The Global Crisis and the Disintegration of Neoliberalism
Alfredo Saad Filho is Professor of Political Economy at the SOAS Department of Development Studies. His research interests include the political economy of neoliberalism, industrial policy, alternative macroeconomic policies, and the labour theory of value and its applications.
The certainties that used to hold neoliberalism together are melting into the air: the common sense of the age has degenerated into clichés. Tried and tested policies such as privatisation, marketisation and trade liberalisation have lost traction, and established political systems are haemorrhaging legitimacy. Even the steadiest political hands have lost their grip on the levers of power, which, themselves, lack effectiveness. The economic turmoil in global neoliberalism is morphing into a wholesale political crisis: the beast is sick, and it might be fatal.
A dysfunctional economic system
Neoliberalism has created unprecedentedly favourable conditions for capital accumulation worldwide since the early 1980s. The ensuing growth process supported a steep concentration of power, income and wealth, in which unparalleled prosperity for certain groups (often identified as financial or other elites or oligarchs, the top 1%, or the top 0.01%) coexist with severe poverty and exclusion.
Yet, accumulation in the ‘core’ OECD countries currently faces falling rates of investment and GDP growth, mounting instability and finance-driven crises, culminating in the deepest and longest economic contraction since the Great Depression. Recoveries have also become increasingly sluggish: a Great Stagnation engulfs the world economy, with no end in sight.
These adverse outcomes directly follow from the economic contradictions of neoliberalism. Its ‘reforms’ dismantle pre-existing systems of provision of goods and services, hamper the processes of co-ordination of economic activity, create socially undesirable wage and employment patterns, preclude the use of industrial policies to achieve socially determined priorities, make the balance of payments structurally dependent on international flows of capital, and allow financial institutions to shift resources from production into speculation almost at will. Unsurprisingly, accumulation tends to inflate bubbles that eventually burst with destructive implications.
A flawed political system hits the buffers
The political project of neoliberalism includes an atrophied form of democracy designed to shield economic reproduction from political ‘interference’, and where popular participation is typically limited to choosing between shades of neoliberalism in a political market policed by a vitriolic right-wing media. Meanwhile, the substantive choices about social provision, the structure of employment and the distribution of income are made elsewhere, across the financial institutions, international organisations, the European Commission and the US State Department. Inevitably, the political spectrum has shifted to the right; left parties, trade unions and mass organisations have imploded, and social decomposition and the blockage of collective forms of dissent have fed political apathy, anomie, and the sense that politicians are there only for the taking: in some sense, ‘the best lack conviction, while the worst are full of passionate intensity’.
Many neoliberal democracies are now engulfed in turmoil. In the Eurozone periphery, elected governments were replaced by so-called non-party technocrats tasked to implement unworkable contractionary strategies to address the economic crisis (Greece, Italy). Later, elected administrations advocating distributive strategies were crushed (Greece). A dour conformity now reigns in those stagnant economies. Then the crisis of neoliberal politics reached the global periphery. There, authoritarian governments were installed by different means, including more or less honest elections (Argentina, Hungary, India, Poland), judicial-parliamentary coups (Brazil, Honduras, Paraguay), the abuse of Constitutional prerogatives (Turkey), and military coups (Egypt, Thailand).
Finally, the malaise reached ‘core’ NATO countries. A hard-right Trump administration was elected in the USA despite the ‘superior experience’ of Wall Street vassal Hillary Clinton; Brexit won the popular vote in the UK, even if nobody could agree what the vote was for. In France, Marine Le Pen hovers above the Élysée while a harsh national security state trumps the notion of Liberté. Nativist populism thrives in Austria, Switzerland and Scandinavia and, in the Eastern periphery of the EU, tinpot far-right politicians lead rudderless societies against ‘enemies’ weaker than themselves, mostly waves of dark-skinned refugees fleeing worse realities further South.
The rise of nationalist authoritarianism
The rise of nationalist authoritarianism is not a transient wobble on the march of neoliberal democracy towards the End of History. Quite the contrary: it is a direct consequence of the restructuring of neoliberal economies and societies under the guise of ‘adjustment’, inflation control and ‘competitiveness’. In doing this, neoliberalism dismantled their previous political systems too.
Critically, neoliberalism has created a vast and heterogeneous array of losers. Millions of skilled jobs have disappeared, and entire professions have either evaporated or were exported to cheaper shores. Opportunities for employment in the public sector shrank, job stability retreated, and pay and conditions worsened everywhere. The condition of labour has deteriorated for the informal workers, the traditional middle classes and for almost everyone in between. Hundreds of millions of people worldwide have been deskilled and moved into precarious jobs. The ‘losers’ include informal workers with no realistic prospect of stable employment, skilled workers fearing the export of their jobs (or reeling from it), indebted small business owners, bankrupt small farmers, endangered middle managers, anxious civil servants, threatened pensioners, and the remnants of erstwhile privileged social strata bewailing their inability to bequeath better material circumstances to their offspring.
In many countries, these upheavals have spawned economic underperformance, long-term stagnation punctuated by crises, shrinking prospects for economic advancement, social decomposition, political deadlock, the disintegration of established forms of representation, and a generalised alienation. In these countries, a diluted democracy is – rightly – perceived to bypass the victims of neoliberalism.
The ‘losers’ tend to perceive the evacuation of democracy through the lens of corruption and capture, in contrast to the ‘good old days’ of economic certainty and (limited) privileges, including jobs for life, law and order, neighbours looking just like themselves, and obedient wives. In contrast, today’s political systems are seen as serving primarily the rich (bankers, tax dodgers, self-perpetuating political élites, foreign tycoons), so-called ‘privileged minorities’ (constructed to mean women, selected ethnic or national groups, and so on), and alien hordes. Annoyingly, all of them seem to draw state support, while the morally upright ‘losers’ find it increasingly impossible to make ends meet. Perhaps even worse than these economic hardships is the erosion of their social standing: it is difficult to understand what has hit them, and why.
Just as disorganised social groups are vulnerable to political capture by the élite, the array of losers under neoliberalism is prone to capture by the political right. Those losers lack a sense of collectivity drawing upon shared material circumstances; they also distrust dysfunctional political systems that, nevertheless, have been used to attack selected consequences of neoliberalism from the right. Their woes lead the ‘losers’ to project hopes and fears onto a universalist (classless) ethics and reactionary political programmes drawing upon immediate impressions of ‘common sense’. These tend to be framed through the language of ‘rights’, ‘respect’, ‘taking back control’ and the preservation of ancient privileges, and fronted by ‘strong’ leaders who can ‘get things done’.
These choices reflect the desperate search of the ‘losers’ for ways to short-circuit a log jammed political system and secure gains for those who have grown tired of losing out, and lack a sense of security grounded on merit, citizenship, or anything else. Those agendas also express their revulsion at slick politicians delivering, time and again, convolute excuses for inaction while the living conditions of the majority continue to deteriorate. The implosion of postwar social democracy can be directly related to these neoliberal pressures.
Mainstream conservative parties have shown greater resilience, because of their traditionally closer identification with neoliberal ideology and policy practice, and because the right is used to deploying misleading or unrealistic programmes and nationalist slogans. As such, they are well positioned to offer disgruntled voters a random menu of desirables, regardless of its contradictions even with neoliberalism itself. Those programmes tend to be naïve, exclusionary, divisive, xenophobic, racist and morally conservative. Yet, even those parties have been triangulating towards an increasingly strident nationalism. Down their necks breathes a new generation of proto- and neo-fascist movements offering even more facile slogans. The far right has a proven ability to mobilise on the basis of national, physical, religious or gender identity, and it thrives best in conditions of anomie: it will continue to prosper.
Nationalist authoritarianism has emerged in response to the economic contradictions of neoliberalism, the sclerosis of the political institutions regulating its metabolism and the corrosion of its ideological foundations.
These alarming political developments have not been designed to shield neoliberalism against the insurgency of an organised left demanding political and economic democracy. Quite the contrary: nationalist authoritarianism is the expression of the impotent fury of a disorganised array of losers under neoliberalism, in conditions of global economic restructuring and social disorganisation. Their focus on attacking the weak – immigrants, refugees, the ‘undeserving poor’, the unjustifiably ‘privileged’ by state action or judicial activism, and so on – feeds retrograde political programmes and shows the urgent need for left-wing alternatives. There is a race between the restoration of social and political collectivity drawing upon progressive principles, and barbarism. The winner will take it all.