Those who declare that the Great Crash of Late 2008 heralds the end of free market economic philosophy – "neoliberalism" for short – are not paying close enough attention.
This includes the Swedish Bank’s Economic Nobel Prize laureate, Princeton professor Paul Krugman. "Everyone’s talking about a new New Deal, for obvious reasons," he told his New York Times column readers. "In 2008, as in 1932, a long era of Republican political dominance came to an end in the face of an economic and financial crisis that, in voters’ minds, both discredited the free-market ideology and undermined its claims of competence. And for those on the progressive side of the political spectrum, these are hopeful times."
But notwithstanding some promised fiscal stimulation and public works projects in the US, a more realistic – and also radical – approach requires us to first humbly acknowledge that a dangerous period lies immediately ahead, because of at least three factors:
o public policy will suffer from the financial sector crisis via intense austerity, pressures associated with extreme economic volatility, and a renewed lobby for micro-neoliberal strategies like privatisation;
o there remains unjustified faith in multilateral system solutions (from Kyoto climate change mitigation to Bretton Woods revivalism), which distracts us from the national-scale solutions that are both potentially feasible and just; and
o a new threat arises, in the form of relegitimised neoliberalism and imperialism, via the election of Barack Obama as US president.
The mid-November G20 meeting on the international financial crisis was one site where illusory post-neoliberalism was on display. International Monetary Fund managing director Dominique Strauss-Kahn suggested "fiscal stimulus equal to 2 percent of gross domestic product" across the world, "everywhere, everywhere where it is possible".
In reality, though, the IMF was simultaneously treating South Africa – and even wealthier Seychelles – like a typical Third World debtor deserving of a full neoliberal work-out. For at precisely the same moment, on November 15, the IMF lent Seychelles $26 million to cure a sickness (currency collapse) caused, in turn, by IMF medicine.
According to one report, "As part of its reform package, the Seychelles lifted long-standing currency exchange controls earlier this month, prompting a 48 percent slide in the value of the rupee. The IMF said the government had made a good start… but it said further steps were needed… ‘in order to secure substantial primary surpluses over the medium term.’" (Translation: no fiscal stimulus for Seychelles citizens.)
The South African case is even more telling, for on 22 October, the IMF filed several lengthy reports which made the following points:
o the SA government should run a budget surplus;
o the government should adopt privatisation for ‘infrastructure and social needs’ including electricity and transport;
o the Reserve Bank should maintain existing inflation-targeting andraise interest rates;
o the Treasury and Trade Ministry should remove protections against international economic volatility, especially financial and trade rules;and
o the Labour Ministry should remove worker rights, including ‘backward-looking wage indexation’ to protect against inflation.
Instead of conceding the need for exchange controls and import controls on luxury goods so as to restore payments and trade account balances, the IMF had one solution, contrary to Strauss-Kahn’s rhetoric: "Tighter fiscal policy to avoid exacerbating current account pressures."
Even the apparent death of South Africa’s neoliberal project in September, personified by former president Thabo Mbeki, is misleading.
The ruling party leader, Jacob Zuma, appears intent on not only retaining finance minister Trevor Manuel as long as possible but preparing a collision course with his primary internal support base, trade unionists and communists, in the run-up to the general election next March.
Zuma’s main opposition, former ruling party chairperson Terror Lekota (who recently cofounded "The Congress of the People" party), also confirmed his allegiance to neoliberalism and fiscal discipline, attacking welfare grants at a debate our Centre for Civil Society hosted between Lekota and Dr Ashwin Desai last week (http://www.ukzn.ac.za/ccs).
Worsening austerity awaits South Africa and many poorer, aid-dependent countries, thanks to the useless mode in which multilateral economic, political and climate arrangements have been negotiated. Last week’s Poznan climate talks again revealed how dysfunctional global processes can be.
During the height of the false prosperity, numerous promises about increased development aid were offered by wealthy countries (e.g. OECD members), especially at the Gleneagles G8 meeting.
But, according to Trevor Manuel, who also serves as the UN secretary general’s Special Envoy on Financing for Development, "World military expenditure is estimated by the Stockholm Institute to have been $1.3 trillion in 2007. Compare this to the $104 billion spent on Overseas Development Assistance!"
The Institute reports that rich countries decreased their aid flows by
4.7 per cent in 2006 and 8.4 per cent in 2007, in contrast to rising military spending of 3 per cent in 2006 and 6 per cent in 2007.
Manuel lamented, "The food and fuel shocks and global financial turmoil are a bellwether of the consequences of broken promises. They are a signal of our failure."
I agree with him for once. Yet in the face of such consistent failure – on development aid, Bretton Woods Institution reform, the World Trade Organisation’s disastrous Doha Agenda, international financial regulation as proposed at the G20 summit, United Nations Security Council democratization, and various other crucial challenges to world elites – the most myopic approach is to advocate yet more ‘global economic governance’.
I will concede that hope for a post-neoliberal global project emerged from the (brief) presidency of the United Nations General Assembly by Miguel d’Escoto Brockmann, the former Sandinista foreign minister.
D’Escoto chose as advisors some of the world’s most profound left and centre-left analysts, including Joseph Stiglitz, Maude Barlow, Leonardo Boff, François Houtart, Noam Chomsky, Ramsey Clark, Richard Falk and Howard Zinn.
Stiglitz and Houtart joined a UN team at the Doha Financing for Development summit in late November, hoping to promote a new, more equitable and developmental Bretton Woods world financial architecture.
But that meeting too was a complete waste of CO2 emissions, energy and time – as witnessed by the refusal of Strauss-Kahn and World Bank president Robert Zoellick to even bother showing up.
D’Escoto’s extraordinary gathering cannot substitute for more serious, durable forces, such as control of at least four Latin American countries by leftist governments. Unfortunately, the demise of both neoconservatism’s main power base (the US White House, Vice Presidency, Pentagon and CIA) and neoliberalism’s financial and ideological base, has not fundamentally altered power relations between elites and subaltern forces.
Indeed, neoliberalism may have another breath of life, with mouth-to-mouth resuscitation applied from above by Barak Obama or the IMF. Much stronger pressure is needed from below to resist.
Until grassroots forces again gather their strength to mount an assault, national-scale challenges to global financial power are the only ways forward given adverse global-scale power relations.
From a national power base, various financial sector reforms can be pursued: imposition of exchange controls (such as were applied by Malaysia in 1998 or Venezuela in 2003), financial nationalization (as have some European countries egged), and fiscal stimulation (as national states are generally being encouraged to do at present, in order to avoid global depression).
In his famous 1933 article on national self-sufficiency, John Maynard Keynes cautioned against nationalistic "silliness, haste and intolerance", yet argued forcefully for the national not global scale of economic revival: "I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel–these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national."
He continued, in a passage that rings true today: "Experience accumulates to prove that most modem processes of mass production can be performed in most countries and climates with almost equal efficiency… A moderate increase in the real cost of primary and manufactured products consequent on greater national self-sufficiency may cease to be of serious consequence when weighed in the balance against advantages of a different kind. National self-sufficiency, in short, though it costs something, may be becoming a luxury which we can afford, if we happen to want it."
For those (like myself) aiming for a society left of Keynes, it is still the case that, as Marx and Engels wrote in the Communist Manifesto, "The proletariat of each country must, of course, first of all settle matters with its own bourgeoisie." The national scale is where the most power lies, and where strategies against commodification and corporate globalization have the best chance of success.
In South Africa, to illustrate, the Treatment Action Campaign and Johannesburg Anti-Privatisation Forum have won, respectively, antiretroviral medicines needed to fight AIDS and publicly-provided water. The drugs are now made locally in Africa – in Johannesburg, Kampala, Harare, etc – and on a generic not branded basis, and are provided free of charge, a great advance upon the $15,000/patient/year cost of branded AIDS medicines a decade earlier (in South Africa, half a million people receive them).
And after massive battles, water in Johannesburg is now produced and distributed by public agencies (Suez was sent back to Paris after its controversial 2001-06 protest-ridden management of municipal water). In April, a major constitutional lawsuit in the High Court resulted in a doubling of free water to 50 liters/person/day and the prohibition of pre-payment water meters.
But what is most crucial, then, for a realistic post-neoliberal project, is ongoing delegitimisation of the US in its political and military modes. One danger zone is Africa, where the Bush/Cheney/Gates geopolitical and military machinery ground to a halt in the form of the Africa Command. No state aside from Liberia would entertain the idea of hosting the headquarters (which remained in Stuttgart), notwithstanding an endorsement of Africom from even Obama’s main Africa advisor, Witney Schneidman.
More importantly, even if Obama restores a degree of US credibility at the level of international politics, US military decline will continue to be hastened by failed Pentagon strategies against urban Islamist guerilla movements in Baghdad, rural Islamist fighters in Afghanistan and Pakistan, and the belligerent nuclear-toting state of North Korea.
None of these forces represent social progress, of course, but they probably are responsible for such despondency in Washington that other targets of US imperial hostility, such as the governments of Cuba, Venezuela, Bolivia and Ecuador, remain safe from blatant overthrow in the near term.
In turn, the leading Latin American countries have the best opportunity in the world, today, to build post-neoliberal economic, social and environmental projects.
The latter eco-socialist project is vitally important, because to counter the objectionable idea of petro-socialism, as practiced in Venezuela, there are inspiring examples in Cuba’s post-carbon innovations, in Bolivia’s indigenous people’s power and in Ecuador’s official commitment – no matter how it wavers in practice – to a "keep the oil in the soil" policy in the Yasuni National Park.
Finally, as even Keynes saw in 1933, global capitalism has had it: "The decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous–and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it."
Turning our energies of dislike/despise into social progress is not impossible. But the most powerful SA examples are not (yet) the negation of national neoliberalism, but rather the grassroots activist initiatives – such as acquiring generic AIDS medicines and free public water supplies – against forces of micro-commodification.
These are indeed useful signals that another world – realistically post-neoliberal – is not only possible, but is being constructed now, going into a very dangerous 2009.
(Bond is based at the Centre for Civil Society in Durban. A longer version is forthcoming in the next issue of Development Dialogue, http://www.dhf.uu.se/)