Socialist Studies Socialist Studies

Neoliberalism or Capitalism?

Fictional accounts of Capitalism

Before 1979, if you are to believe the fictional accounts of capitalism given by the capitalist left, all was grand and dandy in the UK. Children roamed freely and safely through orchards and meadows, the young had no worries about housing, wages and employment, the middle aged were all content and happy while the elderly could relax and live out their remaining years on generous pensions and the safety net of the NHS. Bliss was it then to be alive.

Then along came Margaret Thatcher and all became darkness and gloom. And this evil politician brought with her the seeds of market fundamentalism known as Neoliberalism which she then planted in this veritable Garden of Eden of post-war political consensus and full employment. As a consequence, we are told, Thatcher reaped havoc on everyone’s lives except, that is, the rich and the privileged.

That is a very powerful and oft-repeated political narrative used by the capitalist left to hide its own inadequacy and irrelevance, but it is wholly a myth. Life for the working class majority was just as hard before May 3rd 1979 as it was afterwards. Unfortunately political fairy stories have an enduring power and influence.

So what is Neoliberalism?

So what is “Neoliberalism”? The essential claim of Neoliberalism is that the market and competition are the answer to every economic and social question facing governments. “If it moves, privatise it”, as one of its supporters once said. Markets, so free marketers claim, are rational, efficient and harmonious.

The failure of Keynesianism to prevent economic crises and periodic high levels of unemployment within western capitalism gave “free market” ideas and policies of privatisation and de-regulation, the upper hand. Supporters of nationalisation lost out to those advocating privatisation although nationalisation has nothing to do with socialism: state ownership is still capitalism, not the common ownership and democratic control of the means of production and distribution. Nor is nationalisation a stepping stone to socialism. Nationalisation is just one capitalist policy among many, useful in the past in dealing with monopolies or inefficient but important industries.

This movement towards market solutions rather than government intervention also coincided with the end of the Cold War in 1991, the rise of globalisation and the numerous trade agreements arranged between nations under the auspices of the IMF, the World Bank and the WTO. Market fundamentalism was also propagated by dozens of evangelical free market institutes like the Adam Smith Institute, the Institute of Economic Affairs; all devotees of the classical liberalism of F.A. Hayek and von Mises whose ideas were dominating economic discourse from the 1980s.

Like Keynesianism before it, free market fundamentalism was not going to last. It too had a short shelf-life. The end of the policy Neoliberalism policy was caused by the reality of capitalism biting home. If the legacy of Keynesianism was the oil crises and stagflation of the 1970s then what did it for economic liberalism was the global economic crash of 2007–08, an event defenders of Neoliberalism said was never meant to happen. Markets did fail; they were not harmonious and self-adjusting nor did a wholly free, unregulated, market economy give long term growth and prosperity to everyone.

No more boom and bust”, boasted Gordon Brown, again showing that those who believe they can run capitalism often find their political careers ending in hubris and failure. Capitalism runs and ruins politicians. Globalisation policies created few winners and many losers, with the 1% amassing more wealth than any ruling class in human history but for the majority of the world’s population it was a life of misery and poverty.

Although by 2017 the globe's richest 1% owned half the world's wealth (GUARDIAN, 14 November 2017), immigrants were conveniently blamed by the losers for their own desperate plight and desperate circumstances. Following wars in the Middle East, like that in Syria, the movement of refugees into Europe has been exploited by politicians for their own political advantage. A racist politics has now asserted itself in Germany and Austria, with the “Alt Right” in the US and in central Europe in countries like Hungary, Poland and the Czech Republic. The extremist wing of the Brexit and UkIP movements in Britain has also exploited racist and xenophobic fears and resentment.

With Neoliberalism being increasingly challenged by economic nationalism there has been a rise in white supremacism, anti immigration and political populism. Protectionism is now becoming fashionable once again, as it did during the depression of the 1930s, with Trump imposing tariffs on imports from China, Canada, Mexico and the EU and Jeremy Corbyn announcing that British naval shipping contracts will stay in the UK to be built by British not foreign labour (INDEPENDENT 10th May 2018).

Neoliberalism: “A story of recklessness, hubris and greed”?

It is quite clear why the capitalist left use the term “Neoliberalism” rather than capitalism. It is because they defend a particular form of capitalism rather than seek its abolition.

Neoliberalism was in the news again on the 16th May 2018 when a cross-party group of MPs on two select committees published a report on the bankrupt Carillion construction firm which had cost thousands of jobs and left many sub-contractors unpaid. The MPs stated that Carillion was:

A story of recklessness, hubris and greed

Writing in the GUARDIAN the following day, Owen Jones said that the committee’s report on Carillion was “an epitaph on Neoliberalism” (“Carillion is no one-off scandal. There are many more to come”, 17th May 2018).

Jones went on to say Carillion was a:

...symptom of a decaying social order that is anti-democratic, inefficient and places profit ahead of people’s need, aspiration and even lives” .

He believed that the state of the world was caused by Neoliberalism, allowing greedy bankers and avaricious directors putting “profit before people”. Of course “profit before people” is not a socialist slogan. Socialists want to see people’s needs being met not profit, which is an altogether different proposition advocated by Jones. He wants capitalism without the effects of capitalism. This is pure utopianism.

However, putting profit before people tells shareholders that directors of companies are only doing their job. And if you want democracy surely you should be advancing the establishment of socialism, not another variation of capitalism. Unaware of the realities of capitalism, Jones concluded:

Since the dawn of Neoliberalism in the late 1970s, Britain has suffered its worst three slumps of the post-war era, as well as lower growth that has been less equitably distributed. In the past decade, workers have suffered the worse squeeze in modern times. All of this is interlinked: from privatisation to deregulation to the shifting of power from workers to bosses. Carillion is a story of a system that favours profit, dividends and shareholder’s interests over the common good. That system is Neoliberalism. Until we have a government that rips up these contracts and brings all these public services back in-house, there will be many more Carillons to come

Jones’s answer: vote Corbyn and vote for a Labour Government. Yet, voting for another capitalist political party and its anti-working class policies is no answer at all. And certainly a vote for labour at the next general election is just another vote for the continuation of wage slavery.

The Reality of Capitalism

What about the capitalist reality before the rise of “Neoliberalism”?

Let us take for example the 1970s just prior to Thatcher taking power and supposedly sowing the seeds for 40 years of Neoliberalism.

In 1973 there was a period of economic stagnation in the UK and much of the Western world over which governments had no control. The crisis ended post-war economic expansion. It differed from many previous depressions by being a stagflation, where high unemployment and high inflation existed simultaneously. Post-war government policies, Tory and Labour alike, were influenced by Keynes’s theory, which held that mass unemployment was caused by low levels of demand so could be countered by inflation to boost workers’ spending power. As inflation caused prices and wages to rise, by the 1970s, government economists and even Labour politicians were starting to question this received wisdom, and some even latched onto the economic dogmas of the free market Chicago School led by Professor Milton Friedman.

By 1975 inflation had reached 25 per cent. To combat inflation it was agreed by the government and the TUC that wage increases would be restricted to £6 per week. Unemployment continued to rise and the government was forced to accept loans from the IMF with the consequence that the Chancellor of the Exchequer was forced to cut government expenditure including social welfare.

Unemployment in March 1976 was well in excess of 1,000,000 people, whereas it had been less than 600,000 at the start of the decade. This was the result of the economic decline, as well as advancing engineering techniques which required fewer personnel, along with other factors including the closure of unprofitable factories and coalmines.

By September 1978 there may have been signs of economic growth but inflation was still at 10%, and unemployment now stood at a post-war high of 1,500,000.

In 1976 James Callaghan had become Prime Minister after Wilson had resigned due to ill-health. In 1977 Callaghan announced a wages ceiling of 10 percent (inflation was running at 15.9 percent) and then in July 1978 stated that wage increases would be kept at 5 per cent.

Callaghan lost the co-operation of the trade unions. During the winter of 1978-9 a number of strikes took place, the most serious for the government being the lorry drivers.

The Labour government also used troops to break the fire-fighters’ strike. The strike, again over pay, started on November 14th and lasted for nine weeks, stretching over Christmas and New Year. The unions were calling for a 30 per cent pay increase but their demands were turned down by the Labour government. More than 10,000 members of the armed forces were brought in to cover for the striking fire-fighters.

At the 1978 Labour conference, Callaghan announced that you could no longer spend your way out of a depression and abandoned the Keynesian post-war economic policy for the monetarism of Milton Friedman and his ‘Chicago Boys’ - fresh from advising the Chilean dictatorship under Augusto José Ramón Pinochet.

In the election of March 1979 Callaghan was voted out of office by an electorate who had been persuaded by the media that the problem lay with the trade unions not capitalism. These were the real social conditions faced by the working class before the Thatcher regime of 1979, not some fictional world of milk and honey.

Capitalism is the problem not Neoliberalism

The problem facing the working class is not government policy – whether it be Keynesianism, Monetarism or Neoliberalism - but capitalism. There is a fallacious view that somehow the right politician with the right policies can make capitalism into an equitable and benign social system. This is pure utopianism.

Capitalism is an integrated world-wide system of commodity production and exchange for profit. It has an exploitive wages system and a working class majority who do not own the means of production and distribution but are forced onto the labour market to sell their ability to work for a wage or as salary.

And it is also a social system of war and conflict. Wars under capitalism are caused by competition over resources such as oil and gas, spheres of strategic importance and trade routes. Today there are wars in Syria, in Yemen and in the occupied areas of Palestine. There are also potential future wars between Israel and Iran, Russia and adjoining countries like the Ukraine and between the US and China in the South Indian Sea. And wars and conflict under capitalism will continue even if Corbyn ever gets elected into power and will still take place once he has left office. Only the establishment of socialism can end war.

And it is capitalism which causes poverty, poor health provision and inadequate housing. The profit system caused poverty prior to 1979 and did so after Thatcher came to power, because the working class does not own the means of production and distribution. It is capitalism that causes the problems facing workers and their families not a particular government policy. It is not in the power of governments to end class exploitation, poverty and war.

Economic crises predate Neoliberalism and, if Corbyn’s Labour Party gets into power, there is no reason why, during Corbyn’s period in office as Prime Minister, there will not be another economic crisis and lower growth. Capitalism has contradictions, stresses and conflicts which politicians cannot control. Like its predecessors, a Labour government would have to prioritise the interests of capitalism and the profit motive against the needs of the working class. You cannot have “socialist distribution” and equality based on the private ownership of the means of production and distribution. And if governments introduced too much regulation that it makes British capitalism uncompetitive on the world market they it would be met with protests from capitalists and their political, media and economic supporters.

Nationalisation, the Labour Party’s nostrum, is not the answer for working class problems. It has been tried and failed. Nationalisation can never meet the needs of the working class. The history of nationalisation was a history of workers employed in the state sector facing redundancy through “efficiency” measures in order to save money being forced to accept low pay and “wage freeze” policies and having to take strike action to secure higher wages and better working conditions. From the perspective of working class interests there is no difference being employed by the State or by individual capitalists. Both forms of capitalism leave workers exploited and vulnerable to redundancy.

Under capitalism profit will always come before human needs. You cannot have a form of capitalism which balances profit with human needs. It is either a social system based on profit or a social system based on human needs. It can’t be both. Rather than workers waste their vote on Jeremy Corbyn’s reformism, the working class should use their vote as socialists to end capitalism.

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