Sunday, 9 August 2009

What is?

I often hear the term Neo-liberalism used by those who consider themselves to be on the left and as I frequently ask whatever that is; another subject altogether me thinks!

So I asked Adam Buick this morning if he could do a guest post on this topic for the blog, he has sent the following from his book ‘Economics and Globalization’ Written in collaboration with fellow World Socialist Party member Binay Sarkar who’s located in India.

I would welcome any questions, comments or observations that Adam will be only to happy to answer.

Copies (Economics and Globalisation) can be obtained from the socialist party head office at 52 Clapham High Street London SW47UN or send me a post and I’ll will sort you out! Cost £5.50 plus p&p.


The third popular idea of capitalism – laissez-faire economics – is more controversial as a defining feature of capitalism. Laissez-faire – from the French for “let it take place” or “leave it alone” – is basically a call for governments not to interfere in the operation of the market, to let market forces operate unhindered. It was first coined by some 18th century French economists opposed to the restrictions on trade and industry inherited from feudal times that then still existed. And was taken up by Adam Smith and in the 19th century by the mill-owners of Lancashire – hence its one-time other name of “Manchesterism”. It has also been called “liberalism”, associated as it was with the policy of Free Trade advocated and defended by the British Liberal Party in its hey-day. But it has never really existed in anything like a pure form.

For as long as capitalism has existed (and Marx and others date the beginning of capitalism to the middle of the 16th century) state “interference”, or to use a neutral word state “intervention”, in the economy has always existed. So laissez-faire is more a policy, advocated by certain interest groups within capitalism at certain times and in certain places. As such it can’t be said to be a defining feature of capitalism.

Capitalism without any state regulation has only ever existed on paper. Capitalism and the state are not opposites or incompatibles. They have always co-existed and in fact capitalism could not have come into existence or survived without the support of the state. It was the state that helped dispossess peasants of their land so that they became factory fodder for the capitalist factory owners. It is the state that creates and enforces private property rights, without which the capitalist class would not be able to monopolise the means of production and extract surplus value from the wage-labour of their employees. The predominant form of capitalist enterprise – the limited liability company or corporation – is in fact entirely the creation of the state. The state has to issue the currency and set up bodies to interpret and enforce commercial contracts. It has to maintain armed forces, both to keep law and order internally and to protect and further the interests of the capitalist class abroad. It has to set up bodies to make laws and regulations at national and local level and other bodies to apply, police and enforce them. All these activities essential to the functioning of capitalism have to be paid for. So the state has to levy taxes. There is, then, no such thing as capitalism without the state.

With the Great Slump of the 1930s, state intervention grew continuously. Economic teachings were changed to take this into account and to justify it – the so-called Keynesian Revolution. In fact state intervention was growing to such an extent that, in the 1940s, many thought that the trend was towards a completely statized economy. Witness books such as James Burnham’s The Managerial Revolution and George Orwell’s 1984. There were also optimists who thought that the gradual extension of nationalisation and the Welfare State would eventually end in socialism. But this was not to be: neither full state capitalism nor socialism resulted. Except in places like Russia (and later China) and its satellites where there already existed more or less full state capitalism, this process stopped at a so-called mixed economy of individual, corporate and state enterprises.

Then came the crisis that broke out in the early 1970s, from which the world economy has still not really fully recovered (growth rates are nothing like they were in the 40s, 50s and 60s). But the political reaction to this prolonged period of relative stagnation was the opposite to what it had been in the 1930s. Unproductive state spending had to be cut back in order for a country’s industries to remain competitive on world markets. It resulted in a retreat, not an extension of state intervention. In the 1980s under Reagan in America and Thatcher in Britain and others in other countries, privatisation, deregulation, cuts in the Welfare State, were the order of the day. Keynesian economics was dethroned and replaced by Monetarism. Opponents called these policies “neo-liberalism”, by which they mean a return to the laissez-faire policies advocated by Adam Smith, the Manchester cotton-lords and the 19th century British Liberal Party.

In the literature of the anti-capitalist movement this word “neo-liberalism” occurs again and again. In fact, so often that it gives a very strong hint that this is what the movement is really opposed to, that this is what it means by “anti-capitalism”. Not opposition to capitalism as such (as Marxists understand it: the economic mechanism of production for sale with a view to profit) but opposition only to the policies currently pursued by nearly every country in the world and imposed by the IMF and the WTO on those who might be tempted not to.

The alternative they offer to neo-liberalism is not anti-capitalism, at least only insofar as capitalism is identified with liberalism (which as we saw is wrong). It is basically a return to the state interventionism of the 1950s and 1960s. The argument is that the state could, if it so chose (or if enough popular pressure was brought to bear on it), abandon neo-liberal, laissez-faire policies and again adopt interventionist ones (import controls, currency controls, restore and extend the Welfare State, regulate corporations, even re-nationalise industries). More that “Another Policy” than “Another World” is possible. But there’s nothing anti-capitalist about import controls, currency controls, etc. In fact they were practised before the 1980s by openly pro-capitalist governments just as much as by leftwing pseudo-socialist governments.

- extract from chapter 9 of Marxian Economics and Globalization by Binay Sarkar and Adam Buick, Avenel Press, Kolkata, 2009.

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