Neoliberalism, Globalization, and Inequalities

Consequences for Health and Quality of Life

Vicente Navarro

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9781351863995
• Topic: Psychology
• Subtopic: Mental Health in Psychology
• Index: Psychology

Since U.S. President Reagan and U.K. Prime Minister Thatcher, a major ideology (under the name of economic science) has been expanded worldwide that claims that the best policies to stimulate human development are those that reduce the role of the state in economic and social lives: privatizing public services and public enterprises, deregulating the mobility of capital and labor, eliminating protectionism, and reducing public social protection. This ideology, called 'neoliberalism,' has guided the globalization of economic activity and become the conventional wisdom in international agencies and institutions (such as the IMF, World Bank, World Trade Organization, and the technical agencies of the United Nations, including the WHO). Reproduced in the 'Washington consensus' in the United States and the 'Brussels consensus' in the European Union, this ideology has guided policies widely accepted as the only ones possible and advisable.This book assembles a series of articles that challenge that ideology. Written by well-known scholars, these articles question each of the tenets of neoliberal doctrine, showing how the policies guided by this ideology have adversely affected human development in the countries where they have been implemented.

PART I

What Is Neoliberalism?

CHAPTER 1

Neoliberalism as a Class Ideology; Or, The Political Causes of the Growth of Inequalities

Vicente Navarro

A trademark of our times is the dominance of neoliberalism in the major economic, political, and social forums of the developed capitalist countries and in the international agencies they influence—including the International Monetary Fund (IMF), the World Bank, the World Trade Organization (WTO), and the technical agencies of the United Nations, such as the World Health Organization (WHO), Food and Agriculture Organization, and UNICEF. Starting in the United States during the Carter administration, neoliberalism expanded its influence through the Reagan administration and, in the United Kingdom, the Thatcher administration, to become an international ideology. Neoliberalism holds to a theory (though not necessarily a practice) that posits the following:

1. The state (or what is wrongly referred to in popular parlance as “the government”) needs to reduce its interventionism in economic and social activities.

2. Labor and financial markets need to be deregulated in order to liberate the enormous creative energy of the markets.

3. Commerce and investments need to be stimulated by eliminating borders and barriers to allow for the full mobility of labor, capital, goods, and services.

Following these three tenets, according to neoliberal authors, we have seen that the worldwide implementation of such practices has led to the development of a “new” process: a globalization of economic activity that has generated a period of enormous economic growth worldwide, associated with a new era of social progress. For the first time in history, we are told, we are witnessing a worldwide economy, in which states are losing power and are being replaced by a worldwide market centered in multinational corporations, which are the main units of economic activity in the world today.

This celebration of the process of globalization is also evident among some sectors of the left. Michael Hardt and Antonio Negri, in their widely cited Empire (1), celebrate the great creativity of what they consider to be a new era of capitalism. This new era, they claim, breaks with obsolete state structures and establishes a new international order, which they define as an imperialist order. They further postulate that this new imperialist order is maintained without any state dominating or being hegemonic in that order. Thus, they write (1, p. 39):

We want to emphasize that the establishment of empire is a positive step towards the elimination of nostalgic activities based on previous power structures; we reject all political strategies that want to take us back to past situations such as the resurrection of the nation-state in order to protect the population from global capital. We believe that the new imperialist order is better than the previous system in the same way that Marx believed that capitalism was a mode of production and a type of society superior to the mode that it replaced. This point of view held by Marx was based on a healthy despisement of the parochial localism and rigid hierarchies that preceded the capitalist society, as well as on the recognition of the enormous potential for liberation that capitalism had.

Globalization (i.e., the internationalization of economic activity according to neoliberal tenets) becomes, in Hardt and Negri’s position, an international system that is stimulating a worldwide activity that operates without any state or states leading or organizing it. Such an admiring and flattering view of globalization and neoliberalism explains the positive reviews that Empire has received from Emily Eakin, a book reviewer for the New York Times, and other mainstream critics, not known for sympathetic reviews of books that claim to derive their theoretical position from Marxism. Actually, Eakin describes Empire as the theoretical framework that the world needs to understand its reality.

Hardt and Negri celebrate and applaud, along with neoliberal authors, the expansion of globalization. Other left-wing authors, however, mourn rather than celebrate this expansion, regarding globalization as the cause of the world’s growing inequalities and poverty. It is important to stress that even though the authors in this latter group—which includes, for example, Susan George and Eric Hobsbawm—lament globalization and criticize neoliberal thinking, they still share with neoliberal authors the basic assumptions of neoliberalism: that states are losing power in an international order in which the power of multinational corporations has replaced the power of states, operating within a global market that is responsible for the international order (which neoliberals applaud) or disorder (which some left-wing critics lament).

THE CONTRADICTION BETWEEN THEORY AND PRACTICE IN NEOLIBERALISM

Let’s be clear right away that neoliberal theory is one thing and neoliberal practice another thing entirely. Most members of the Organization for Economic Cooperation and Development (OECD)—including the U.S. federal government—have seen state interventionism and state public expenditures increase during the past 30 years. My area of scholarship is public policy, and, as such, I study the nature of state interventions in many parts of the world. I can testify to the expansion of state intervention in most countries in the developed capitalist world. Even in the United States, Reagan’s neoliberalism did not translate into a decline of the federal public sector. As a matter of fact, federal public expenditures increased under his mandate, from 21.6 to 23 percent of gross national product (GNP), as a consequence of a spectacular growth in military expenditures from 4.9 to 6.1 percent of GNP during the Reagan years (2). This growth in public expenditures was financed by an increase in the federal deficit (creating a burgeoning of the federal debt) and increase in taxes. As the supposedly anti-tax president, Reagan in fact increased taxes for a greater number of people (in peace time) than any other president in U.S. history. And he increased taxes not once, but twice (in 1982 and in 1983). In a demonstration of class power, he reduced the taxes of the top 20 percent (by income) of the population enormously, at the cost of increasing taxes for the majority of the population.

It is not accurate, therefore, to say that President Reagan reduced the role of the state in the United States by reducing the size of the public sector and lowering taxes. What Reagan (and Carter before him) did was dramatically change the nature of state intervention, such that it benefited even more the upper classes and the economic groups (such as military-related corporations) that financed his electoral campaigns. Reagan’s policies where indeed class policies that hurt the majority of the nation’s working class. Reagan was profoundly anti-labor, making cuts in social expenditures at an unprecedented level. It bears repeating that Reagan’s policies were not liberal: they were Keynesian, based on large public expenditures and large federal deficits. Also, the federal government intervened very actively in the nation’s industrial development (mainly, but not exclusively, through the Defense Department). As Caspar Weinberger (3), secretary of defense in the Reagan administration, once indicated (in response to criticisms by the Democratic Party that the U.S. government had abandoned the manufacturing sector), “Our Administration is the Administration that has a more advanced and extended industrial policy in the western world.” He was right. No other Western government had such an extensive industrial policy. And today, the huge growth of the U.S. biomedical industry is to a large degree stimulated by an active state intervention. Indeed, the U.S. federal state is one of the most interventionist states in the Western world.

There exists very robust scientific evidence that the United States is not a liberal state (as it is constantly defined) and that the U.S. state is not reducing its key role in developing the national economy, including in the production and distribution of goods and services by large U.S. corporations—which, incidentally, are wrongly referred to as “multinationals” but are actually “transnationals.” This empirical evidence shows that the U.S. federal government’s interventionism (in the economic, political, cultural, and security spheres) has increased over the past 30 years. In the economic sphere, for example, protectionism has not declined. It has increased, with higher subsidies to the agricultural, military, aerospace, and biomedical sectors. In the social arena, public interventions to weaken social rights (and most particularly labor rights) have increased enormously (not only under Reagan, but also under Bush Senior, Clinton, and Bush Junior), and surveillance of the citizenry has increased exponentially. Again, there has been no diminution of federal interventionism in the United States, but rather an even more skewed class character to this intervention during the past 30 years.

Neoliberal narrative about the declining role of the state in people’s lives is easily falsified by the facts. Indeed, as John Williamson, one of the intellectual architects of neoliberalism, once indicated, “We have to recognize that what the U.S. government promotes abroad, the U.S. government does not follow at home,” adding that “the U.S. government promotes policies that are not followed in the U.S.” (4, p. 213). It could not have been said better. In other words, if you want to understand U.S. public policies, look at what the U.S. government does, not what it says. This same situation occurs in the majority of developed capitalist countries. Their states have become more, not less, interventionist. The size of the state (measured by public expenditures per capita) has increased in most of these countries. Again, the empirical information on this point is strong. What has been happening is not a reduction of the state but rather a change in the nature of state intervention—further strengthening its class character.

DETERIORATION OF THE WORLD ECONOMIC AND SOCIAL SITUATION

Another correction that needs to be made as a rebuttal to neoliberal dogma is that neoliberal public policies have been remarkably unsuccessful at achieving what they claim to be their aims: economic efficiency and social well-being. If we compare the period 1980–2000 (when neoliberalism reached its maximum expression)¹ with the immediately preceding period, 1960–1980, we can easily see that 1980–2000 was much less successful than 1960–1980 in most developed and developing capitalist countries. As Table 1 shows, the rate of growth and the rate of growth per capita in all developing (non-OECD) countries (excluding China) were much higher in 1960–1980 (5.5 percent and 3.2 percent) than in 1980–2000 (2.6 percent and 0.7 percent). Mark Weisbrot, Dean Baker, and David Rosnick (7) have documented that the improvement in quality-of-life and well-being indicators (infant mortality, rate of school enrollment, life expectancy, and others) increased faster in 1960–1980 than in 1980–2000 (when comparing countries at the same level of development at the starting year of each period). And as Table 2 shows, the annual rate of economic growth per capita in the developed capitalist countries was lower in 1980–2000 than in 1960–1980. But, what is also important to stress is that due to the larger annual economic growth per capita in the OECD countries than in the developing countries (except China), the difference in their rates of growth per capita has been increasing dramatically. This means, in practical terms, that income inequalities between these two types of countries have grown spectacularly, and particularly between the extremes (see Table 2). But, most important, inequalities have increased dramatically not only among but within countries, developed and developing alike. Adding both types of inequalities (among and within countries), we find that, as Branco Milanovic (8) has documented, the top 1 percent of the world population receives 57 percent of the world income, and the income difference between those at the top and those at the bottom has increased from 78 to 114 times.

Table 1
Economic growth, 1960–2000

	1960–1980	1980–2000
Rate of economic growth in developing countries (except China):
Annual economic growth	5.5%	2.6%
Annual economic growth per capita	3.2%	0.7%
Rate of economic growth in China:
Annual economic growth	4.5%	9.8%
Annual economic growth per capita	2.5%	8.4%

Sources: World Bank, World Development Indicators, 2001; R. Pollin, Contours of Descent, Verso, 2003, p. 131.

Table 2

I. Average annual rate of per capita economic growth in the OECD and developing countries
	1961–1980	1981–2000
(A) OECD countries	3.5%	2.0%
(B) Developing countries (except China)	3.2%	0.7%
Growth differential (A – B)	0.3%	1.3%
II. Growth in world income inequa...

Table of contents

• Cover
• Title Page
• Copyright Page
• About the Book
• About the Editor
• Table of Contents
• Introduction
• Part I What Is Neoliberalism?
• Part II Neoliberalism, Globalization, and the Welfare State
• Part III The Growth of Inequalities
• Part IV Consequences of Neoliberalism and Globalization for Health and Quality of Life
• Part V European Integration and Its Consequences for Health and Quality of Life
• Part VI The Liberal Model in the United States and Its Social Consequences
• Part VII The Situation in Latin America: Alternatives to Neoliberalism
• Part VIII The Consequences of Neoliberalism in Africa
• Part IX Analysis of Proposed Solutions to Current Health and Social Problems
• Contributors
• Index