Since the 1990’s activists use the word ‘neoliberalism’ for global market-liberalism (‘capitalism’) and for free-trade policies. In this sense, it is widely used in South America. ‘Neoliberalism’ is often used interchangeably with ‘globalization’. But free markets and global free trade are not new, and this use of the word ignores developments in the advanced economies. The analysis here compares neoliberalism with its historical predecessors. Neoliberalism is not just economics: it is a social and moral philosophy, in some aspects qualitatively different from liberalism. Last changes on: 02 December, 2005.
Neoliberalism inadequately defined?
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 in: 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.
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 emphasize 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.
Seattle and Genoa?
The image of ‘neoliberalism’ has been heavily influenced by the protests against it: people think of the violent protests at Seattle and Genoa, and the associated social movements. If you only thought about that, then neoliberalism would be an ideology of the riot police, and that’s not accurate.
It’s true that the Genoa G8 summit was intended as a show of force. The organizers knew that violent demonstrations were probable in an Italian city, but chose to confront them. Democratically elected leaders “should not run from demonstrators”, said Tony Blair. (However, when it was Britain’s turn to organize the G8 summit, the hypocrite choose the isolated Gleneagles hotel in Scotland). 20 000 police and soldiers were deployed at the Genoa G8 summit – NATO used 42 500 troops to occupy Kosovo. This show of force was out of all proportion to the political strength of anti-market forces, but it emphasized the legitimacy of the market-democratic states.
It is possible for ‘the state’ to suppress ‘the market’, but also to promote it. In fact, the free market emerged in Europe under the protection of the state, and the market needs the state, more than the other way around. The market needs internal regulation, in order to function: the state, in the form of the legal system, ensures contracts are enforced. In the form of the police, it prevents theft and fraud. It establishes uniform systems of weights and measures, and a uniform currency. Without these things there would be no free market, no market forces, and no resulting market society. Bill Gates disputes the US Government’s authority over his business – but if there was no government at all, the poor would soon steal his wealth. The attack on the World Trade Center provided some images of this dependency – the reopening of the New York Stock Exchange by police and firefighters, for instance. (In turn, at least in the United States, the market is integrated in the national identity: the NYSE reopening was seen as an act of national defiance).
The free market is itself a form of social organization: it is neither spontaneous nor endemic to humans. If no-one ever promoted or enforced it, there would be no free market on this planet. For thousands of years, there was none. The modern free market came into existence primarily because liberalism demanded its existence. This demand was a a political demand, and it was enforced through the state.
The general functionalist starting premise is only modified to the extent that the “system” is comprehended as capitalist, in a specific way “form-determined”. The state and the political system function as a form of an ‘ideal all-around capitalist’, who must uphold not just the society as such, but the ‘capitalist element’. The different forms of state interventionism are explained both as an expression of functional needs of the accumulation and reproduction process of capital. The general requirements of capital accumulation such as basic infrastructure, functioning law systems and legitimization mechanisms are tasks that cannot be carried out by individual capitalists due to the competition relations, but instead systemically require a “fictive all-around-capitalist”. This “capitalist referee” must guarantee the fulfillment of these tasks in the interest of maintaining the system of capitalist society..
If everyone on this planet was a liberal, an enthusiastic supporter of the free market, then that would be the end of the matter. But of course some people oppose the market, and its effects – especially the resulting inequality. The market is a political and social regime, and like any other regime, it must be enforced against opposition. That is true even of democracies: democrats overthrow dictators, and dictators overthrow democracies. If either side wants to avoid their own overthrow, they must use force. Democrats do use democratic force, and do fight democratic wars, as they know in Iraq.
The relationship between supporters and opponents of the free market, is similar to that between democrats and anti-democrats. They are enemies, inherently. On the very existence of the market, no compromise is possible. The free market either exists, or it does not exist. It can disappear by consent – which is absurdly unlikely – or without consent. Any attempt to end the free market is, by definition, an attempt to overthrow a fundamental social structure. Certainly, in the long-established western market democracies, it would mean a collapse of the existing social structures. The effect would be dramatic – comparable to occupation by a foreign power.
So it is not surprising that force is used in the face of a threat, and it is not surprising that it is the force of the state. That is after all, a typical task of the state – the preservation of the regime itself, the preservation of the nature of the state. Anarchist propaganda speaks of “the State”, as if all states were interchangeable, but they are not. A market democracy is not interchangeable with a Bolshevik regime, simply because they both have a government, an army, and a police force. A market democracy will use force, state force, against an attempt to overthrow either democracy or the market. That is what the riot police did: defend the state, and defend the market – without contradiction between them.
In historical perspective ‘Genoa’ was an absurd over-reaction. The western market democracies are the most stable and successful societies in history. The principle of the free market is accepted by well over 90% of their population, probably closer to 99% in western Europe. The tensions can be explained by the underlying sense of threat, but they are not specifically related to neoliberalism, and they certainly do not explain it. For that, a long-term and ideological perspective is necessary.
Liberalism as a coherent social philosophy dates from the late 18th century. At first there was no distinction between political and economic liberalism (economics was not considered a separate discipline until about 1850). Classic liberal political philosophy has continued to develop – after 1900 as a purely conservative philosophy. The basic principles of all liberal philosophy are:
1- Liberals believe that the form of society should be the outcome of processes. These processes should be interactive and involve all members of society. The market is an example, probably the best example, of what liberals mean by process. Liberals are generally hostile to any ‘interference with process’. Specifically, liberals claim that the distribution of wealth as a result of the market is, in itself, just. Liberals reject the idea of redistribution of wealth as a goal in itself.
2- Liberals therefore reject any design or plan for society – religious, utopian, or ethical. Liberals feel that society and state should not have fixed goals, but that ‘process should determine outcome’. This anti-utopianism became increasingly important in liberal philosophy, in reaction to the Communist centrally-planned economies: it anticipated the extreme deregulation-ism of later neoliberalism.
3- Liberalism is therefore inherently hostile to competing non-liberal societies – which it sees not simply as different, but as wrong. In the last 10 years, Islamic society has replaced the Communist state, as the perceived ‘opposite’ to a liberal society.
4- Nevertheless liberalism has compromised with one specific form of non-liberal ideology: nationalism, in the ethno-national form which underlies most present nation states. A political community based on common origin, history and language is not liberal, but liberals never tried to form the voluntarist, contractual, non-historical state – which liberalism would logically imply. The nation state was simply taken for granted, as the political and economic arena for liberal process.
5- Liberals define liberalism itself as ‘freedom’, so they rarely think consent is required for the imposition of a liberal society. In fact, most would say it cannot be imposed, inherently. After the Cold War this belief has acquired a geostrategic significance: many western liberal-democrats now believe that a war to impose a liberal-democratic society is inherently just. This belief influences interventionist policy, but as yet no war for the sole purpose of liberalization has been fought.
6- Classic political liberals reject the idea that there are any external moral values: they say that there are only opinions. They feel that these opinions should be ‘expressed’ in public, and that in some way this ‘market of opinions’ will favor the truth. (The idea that truth can be revealed by discourse is much older than liberalism).
7- The liberal rejection of external moral values is formally expressed in the liberal idea of human rights: both good and evil humans have equal rights, which apply equally when they facilitate good or evil actions. Classic liberal philosophy advocated ‘liberty’ as a value, even if they did not call it a value. In effect it places liberty as a value above good (and evil).
8- Liberals believe in formal equality among participants in a liberal society, but almost all liberals also believe in inequality of talent. Many liberals were therefore sympathetic to biological theories of inequality. (Theories of hereditary racial differences in intelligence are now popular among US neoliberals).
Liberalism is a universal ideology, and in principle liberals seek to apply it to the entire planet, and the entire human population. Most liberals have supported the expansion of liberal society, although in the 19th century that meant among the ‘civilized nations’. For a long time the free market was considered the only cross-cultural and ‘exportable’ element of liberalism. Only recently have liberals advocated, that African and Asian societies should become 100% liberal-democratic societies. ‘Liberal missionaries’, such as George Soros, were unknown or marginal in the 19th century.