Part of an illustration by Katrin Stenmark.

Reviews The end of neoliberalism — and the beginning of a new story?

Kean Birch & Vlad Mykhnenko (eds.) The Rise and Fall of Neoliberalism: The Collapse of an Economic Order? London & New York Zed Books 2010, 280 pages

Published in the printed edition of Baltic Worlds pages 59-60, 2 2011
Published on on June 30, 2011

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The ideological paradigm of neoliberalism that has dominated the economy and politics of the world for the last thirty years is being questioned. This is visible both in the increase in state intervention in the economy, and in intellectual debates. The current financial and economic crisis has undermined the credibility of neoliberalism. It has also revived the interest of those economists and social researchers who traditionally questioned the orthodoxy of neoclassical mainstream economics and the political recommendations prescribed by it. The anthology The Rise and Fall of Neoliberalism, with texts by British researchers, makes an important contribution to the current debate and shows how neoliberalism influenced developments in the West, in the post-communist space and in the Third World, with varying results for the populations and countries involved.

Three groups of articles may be distinguished in the book. The first consists of texts by economists and sociologists (Bob Jessop, David Miller, Ben Fine, Jean Shaoul, and Elisa van Wayenberge) who base their analysis mainly on the methodological propositions of the Regulation School and other neo-Marxist theories. The second group of authors (Kean Birch, Vlad Mykhnenko, Shaun French, Julie MacLeavy, and Adam Swain) consists of economic and social geographers who take up the issue of different regional and national varieties of neoliberalism. Finally, several articles are written by political activists opposed to neoliberal policies.

The authors seem to share the common definition of neoliberalism presented in the book as a distinctive political economic theory advocating the creation of a society governed by market mechanisms in the absence of state intervention (p. 136). Despite different variations of neoliberalism, it is characterized by an emphasis on five core principles: privatization of state-run assets; liberalization of trade in goods and capital investment; monetarist focus on inflation control and supply-side dynamics; deregulation of labor and product markets; and marketization of different aspects of society (p. 5). Neoliberalism as an ideological and political system rests on a contradiction. While rejecting an active role of the state in economic and social affairs, its very existence has been dependent on the state intervention. Thus, neoliberalism did not eliminate the welfare state in the core Western countries, but transformed it to make possible the functioning of “flexible”, i.e. insecure, labor markets based on part-time temporary jobs supported by strictly controlled and socially stigmatized welfare benefits (see Julie MacLeavy’s article on the neoliberal remaking of the welfare state, pp. 133—147).

The book traces ideological and political currents of neoliberalism since its emergence in the 1930s up to its triumph in the 1970s and 1980s. The crisis of the regime of accumulation based on mass production and Keynesian state policies made possible the ideological and political domination of neoliberal ideas. The main feature of the new accumulation regime that resulted from the spread of neoliberal ideology is the financialization of the economy and society in contrast to the previous regime based on the primacy of productive capital (p. 184). In this sense, as Jessop points out, neoliberalism privileges capitalism’s exchange-value moment over its use-value moment and puts hypermobile financial capital in the center at the expense of productive capital embedded in broader sets of social relations. The profit-oriented principles are introduced under such conditions in those spaces where they previously were absent. The commodification of all aspects of social life and its final securitization is a logical consequence of neoliberal ideology. While not giving priority to the creation of additional value by investing in physical assets, the neoliberal regime of accumulation is centered mainly on making profits through a plethora of exchange mechanisms and speculations. This involves a high level of sophistication, abstraction, and virtualization of financial assets, of which an explosion of financial derivatives markets provides a good example. Neoliberal capitalism has demonstrated a capability of making assets from
everything, including the climate itself, which neoliberalism attempted to privatize (see Larry Lohman’s contribution on the rise of carbon trading, pp. 77—93). Naturally, the creation of financial bubbles without corresponding growth of productive assets finally undermined the strength of the Western capitalist economy and resulted in its current crisis, leading to, among other consequences, the collapse of a number of small economies such as Latvia and Iceland.

Some worthwhile contributions to the anthology are made by sociologists as well as economic and social geographers who problematize the diversity of modes of implementation and embeddedness of neoliberal ideology in different countries and regions. It is against this backdrop that the influence of neoliberalism in the post-Soviet space is presented. Bob Jessop identifies four forms of neoliberalism, with neoliberal system transformation as the most radical one. This was attempted in the states that emerged after the dissolution of the Soviet block. A “creative destruction” of inherited state socialist institutions was expected to lead to a “spontaneous emergence of a fully functioning liberal market economy” (p. 172). Prescribed in accordance with the Chicago-style neoliberalism, this transformation led to considerable downfall of economic activity and social disaster in the countries affected by the process. Adam Swain, Vlad Mykhnenko, and Shaun French discuss the “corruption industry” created by the Western neoliberal centers of power and applied towards Eastern European states in order to align post-Soviet political economies with their interests (p. 118). The writers claim that this “corruption industry”, which involved a wide array of academic expertise as well as rating agencies like Transparency International, has much in common with the core concept of neoliberalism. The latter advocates a “universalist notion of the economy which is nowhere realized in a pure form” and a focus on the extent to which neoliberal ideas as a normative project are realized (p. 113). In the same fashion, the Western corruption industry invents an imaginary world where corruption does not exist and attempts to identify and stigmatize as corrupt non-Western and non-market economic practices. Thus, corruption is used to justify neo-imperial projects intended to reorganize the post-Soviet states and their economic organizations. However, as the writers note, the global financial crisis of 2007—2009, which originated in the core Western capitalist countries, challenged the assumption that the corruption is confined to the non-Western world. This undermines the credibility of the corruption industry and the indexes it produces (p. 128).

Contributions made by political activists opposing neoliberal ideas are less successful. What a reader needs is a thorough academic analysis of neoliberalism as a political and ideological phenomenon, not political declarations. Nor is the attempt to “defeat” neoliberalism from a traditional Marxist position by economist Jean Shaoul convincing. While interesting in its analysis of the factors behind the current financial and economic crisis, her argumentation concerning the consequences of the crisis is transformed into a political declaration as well. Shaoul’s appeal to the working class misses the point, because this class is split, weakened, and in some countries almost non-existent as a consequence of the de-industrialization imposed by the global neoliberal finance-led regime of accumulation. This upheaval has already taken place in most parts of the rich Western world and in Eastern Europe. Not surprisingly, the current crisis has rather strengthened the positions of the political right that adheres to neoliberal ideology. The costs of the crisis are currently borne by taxpayers in the form of massive socialization of private losses by “the all-too-visible hand of major Western governments” (p. 256). A period of new “austerity” for the majority of taxpayers has started and this can easily be just a beginning of deteriorating living standards in most Western and post-communist countries. It is quite probable that Latvia may be just the first victim of a neoliberal approach to the crisis. This despite the fact that the same ideology and political power centers associated with it bear direct responsibility for the emergence of the current crisis. ≈

Kean Birch & Vlad Mykhnenko (eds.) The Rise and Fall of Neoliberalism: The Collapse of an Economic Order? London & New York Zed Books 2010, 280 pages