbH competes with Great Britain Ltd, BV Nederland, and USA Inc. However, when this is a view of nation states, it is as much a form of neo-nationalism as neoliberalism. It also looks back to the pre-liberal economic theory - mercantilism - which saw the countries of Europe as competing units. The mercantilists treated those kingdoms as large-scale versions of a private household, rather than as firms. Nevertheless, their view of world trade as a competition between nation-sized units, would be acceptable to modern neoliberals.

This sense of the word 'neoliberalism' is widely used in Latin America. However, neoliberalism is more a phenomenon of the rich western market democracies, than of poor regions. That is why I emphasise the historical development of liberalism, in those western market democracies. The IMF and the World Bank are not the right places to look, to see the essence of neoliberalism. And the WTO ideology - free trade and 'competitive advantage' - is 200 years old. There is nothing 'neo' in their liberalism.

Policy implications

Neoliberalism seeks to transfer control of the economy from public to the private sector, under the belief that it will produce a more efficient government and improve the economic health of the nation.[ The definitive statement of the concrete policies advocated by neoliberalism is often taken to be John Williamson's"Washington Consensus", a list of policy proposals that appeared to have gained consensus approval among the Washington-based international economic organizations (like the International Monetary Fund (IMF) andWorld Bank). Williamson's list included ten points:

§ Fiscal policy Governments should not run large deficits that have to be paid back by future citizens, and such deficits can only have a short term effect on the level of employment in the economy. Constant deficits will lead to higher inflation and lower productivity, and should be avoided. Deficits should only be used for occasional stabilization purposes.

§ Redirection of public spending from subsidies (especially what neoliberals call "indiscriminate subsidies") and other spending neoliberals deem wasteful toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment

§ Tax reform– broadening the tax base and adopting moderate marginal tax rates to encourage innovation and efficiency;

§ Interest rates that are market determined and positive (but moderate) in real terms;

§ Floating exchange rates;

§ Trade liberalisation – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by law and relatively uniform tariffs; thus encouraging competition and long term growth

§ Liberalisation of the "capital account" of the balance of payments, that is, allowing people the opportunity to invest funds overseas and allowing foreign funds to be invested in the home country

§ Privatisation of state enterprises; Promoting market provision of goods and services which the government can not provide as effectively or efficiently, such as telecommunications, where having many service providers promotes choice and competition.

§ Deregulation – abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions;

§ Legal security for property rights; and,

§ Financialisation of capital.

History

Embedded liberalism

The term embedded liberalism refers to the economic system that dominated the non-communist global economy from the end of World War II to the 1970s. David Harvey argues that at the end of World War II, the primary objective was to develop an economic plan that would not lead to a repeat of the Great Depression during the 1930s. Harvey notes that under this new system free trade was regulated "under a system of fixed exchange rates anchored by the US dollar's convertibility into gold at a fixed price. Fixed exchange rates were incompatible with free flows of capital.Harvey argues that embedded liberalism led to the surge of economic prosperity that came to define the 1950s and 1960s.

Across much of the world, the work of John Maynard Keynes, which sought to formulate the means by which governments could stabilize and fine-tune free markets, became a highly influential approach. Within the developing world, several developments – among themdecolonization, a desire for national independence and the destruction of the pre-war global economy, and the view that countries could not effectively industrialize under free market systems (e.g., the Singer–Prebisch thesis) – encouraged economic policies that were influenced bycommunist, socialist and import substitution precepts.

The period of government interventionism in the 1950s and 1960s was characterized by exceptional economic prosperity, as economic growthwas generally high, was contained, and economic distribution was comparatively equalized. This era is known as les Trente Glorieuses("The Glorious Thirty [years]") or "Golden Age", a reference to many countries having experienced particularly high levels of prosperity between (roughly) World War II and 1973.

Collapse of embedded liberalism

David Harvey notes that the system of embedded liberalism began to break down beginning towards the end of the 1960s. The 1970s were defined by an increased accumulation of capital, unemployment, inflation (or stagflation as it was dubbed), and a variety of fiscal crises. He notes that "the embedded liberalism that had delivered high rates of growth to at least the advanced capitalist countries after 1945 was clearly exhausted and no longer working." A number of theories concerning new systems began to develop, which led to extensive debate between those who advocated "social democracy and central planning on the one hand" and those "concerned with liberating corporate and business power and re-establishing market freedoms on the other. Harvey notes that by 1980, the latter group had emerged as the leader, advocating and creating a global economic system that would become known as neoliberalism.

Some argue that the strains which occurred were located in the international financial system,[13][14] and culminated in the dissolution of the Bretton Woods system, which some argue had set the stage for theStagflation crisis that would, to some extent, discredit Keynesianism in the English-speaking world. In addition, some argue that the postwar economic system was premised on a society that excluded women and minorities from economic opportunities, and the political and economic integration given to these groups strained the postwar system.

Farshad Araghi, professor of the Department of Sociology at Florida Atlantic University, argues that a very abandonment of Keynesianism for Neoclassical Economics has never occurred. In fact, he states that the magniloquence of anti-Keynesianism and deregulation concerned more the matter of demolishing national-developmentalism in the decolonized world, along with the wage contracts and welfare states in the industrialized countries

Post-1970s economic liberalism

Global spread

Chronic economic crisis throughout the 1980s, and the collapse of the Communist bloc at the end of the 1980s, helped foster political opposition to state interventionism in favor of free market reform policies. From the 1980s onward, a number of communist countries initiated various neoliberal market reforms, such as the Socialist Federal Republic of Yugoslavia under the direction of Ante Markovic (until the country's collapse in the early 1990s), and the People's Republic of China under the direction of Deng Xiaoping.

Changes occurred from the 1970s to the 1980s. Started off with most of the democratic world governments focused primarily on the primacy of economic individual rights, rules of law and roles of the governments in moderating relative free trade. It was almost considered national self determination at the time.

Stances of organized labour shifted when governments of Ronald Reagan and Margaret Thatcher took strong stances to break down trade barriers entirely to reduce government power; thus allowing the market to be more important. Therefore industries will increasingly shift globally with integrated knowledge boosting the economy.

Socially, neoliberalism is marked by the return of class rules and the blurring of social and market valuesAssuming this perspective is true, neoliberalism can be viewed as a domino-effect concept. On one end, once a state-run industry is handed over to the private sector, there is little telling in how far privatization will manipulate that industry to fit their economic needs. The other portion of this statement implies that once neoliberal policies are adopted by governments, they are modeled by other states and often expanded upon to insure an even more positive economic benefit. Therefore, neoliberalism is a constant in the equation of the current era of market globalization. This is precisely why neoliberalism is not only considered an economic concept, but also a geographic one.

Chicago School

The Chicago school of economics describes a neoclassical school of thought within the academic community of economists, with a strong focus around the faculty of University of Chicago.

The school emphasizes non-intervention from government and rejects regulation in laissez-faire free markets as inefficient. It is associated with neoclassical price theory and libertarianism and the rejection of Keynesianism in favor of monetarism until the 1980s, when it turned to rational expectations. The school has impacted the field of finance by the development of the efficient market hypothesis. In terms of methodology the stress is on "positive economics"– that is, empirically based studies using statistics to prove theory.

Approximately 70% of the professors in the economics department have been considered part of the school of thought. The University of Chicago department, widely considered one of the world’s foremost economics departments,[18][19][20] has fielded more Nobel Prize winners and John Bates Clark medalists in economics than any other university.

Those who attend to the Chicago School prefer some form of competition law, school vouchers, a central bank, intellectual property and prefer Milton Friedman's negative income tax as a replacement to the existing welfare system, arguing that it is simpler and has fewer of theperverse incentives of "government handouts".

Reach and effects

Neoliberal movements ultimately changed the world's economies in many ways, but some analysts argue that the extent to which the world has liberalized may often be overstated. Some of the past thirty years' changes are clear and unambiguous, like:

§ Growth in international trade and cross-border capital flows

§ Elimination of trade barriers

§ Cutbacks in defense spending, although it is unclear whether these reductions are associated with neoliberalism or the peace dividendthat was supposed to accrue at the end of the Cold War

§ Cutbacks in public sector employment

§ The privatization of previously public-owned enterprises

§ The transfer of the share of countries' economic wealth to the top economic percentiles of the population.

Other changes are not so apparent, and are debated in the literature.

§ Reduction in the size of governments. Governments do not appear to have shrunk wholesale. With the exception of exceptionally high-spending governments, government expenditures (as a percentage of GDP) appears to have stayed the same since 1980. Most of the cuts to government spending appear to have been a temporary phenomenon that took place during the 1990s.

§ Social welfare spending. Many governments have generally spent more on health, education, social security, welfare and/or housing. However, populations have increased and populations have aged in affluent countries. As well, some of these services (such as health care and education in the U.S.) are also inefficiently organized.

Effects in Latin American urbanization

Between the 1930s and the late 1970s most countries in Latin America used the import substitution industrialization model (ISI) to build industry and reduce the dependency on imports from foreign countries. The result of ISI in these countries included rapid urbanization of one or two major cities, a growing urban population of the working class, and frequent protests by trade unions and left-wing partiesIn response to the economic crisis, the leaders of these countries quickly adopted and implemented new neoliberal policies due to prospect theory.

A study based on the transformations of urban life and systems as a result of neoliberalism in six countries of Latin America was published by Alejandro Portes and Bryan Roberts and titled “The Free-Market City: Latin American Urbanization in the Years of the Neoliberal Experiment”. This comparative study included census data analysis, surveying, and fieldwork focused in Argentina, Brazil, Chile, Mexico, Peru, and Uruguay. Predictions of the neoliberalism were extended to these six countries in four areas: urban systems and primacy, urban unemployment and informal employment, urban inequality and poverty, and urban crime and victimization. Data collected support a relationship between the economic policies of neoliberalism and the resulting patterns of urbanization.

In the area of urban systems and primacy two tendencies were revealed in the data. The first was continuing growth in total size of urban populations while the second tendency was the decline in size of the primate city with decreased migration flows to these cities. Therefore, when calculating the urban growth rate each of these countries all showed minimal or a significant decline in growth. Portes and Roberts theorize that the changes are due to the “loss of attraction of major cities...due to a complex set of factors, but is undoubtedly a related to the end of the ISI era”. Although the relationship between the open-market and the transformation of urban systems has not been proven to be a perfect one-to-one relationship, the evidence supports the acceleration or initiation of these two tendencies following neoliberal changes.[

While every country showed that rates of urban unemployment and informal employment remained stagnant or increased, slight variations were discovered between the six countries. For example, in Argentina the deteriorating labor-market and working conditions coincided perfectly with the application of strict economic neoliberal policies. Strict neoliberal policies were considered a success, however, in Chile. Interestingly, this study critiques that while Chile avoided unemployment by creating jobs, these jobs were often lacking necessary social services and labor protection. Portes and Roberts use these various countries to demonstrate that though neoliberal policies are predicted to increase employment, the actual variant effects range from stagnant or increased unemployment to unreliable or unsafe employment.

With the variation of urban employment and informal employment there was also a variation in the inequality and poverty in the six countries. While the majority of the population within these countries suffered from poverty, the upper classes received the benefits of the neoliberal system. According to Portes and Roberts, “the ‘privileged decile’ received average incomes equivalent to fourteen times the average Latin American poverty-line income”. In the six countries, it cannot be accurately concluded that poverty increased in response to neoliberal policies, in part, because of a disproportionate share of wages in the upper classes. The neoliberal policies in some countries did increase wealth though the distribution was not equally spread. While it cannot be concluded that the policies created poverty, the disproportionate distribution of wealth increased the inequality within all six countries.[

As a direct result of visible growing inequality, each country struggled with increased crime and victimization in both urban and suburban settings. However, due to corruption within the police force it is not possible to accurately extrapolate a trend in the data of crime and victimization. The location of crime is not limited to the urban areas and has spread throughout the suburban communities, though according to Portes and Roberts, most criminals reside within the impoverished urban communities. The combination of origins and location of crime supports the hypothesis of forced entrepreneurialship within these six countries. Even though crime and victimization increases with an increase in inequality, it cannot be definitively correlated to neoliberal policies.

This study published by Portes and Roberts demonstrates that though the ISI model was ineffective in maintaining economic stability, the neoliberal policies implemented were drastic and detrimental to social stability. Therefore, while neoliberalism is often theorized as an effective economic strategy, the social realities are often understated and traumatic.

Support

Political freedom

In Capitalism and Freedom (1962), Friedman developed the argument that economic freedom, while itself an extremely important component of total freedom, is also a necessary condition for political freedom. He commented that centralized control of economic activities was always accompanied with political repression.

In his view, the voluntary character of all transactions in a free market economy and wide diversity that it permits are fundamental threats to repressive political leaders and greatly diminish power to coerce. Through elimination of centralized control of economic activities, economic power is separated from political power, and the one can serve as counterbalance to the other. Friedman feels that competitive capitalism is especially important to minority groups, since impersonal market forces protect people from discrimination in their economic activities for reasons unrelated to their productivity.

It is important to take into account, however, that an early neoliberal regime was attempted in Chile under what some would consider a military dictatorship and severe social repression. However, despite what most would consider a highly objectionable context for implementation of economic liberty, Chile now enjoys the highest rate of GDP per capita in Latin America; this lends strong credence to the assertion that economic freedom is more important to prosperity than are democratic institutions. Also, increased economic freedom put pressure on the dictatorship over time and increased political freedom.

In The Road to Serfdom, Hayek argued that "Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends.

State-centric approach

The state-centric approach to neoliberalism is not critical, but it concurs with the critical approach that neoliberal ideas are really just laissez-faire liberal prescriptions that overthrew Keynesianism. State-centric theorists hold that neoliberalism is "the attempt to reduce the role of the state in the market through tax cuts, decreases in social spending, deregulation, and privatization." However, the state-centric approach argues that state actors were the political entrepreneurs who formulated neoliberalism – rather than, as critics of neoliberalism would claim, capitalist political organizations, and economists and economic departments, think tanks, and politicians all supported by class-conscious capitalists. State-centric theorists argue that neoliberalism spread because it fit the voters' preferences best; they disagree in this with the critical approach, which maintains that neoliberal framing and policies were propagated by well-heeled, highly organized political machines that insisted to the public, "There is no alternative". State-centric sociologist Monica Prasad (2006) further argues that neoliberalism became dominant where the (federal) tax structure was progressive, where industrial policy was "adversarial" to business, and where welfare was associated with the poor. She asserts this was the case in the U.S. and UK, relative to France and Germany. However, in France and Germany, taxation by the national government was regressive, industrial policy favored business, and the welfare state was widely recognized to benefit the middle class; consequently neoliberalism was not as favored by either business or the middle classes in these two countries as it was in the U.S. and the UK in particular. Prasad's analysis suggests that neoliberalism has been a corrective to policies that favored the working class over capitalist interests, and it was championed by autonomous state actors. However, most political sociologists would agree that only strained methodological choices would allow U.S. policy especially to be portrayed as favoring the working class over capitalist interests, even in the New Deal; state autonomy theses are generally very vulnerable to more class-sensitive historical research, especially in the case of the U.S.; and methodological choices, such as the omission of social democratic countries from her analysis, contribute heavily to Prasad's conclusions.

Opposition

Opponents of neoliberalism argue the following points:

§ Globalization and liberalization subvert nations' ability for self-determination.

§ Exploitation: critics consider capitalist economics to be exploitative.

§ Negative economic consequences: Critics argue that neo-liberal policies produce inequality.

§ Increase in corporate power: some anti-corporate organizations believe neoliberalism, unlike liberalism, changes economic and government policies to increase the power of corporations and large business, and a shift to benefit the upper classes over the lower classes.

§ There are terrains of struggles for neoliberalism locally and socially. Urban citizens are increasingly deprived of the power to shape the basic conditions of daily life.

§ Trade-led, unregulated economic growth and state regulation of pollution and other environmental impacts economic growth.

§ It is claimed by that deregulation of the labor market produces flexibilization and casualization of labor, greater informal employment, and a considerable increase in industrial accidents and occupational diseases.

Anglo-American

"The standard neoliberal policy package includes cutting back on taxes and government spending; eliminating tariffs and other barriers to free trade, reducing regulations of labor markets and financial markets and focusing macroeconomic policies on controlling inflation rather than stimulating the growth of jobs," reports economist Robert Pollin (2003). Arising out of a rejection of the class compromises embedded in previous liberal political-economic policies, including Keynesian and Active Labour Market Policies (ALMPs), neoliberal theory, institutions, policies, and practices are not regarded as politically neutral by their opponents. Economic neoliberalism usually brings about strong economic inequality, and while proponents of neoliberal shifts, such as George H.W. Bush and Bill Clinton argue that over time all levels of income are better off, some claim that empirical evidence has shown this not to be the case.

Criticism from left

Critics on the left sometimes refer to neoliberalism as the "American Model," and they make the claim that it promotes low wages and high inequality. According to the economists Howell and Diallo (2007), neoliberal policies have contributed to a U.S. economy in which 30% of workers earn "low wages" (less than two-thirds the median wage for full-time workers), and 35% of the labor force is "underemployed"; only 40% of the working-age population in the U.S. is considered adequately employed. The Center for Economic Policy Research's (CEPR) Dean Baker (2006) has argued that the driving force behind rising inequality in the U.S. has been a series of deliberate, neoliberal policy choices including anti-inflationary bias, anti-unionism, and profiteering in the health industry. However, countries have applied neoliberal policies at varying levels of intensity; for example, the OECD has calculated that only 6% of Swedish workers are beset with wages it considers low, and that Swedish wages are overall lower due to their lack of neoliberal policiesJohn Schmitt and Ben Zipperer (2006) of the CEPR have analyzed the effects of intensive Anglo-American neoliberal policies in comparison to continental European neoliberalism, concluding "The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates, poor and unequal educational outcomes, poor health outcomes, and high rates of crime and incarceration. At the same time, the available evidence provides little support for the view that U.S.-style labor-market flexibility dramatically improves labor-market outcomes. Despite popular prejudices to the contrary, the U.S. economy consistently affords a lower level of economic mobility than all the continental European countries for which data is available."[

Notable critics of neoliberalism in theory or practice include economists Joseph Stiglitz, Amartya Sen, and Robert Pollin,[107] linguist Noam Chomsky,[108] geographer David Harvey,[6] and the alter-globalization movement in general, including groups such as ATTAC. Critics of neoliberalism argue that not only is neoliberalism's critique of socialism (as unfreedom) wrong, but neoliberalism cannot deliver the liberty that is supposed to be one of its strong points. Daniel Brook's "The Trap" (2007), Robert Frank's "Falling Behind" (2007), Robert Chernomas and Ian Hudson's "Social Murder" (2007), and Richard G. Wilkinson's "The Impact of Inequality" (2005) all claim high inequality is spurred by neoliberal policies and produces profound political, social, economic, health, and environmental constraints and problems. The economists and policy analysts at the Canadian Centre for Policy Alternatives (CCPA) offer inequality-reducing social democratic policy alternatives to neoliberal policies. In addition, a significant opposition to neoliberalism has grown in Latin America. Prominent Latin American opponents include the Zapatista Army of National Liberation rebellion, the Brazilian MST, and the socialist governments of Venezuela, Bolivia and Cuba.

According to (Pollin 2003), neoliberalism under the U.S. Bill Clinton administration– steered by Alan Greenspan and Robert Rubin– was the temporary and unstable policy inducement of economic growth via government-supported financial and housing market speculation, featuring both low unemployment and low inflation. He claims that this unusual coincidence was made possible by the disorganization and dispossession of the American working class. Santa Cruz history of consciousness professor Angela Davis and Princeton sociologist Bruce Western have claimed that the high rate (compared to Europe) of incarceration in the U.S. – specifically 1 in 37 American adults is in the prison system – heavily promoted by the Clinton administration, is the neoliberal U.S. policy tool for keeping unemployment statistics low, while stimulating economic growth through the maintenance of a contemporary slave population and the promotion of prison construction and "militarized policing." The Clinton Administration also embraced neoliberalism by pursuing international trade agreements that would benefit the corporate sector globally (normalization of trade with China for example). Domestically, Clinton fostered such neoliberal reforms as the corporate takeover of health care in the form of the HMO, the reduction of welfare handouts, and the implementation of "Workfare".

(Harvey 2005) claims that neoliberalism is a global capitalist class power restoration project. Neoliberalism, he argues, is a theory of political-economic practices that dedicates the state to championing private property rights, free markets, and free trade, while deregulating business and privatizing inefficient government assets. Ideologically, he suggests that neoliberals promote entrepreneurialism as the normative source of human happiness. Harvey also considers neoliberalization a form of capitalist "creative destruction", a Schumpeterian concept. This indicates that while neoliberalism is a critical concept with a critique of capitalist class relations, it is not strictly a Marxist concept; the Marxist term for neoliberalism is "primitive accumulation".

Harvey (2000)[112] claims that neoliberalism has become hegemonic worldwide, sometimes by coercion. Neoliberalism has had the support of large debt restructuring organizations such as the World Bank and the International Monetary Fund (IMF), which were encouraged to promote neoliberalism in order to promote higher living standards in developing countries. Opponents of neoliberalism argue that neoliberalism is the implementation of global capitalism through government/military interventionism to protect the interests of multinational corporations.

European and Latin American opposition

Neoliberalism and globalization are considered related to one another. While generally theorists describe neoliberalism as the contemporary version of capitalist expansionism,some theorists argue that the terms "globalization" and "neoliberalism" must be rigorously separated and that culture should be the primary lens through which the concepts are understood. “Free markets and global free trade are not new, and this use of the word (neoliberalism) ignores developments in the advanced economies...Neoliberalism is not just economics: it is a social and moral philosophy, in some aspects qualitatively different from liberalism.”

One Euro-Latin American perspective critical of neoliberalism focuses upon the way in which neoliberalism becomes habitually embedded in the economic system itself. For example, German author Paul Treanor argues that the ideas derived from neoliberalism (and neoliberalism itself) are a philosophy and not just an “economic structure.” For example, a neoliberal perceives the world in a “term of market metaphors” and when members of a society commonly refer to countries as companies, that civilization would then be deemed a neoliberal instead of a liberal culture. Yet Treanor also recognizes continuity between historical liberal and contemporary neoliberal cultures. “When this is a view of nation states, it is as much a form of neo-nationalism as neoliberalism. It also looks back to the pre-liberal economic theory — mercantilism — which saw the countries of Europe as competing units. The mercantilists treated those kingdoms as large-scale versions of a private household, rather than as firms. Nevertheless, their view of world trade as a competition between nation-sized units would be acceptable to modern neoliberals.”[

Two of Treanor's collaborators, Elizabeth Martínez and Arnoldo García, find that neoliberalism is a collection of economic policies that has spread its ideals from country to country over the last 25 years. They claim that neoliberalism clearly treats its poorest citizens badly, by allowing for the increased disparity of the distribution of wealth ("the rich get richer, while the poor get richer at a slower rate"). Highlighting ideology, Martínez and García explain the difference between neoliberalism and liberalism by pointing to liberalism's association with class compromising ideology, stating that “"Liberalism" can refer to political, economic, or even religious ideas. In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right-wing.” However, they further argue that this liberal social contract was broken by the elite political movement which included neoliberalism in the U.S.

Argentine economic collapse

Decades of poor governance, a spend-thrift military dictatorship, labour market reforms, and neoliberal structural adjustment programseventually led to the 1999-2002 Argentine economic crisis. During the Menem administration, Argentina was under the guidance of the International Monetary Fund (IMF), the World Bank (WB), and U.S. Treasury. Although heavily indebted, the IMF continued to lend Argentina loans, and public debt sky rocketed as loans were postponed. Argentina commenced a neoliberal restructuring process. This small case study exemplifies how neoliberal policies directed with a top-down approach under the guidance of the 'Washington Consensus' were inefficient and only caused further damage to the Argentine economy. The unofficial mantra of the 'Washington Consensus' was "stabilize, privatize, and liberalize".A number of labour market reforms were enacted, including the establishment of new regulations for public employment, the decentralizarion of social services, the deregulation of the private economy along with weakened labor laws, the partial privatization of the social security system, and the flexibilization of the labor market. During this time Argentina’s foreign debt grew substantially from US $57.6 billion in 1990 to US $144.5 billion in 2001. This debt accumulation, coupled with the immediate devaluation of the Argentine peso, led to hyperinflation, high unemployment rates, a large informal labour sector, an increase in poverty levels, and basic educational and health service cuts. A reduction in public salaries and numerous lay-offs stemming from privatization resulted in the loss of income of masses of workers, effectively creating a "new poor" among lower- to middle-class Argentines. At the same time that Argentina's economy grew increasingly uncompetitive as a result of convertibility, international debt continued to rise and government corruption became rampant, deregulation resulted in the flight of capital and heightened levels of anxiety among the public.

Competition for inward investment, on the other hand, was generally unknown until the late 19th century. This competition is often seen by activists as the core doctrine of neoliberalism, especially since the neo-mercantilist policies are easy to understand and very unpopular: wage cuts, less money for public services, less tax on the rich. The neo-mercantilist nation, in other words, behaves like a caricaturally mean and nasty capitalist. It is not relevant either for these policies, or for opposition to them, whether they have any effect at all. Perhaps investment decisions are not made on this basis, perhaps there is no real mobility of capital, perhaps no investor is interested in Argentina, for instance. But so long as the Argentine government believes that it should pursue certain polices to attract investors, then it will do so. So long as it believes that the 'SA Argentina' is a business firm, then it will run Argentina accordingly.

The market metaphor is not only applied among nations, but among cities and regions as well. In neoliberal regional policy, cities are selling themselves in a national and global marketplace of cities. They are considered equivalent to an entrepreneur selling a product, but the product is the city (or region) as a location for entrepreneurs. The successful 'sale' of the product is the decision of an entrepreneur to locate there, not simply the sale of land or factories. This view of cities as sub-firms within the fictive 'national firm' parallels the creation of sub-markets within real firms. The difference is, that those sub-markets really exist - neoliberal city governments, on the other hand, act primarily on a belief in a metaphor. Again, there is no hard evidence that the global marketplace of cities exists: for most economic sectors complete mobility of plant and labour is an illusion. Most firms can not simply move from city to city, across continents and ignoring language and cultural barriers, in pursuit of locational advantage. Here too, the neoliberalism is a philosophy, an attitude - rather than an economic reality. It has influenced European politics - the fear of this neoliberalism dominated the French campaign against the European Constitution. There is certainly a neoliberal lobby within the EU, represented by the Lisbon Council, although it sees the world in terms of competing trade blocks rather than competing cities or regions. However, it is not clear how a continent could be run as a business firm - even its inhabitants wanted that. (More on neoliberal economic geography below).

A good example of the underlying attitudes is the basic policy document of the city of Düsseldorf - the Leitbild, equivalent to a 'mission statement' in English. It was adopted in 1997, and is no longer online at the city website, but parts are quoted at St@ttbuch Düsseldorf...

Düsseldorf bekennt sich zum Prinzip des Wettbewerbs. Der Erfolg von Städten entscheidet sich im Wettbewerb nach innen und aussen. Düsseldorf will besser sein.
Wettbewerb ist treibende Kraft unseres gesellschaftlichen Systems. Im zusammenwachsenden Europa gilt dies in hohem Masse auch für die Beziehungen zwischen den Regionen, die als Wirtschaftsstandort, als Lebensraum für die Bürgerinnen und Bürger und als Kulturstandort miteinander konkurrieren. Sich hierzu bekennen heisst, den Wettbewerb aufnehmen und aktiv gestalten zu wollen.
Im Wettbewerb besteht nur, wer gut ist. Düsseldorf will Wettbewerb. Im Interesse der vielen Millionen Menschen des Lebens- und Wirtschaftsraums: Düsseldorf will besser sein.
...
Düsseldorf is committed to the principle of competition. The success of cities is decided by competition, internal and external. Düsseldorf wants to be better. Competition is the driving force of our social system. In a Europe which is becoming more integrated, this applies increasingly to the relations between regions. They compete with each other as investment location, as residential choice for the citizens, and in cultural activity. Our commitment means that we will actively and structurally enter into this competition. In a competitive world, only the good can survive. Düsseldorf wants to compete! In the name of the millions of people in our economic and residential region: Düsseldorf wants to be the best!

The neoliberal urban vision was adopted, without debate, by many city governments in the 1990's. At some point, a belief in 'competition by population structure' was incorporated - the idea that a successful city is inhabited only by successful people. This belief, nonsensical or not, has had an effect in a negative sense: some cities now pursue active policies aimed at relocating low-income households outside the city. In the Netherlands, a new law allows large cities to legally ban poor people, from certain areas, or from the entire city..

As you would expect from a complete philosophy, neoliberalism has answers to stereotypical philosophical questions such as "Why are we here" and "What should I do?". We are here for the market, and you should compete. Neo-liberals tend to believe that humans exist for the market, and not the other way around: certainly in the sense that it is good to participate in the market, and that those who do not participate have failed in some way. In personal ethics, the general neoliberal vision is that every human being is an entrepreneur managing their own life, and should act as such. Moral philosophers call this is a virtue ethic, where human beings compare their actions to the way an ideal type would act - in this case the ideal entrepreneur. Individuals who choose their friends, hobbies, sports, and partners, to maximise their status with future employers, are ethically neoliberal. This attitude - not unusual among ambitious students - is unknown in any pre-existing moral philosophy, and is absent from early liberalism. Such social actions are not necessarily monetarised, but they represent an extension of the market principle into non-economic area of life - again typical for neoliberalism.

The idea of employability is characteristically neoliberal. It means that neoliberals see it as a moral duty of human beings, to arrange their lives to maximise their advantage on the labour market. Paying for plastic surgery to improve employability (almost entirely by women) is a typical neoliberal phenomenon - one of those which would surprise Adam Smith.

Eileen Bradbury, a psychologist who advises surgeons at the Alexandra Hospital in Cheadle, Cheshire, said she was particularly worried that Jenna wanted the operation so that she could be successful. "That is a very disturbing belief for a 15-year-old girl to have, and also a false one," she said. "I have seen women coming for surgery who work in television and they say they have to have it done or they won't get the work. I usually go along with that because it is probably true".
Guardian: Parents defend breast implants for girl, 15.

In practice many 'workfare neoliberals' also believe that there is a separate category of people, who can not participate fully in the market. Workfare ideologies condemn this underclass to a service function for those who are fully market-compatible. Note however, that by recognising a non-market underclass, neoliberals undermine their own claims about the universal applicability of market principles.

The general ethical precept of neoliberalism can be summarised approximately as:

  • "act in conformity with market forces"
  • "within this limit, act also to maximise the opportunity for others to conform to the market forces generated by your action"
  • "hold no other goals"

If everyone lives by such entrepreneurial precepts, then a world will come into existence in which not just goods and services, but all human and social life, is the product of conformity to market forces. More than traditional market liberals, neoliberals therefore have a quasi-heroic attitude to the entrepreneur, and to engagement in the market. A 1998 speech by German entrepreneur Jost Stollmann is typical: his neoliberal ideas played a prominent role in the national elections in Germany in that year. Stollmann includes his personal moral philosophy, such as it is...

Ich möchte die Lust und Bewunderung unternehmerischen Erfolgs in den Augen der jungen Menschen sehen. Ich möchte den Stolz und den Zuspruch der Eltern spüren, wenn sich Sohn oder Tochter tatenvoll in das Abenteuer Selbständigkeit stürzen.
....so gut sein, wie wir nur können - getreu der bewährten Formel, die ich während meiner Zeit in Amerika verstehen gelernt habe: 'BE THE BEST YOU CAN BE'
Jost Stollmann

The idea that everyone should be an entrepreneur is distinctly neoliberal. Early liberals never expected the majority of the population to own property, let alone run a business. (The participation of the poor in the market was limited to accepting any work they were offered). The practices on the flexibilised labour market would seem strange to the early liberals. For instance, individuals set up a one-person employment agency with one person on the books, themselves - partly for tax reasons, but also to meet the ideal of the entrepreneur. Policy to increase the number of entrepreneurs is typically neoliberal, although ironically it must be implemented by the State. A classic market-liberal would not say that a free market is less of a free market, because only 10% of the population are entrepreneurs. For neoliberals it is not sufficient that there is a market: there must be nothing which is not market.

the neoliberalism joke

Marxist: "The workers have nothing to sell but their labour power"
Neoliberal: "I offer courses on How to Sell Your Labour Power Like A Shark"

There is therefore no distinction between a market economy and a market society in neoliberalism. With the attitudes and ethics set out above, there is only market: market society, market culture, market values, market persons marketing themselves to other market persons. In a sense neoliberalism has returned to the position of early liberalism - which also combined culture, values and ethics with economics. But neoliberalism brings a far more intensive 'market' - replacing not only traditional social forms, but also the concept of private life. At the same time this 'market' is increasingly remote from the necessity of production, which was so real for the early liberals - when there were still regular famines in Europe. In fact it is so remote from the existing cultural perception of a 'market', that it would perhaps be better to use some other word.

Finally, neoliberalism has become associated with specific cultures (especially US culture) and a specific language (English). This is not surprising: Anglo-American liberalism had the most influence on neoliberalism. Neoliberalism as ideology is not tied to any culture or language. It is true that a single global language would facilitate free trade - but that could be Esperanto, as well as English. In practice, the promotion of the English language, neoliberal policies, and pro-American foreign policy, usually go together: this was especially true in Central and Eastern Europe.

Globalisation and neoliberalism

Often the terms 'globalisation' and 'neoliberalism' are used as if they were interchangeable. That is only correct in a limited sense, for the neo-mercantilist aspects of the neoliberal ideology. I will try to clarify the perceived and actual relationship between the two - especially for the South American use of the term 'neoliberalism'.

The neoliberal ideology sees the nation primarily as a business firm, as explained above. The nation-firm is selling itself as an investment location, rather than simply selling export goods. If no-one in government believes in this ideology, it will have no consequences. If however, a neoliberal government is in power, it will pursue policies designed to make the nation more attractive as an investment location. These policies are generally pro-business, and are perceived as such by the opponents of the policies.

But remember that the ideology is neo-mercantilist: the policies are national policies, directed ultimately at the welfare of the nation and not of the market. Paradoxically, they are a form of protectionism: if there is a global market of investment locations, then it is 'unfair competition' for governments to artificially increase the attractiveness of their own country. Such governments are, strictly speaking, not good market liberals. Hard-line classic market liberals would shrug their shoulders at the election of an anti-business government. "Business will go elsewhere, the country will become poor, that's the way the global market works, leave the market alone", they would say. They would not waste their time trying to get a pro-business government elected there. In reality few liberals are so consistent, neoliberals certainly are not. But their rhetoric of 'national competitiveness' is a form of economic nationalism: it is a modern version of the old nationalist insistence, that the whole nation should work together. It revitalises jingoism, chauvinism, flag-waving and foreigner-bashing: Tony Blair is probably the best example.

Now, a neoliberal government will almost certainly appeal to 'globalisation' as a justification and legitimisation of its policies - Tony Blair certainly does. By globalisation they mean, more or less, that the global market of investment locations now exists, and that it is an inevitable historical development. The opponents of the neoliberal government will, in turn, oppose this 'globalisation'. However, that does not mean that the global market of nations actually exists. The existence of neoliberal governments, pursuing neoliberal policies justified by an appeal to globalisation, does not mean that a new global order has superseded the order of nation states. The very fact, that it is still primarily the nation state which is being 'marketed' in this way, shows that the nation has not disappeared.

Before considering the reality of the global order, it is also necessary to consider the beliefs of the opponents of such a neoliberal government. Again paradoxically, many of them accept without question the neoliberal claim that there is a long-term historical process of 'globalisation', transforming the nation into a business firm on a global market of nation-firms. Worse, if the nation is a business then it is often clearly weak - everyone can see that Argentina is economically worse off than the United States. A neoliberal government will therefore try to convert a nation such as Argentina into a 'strong player', which means worsening the living conditions of much of the population. Now here is the next paradox: the response of the opponents is also an economic nationalism, this time with the emphasis on protectionism. The opposition perception of globalisation differs in one respect: for them it is a historical but not spontaneous development. For them it is a policy imposed by a non-national global elite, directed against the individual nations.

In their view, the international financial institutions are equivalent to an imperial power, which has de facto colonised countries such as Argentina. In caricatural form: they believe that a new and powerful empire has come into existence, the Empire of IMF-ia, at an indeterminate location. The neoliberal government, in this view, is a traitorous elite acting as a colonial Viceroy for the IMF-ian Empire. The opposition wants to replace it with a government which will 'liberate' the nation from the global market, from its colonial status. That 'liberation' is generally understood as: withdrawal of the nation-firm from the global market of nation-firms, protectionism, economic nationalism, and self-sufficiency instead of trade. Here too there is a paradox: the oppositional movements are not anti-business: they generally see national business as a victim of global business. (Local business in South America is in the comfortable position, that both neoliberals and anti-neoliberals want to help it, for different reasons).

The 'IMF-ia model' is partly correct: the global financial institutions are indeed a bastion of neoliberal ideology, and they can bully some poor countries into adopting neoliberal policies. But they can't do that to the rich western powers, in fact they would not exist without the support of these powers. They are not a force outside nations, they are not an imperial power. The global financial institutions are, in the simplest terms, an instrument of US policy - and if there is a quasi-imperial power, it is the United States.

The point is, once again, that the truth of beliefs about globalisation is itself irrelevant. If the government and people all believe that a country is being attacked by fire-breathing dragons, then the government might distribute asbestos suits to the population, and the opposition might complain that there were not enough of them. Ideologies and politics can operate on a completely fictive basis. Millions of Europeans died to 'resolve' theological issues such as the Virgin Birth of Mary, Mother of God.

So the perceptions have themselves generated a political reality: on the basis of a belief in 'globalisation' some governments pursue neoliberal policies, which are neo-mercantilist in their logic and aims. In such circumstances opposition to globalisation and neoliberalism coincides, rather than neoliberalism being identical or synonymous with globalisation. Both sides share a common fallacy: that trade and sovereignty are opposites, a zero-sum pair. The neoliberals believe that national success - "in today's global market" - requires the abandonment of national economic autonomy and sovereignty. Their opponents believe that national welfare requires minimisation of trade and external links: they believe that trade and invasion are equivalent, although no-one will say that outright. Once again, the equivalences and perceptions on both sides are false. Most of the Gross Global Product is tied to individual nation states for technical, climatic, logistical, and cultural reasons. For most investment decisions, there is no global market of locations. And sovereignty is not necessarily inverse to trade volume and trade regime. A powerful country such as the United States can have a high trade volume relative to GNP. Many colonies - by definition not sovereign - had a low trade volume relative to GNP, because the bulk of 'GNP' consisted of peasant agriculture. But even a fallacious belief can apparently support not just one, but two competing forms of economic nationalism.

So what is the reality behind the perceived globalisation? One reality is that nation states still dominate global social and economic structures. However these nation states themselves form a specific arrangement of a specific type of state. Globalisation claims appear logical if you see nation states as isolated islands, but that is not the historical reality. The very existence of a world of nation states, indicates some form of global order of nation states. What these nation states do - trade or no trade, capital flows or no capital flows - is irrelevant to that issue. What is already global can not logically be globalised: therefore there is no globalisation, in the widely used sense. There is no transition underway, or recently completed, to a fundamentally different global structure. Because the existing order of nation states is already global, intensification of global flows, or global trade, or global communication does not undermine it, or fundamentally alter it. If some part of the world were to break with this global order - for instance a future autarkic caliphate - that would be a radical change. When nations trade with each other, that simply indicates that the global order of nations is functioning as expected.

The false premise in the globalisation thesis is in fact the standard nationalist claim, that each nation is a separate and particular entity. In reality nations collectively are a global and universalist structure: the functional equivalent of a nationalist world state. The world functions as if a nationalist world government had seized power in the 19th century, led by Mazzini and Garibaldi and friends. Most existing states were indeed established by nationalist groups. Nationalists co-operate to maintain one (nationalist) world order and exclude others. The nation state is not a particularity, existing by itself in isolation, but part of a global design. Supporters of the globalisation thesis claim, that a world of isolated nation states existed in the recent past - before 1989, or more approximately before 1950. They claim that these isolated nation states are now being eroded in a global process: it includes the formation of the neoliberals claimed 'market of nations'.

But is the global order of nation states disappearing, anywhere? In reality, there is no collapse of the nation state to be seen. Nation states have not suffered anything comparable to the dissolution of the Austro-Hungarian or Ottoman empires. All that remains of those empires are oversized palaces in Vienna and Istanbul. The rest of their institutions have completely disappeared: there is not a square metre of Habsburg or Ottoman territory left in Europe. There is no longer an Austro-Hungarian imperial army, or police, or courts, or parliament. The nation states succeeded the multi-ethnic empires, seized all their territory, and remodelled all society on that territory. The replacement was total. Where is the equivalent 'collapse' of the nation state? There are few places on earth without the institutions of a nation state - perhaps Somalia, but that is not the result of globalisation. If the world was truly 'globalised' then it would be full of disused national parliament buildings - and not a national army in sight. The world is not like that, and will not be like that in the immediate future.

In other words, 'globalisation' remains a belief rather than a reality. It is an instrumental belief with great political influence and effect. It is appealed to by both neo-mercantilist neoliberals and their economic-nationalist opponents. Nationalists have a tradition of appealing to external threats to enforce national unity. The nation must unite and work together, they said - to defeat the Hun, or the Bolshevik threat, or the Yellow Peril, or the enemy within the gates, or Osama bin Ladin. The instrumental use of 'globalisation' is in the same dishonourable category.

Summarising neoliberalism

To conclude, here are summaries of neoliberalism in two forms. First a list of key points in neoliberalism:

  • transaction maximalisation
  • maximalisation of volume of transactions ('global flows')
  • contract maximalisation
  • supplier/contractor maximalisation
  • conversion of most social acts into market transactions
  • artificial maximalisation of competition and stress
  • creation of quasi-markets
  • reduction of inter-transaction interval
  • maximalisation of parties to each transaction
  • maximalisation of reach and effect of each transaction
  • maximalisation of hire/fire transactions in the labour market (nominal turnover)
  • maximalisation of assessment factors, by which compliance with a contract is measured
  • reduction of the inter-assessment interval
  • creation of exaggerated or artificial assessment norms ('audit society')

A final summary definition of neoliberalism as a philosophy is this:

Neoliberalism is a philosophy in which the existence and operation of a market are valued in themselves, separately from any previous relationship with the production of goods and services, and without any attempt to justify them in terms of their effect on the production of goods and services; and where the operation of a market or market-like structure is seen as an ethic in itself, capable of acting as a guide for all human action, and substituting for all previously existing ethical beliefs.

Prepared by Biju P R,Assistant Professor in Poltical Sceince,Govt Brennen College,Thalassery

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